Weekly Newsletter: March 16th, 2024

March 28 USDA Reports Can Lead to Significant (and Unpredictable) Price Swings

Major changes in corn and soybean futures prices have been seen on the day when the USDA releases its Prospective Plantings and Grain Stocks reports. The magnitude of the changes has generally increased in recent years underscoring the financial impact. Price prediction is impossible, but a disciplined risk management program can help manage increased price volatility regardless of market direction. As always, your Advance Trading advisor is well prepared to help develop and implement a customized strategy for your operation.

Highlights

Major price changes have been seen on the day when the USDA releases the Prospective Plantings & Grain Stocks reports

A disciplined risk management program can help manage increased price volatility regardless of market direction

At current cash prices, losses for a cattle feedyard not hedging ranged from $288.02 to $288.38/head

Increased price volatility has been associated with the release of USDA Prospective Plantings, Grain Stocks

Two eagerly anticipated reports from the USDA will be released on March 28: Prospective Plantings and Grain Stocks. History shows that major changes in corn and soybean futues prices have been seen on the day when the USDA releases these reports. To illustrate those trends, the chart on the previous page and the chart below quantify the change in old-crop futures (represented by “CK” and “SK”) and new-crop futures (“CZ” and “SX”) on the day the reports were released compared to the settlement prices on the previous day. For example, in 2022 the price of December 2022 corn futures (“CZ”) closed $0.2775 higher on March 31 while November 2022 soybean futures ended $0.4975 lower.

Observations: There is no trend in the changes from one year to the next, e.g. old-crop beans were down $0.45 ¾ in 2024 but up $0.31 in 2023. Next, while the change for old-crop and new-crop prices for a particular crop is usually in the same direction for a given year, the direction of corn and soybeans can be different, e.g. this is what was seen in 2022, as noted above. Finally, the magnitude of the changes has generally increased in recent years, underscoring the financial impact.

Price prediction is impossible, but a disciplined risk management program can help manage increased price volatility regardless of market direction. As always, your Advance Trading advisor is well prepared to help develop and implement a customized strategy for your operation.

Livestock

The average cash price for 750-pound feeder cattle was down $6.50 from the week before at $257.00/cwt. Expected corn costs were up $.11 from the week before at $5.84/bushel. At these levels, we pencil a breakeven price of $203.51/cwt, down $3.52/cwt from the week before. With cash cattle in July projected to be $180.14/cwt, a feedyard could expect a loss of $292.09 per head.

The Iowa/So. Minnesota weekly average price was up $1.55/cwt from the week before to $56.51/cwt. At this price, our calculations indicate a typical Iowa hog producer with un-hedged hogs projected a profit of $6.31 to $8.80 per head, depending on how the feed was purchased. A sow bred today would farrow a pig in June and with estimated corn costs up $0.08 at $4.37/bushel and soybean meal cost up $9.10 to $341.40/ton, expected production costs are $52.10/cwt to raise the pig to a live market weight in December. With cash hogs projected to be $63.36/cwt, a pork producer would have a profit of $28.13/cwt.

Broiler egg sets during the latest reported week were above last year’s levels. Egg sets during the week ending 03/02/24 were down 0.1% from the week before. Egg sets were up 0.4% from a year ago and the average egg set over the last four weeks is up 0.7% from last year. Egg sets were above the 5-year average for this time of year. Last week’s egg set was 1.7% more than the average set for this time for 2019 through 2023 and over the last four weeks, egg sets have averaged 1.7% above the five-year average. Chick placements were down 0.3% from the year ago levels. Placements during the latest week were up 0.5% from last week and placements over the last four weeks were down 0.7%.

Chicken prices were down $0.01 from last week remaining higher than estimated production costs. Income from both whole broilers and further processed birds was $5.54 per bird. Our estimates indicate feed, growout costs and processing for an average integrator were down $0.02 from last week at $3.39 per bird. With this, estimated returns were unchanged from the week before at $2.14 per bird.

Ethanol

Ethanol grind: 1,024,000 barrels per day for the week ending March 8th. —down 3.1% vs. last week but up 1.0% versus 2023. Stocks were 25.782 million barrels, down 0.269 million barrels from the prior week and down 0.612 million barrels versus last year.

Information provided may include opinions of the author and is subject to disclosures found at the end of this document.

The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.