Futures contract identification information, a brief synopsis, and relevant market data are provided for the following Agricultural commodities:
● Live Cattle
● Lean Hogs
The statistical information used in this report pertain to the trading year of 2016/17 and are derived from official USDA Agricultural Commodity Reports. The monthly USDA release dated January 12, 2017 was referenced, as well as USDA biannual and quarterly reports from 2016. Futures pricing data is courtesy of the CME Group and ICEUS online trader portals. The Wall Street Journal daily online cash price index for Friday, January 27, 2017 is referenced for current commodity spot pricing.
Market: CME Globex
Description: Chicago SRW Wheat, Kansas City HRW Wheat
Symbol: ZW, KE
Front Month Contract: March 2017 (ZWH7)
The global trade of wheat futures is primarily focused upon the Soft Red Winter (SRW) and Hard Red Winter (HRW) strains. For the period of 1/15/17 to 1/30/17, Chicago SRW Wheat traded with substantial volumes, between 50,000 and 75,000 contracts daily. For the month of January, SRW Wheat has traded off of last December's lows at 392'6. Chicago SRW wheat serves as the global benchmark for wheat futures trading.
Wheat Market Fundamentals
● Typically, January marks a regression in wheat pricing, with a return to more normal levels. A descent into lower pricing of the spring months is commonplace.
● Global wheat supplies for 2016/17 are raised 1.3 million tons. Largest increases are for Argentina, Russia, and the EU. Global exports have increased 1.2 million tons, led by Argentina, Australia and the EU. Canada has seen a sharp decline in exports of wheat.
● Global wheat consumption for 2016/17 increased by .1 million tons . Global wheat stocks are increasing faster than consumption, with an upward revision of 1.2 million tons to a new record of 253.3 million tons.
● US wheat production for 2016/17 is unchanged. Seed use has been lowered by 8 million bushels planted.
● US consumption for 2016/17 has been reduced 35 million bushels, with ending stocks having been revised upward to 43 million bushels. Stocks for 2016/17 are slated to reach the highest levels since the late 1980's.
● For the period 1/15/17 to 1/30/17, SRW Wheat futures have traded in a consolidation pattern between a high of 437'4 and a low of 419'2, with price cycling downward on strong supply numbers.
● Spot prices for St. Louis Soft No. 2 Red closed at 4.1550 per bushel on 1/27/17, down from 4.4950 one year ago to the day.
Market: CME Globex
Description: Rough Rice
Front Month Contract: March 2017 (ZRH7)
Although a worldwide staple, rice is a lightly traded commodity on U.S. futures markets. For the period 1/15/17 to 1/30/17, Rough Rice futures trading was light, with daily trade volumes ranging from 500 to 1000 contracts on the CME Globex. This is not uncommon, as Rough Rice regularly exhibits limited liquidity and overall market participation. Periods of widespread economic downturn often lead to rising demand for rice, due to its affordability. Rice is quantified in hundredweight (NYSE:CWT).
Rice Market Fundamentals:
● Seasonal fluctuations in rice values are more random than other commodities, as unique weather patterns often have a large impact. Increased snowpack and rainfall have positively impacted California rice producers, providing relief from extended drought conditions.
● Global production of rice for 2016/17 has been revised downward 1.5 million tons. Decrease in output of .7 million tons for Sri Lanka has led the slump in global production.
● Global consumption of rice for 2016/17 has been increased slightly. Ending stocks have also been lowered 1.5 million tons to 118.7 million.
● U.S. production for 2016/17 all rice crops have been reduced 10.6 million cwt to 224.1 million. Average rice yields have been lowered 256 pounds per acre to 7,237 pounds. Lagging production from Arkansas, California and Texas have led the decline.
● U.S. consumption for 201/17 is also down 1 million cwt to 132 million. Total exports remain unchanged. All season price average remains unchanged from last month, projected at a range of $9.90 to $10.90 per cwt.
● For the period 1/17/17 to 1/27/17, Rough Rice futures traded in a range of 1010 to 966, up substantially from last year's December low of 940.5.
● Spot prices for Long Grain Milled, No. 2 Arkansas closed at 21.00 on 1/27/17, down from 23.00 one year ago.
Market: CME Globex
Description: Soybean futures
Front Month Contract: March 2017 (ZSH7)
Soybeans are one of the most heavily traded agricultural commodities on the futures market. For the period of 1/17/17 to 1/27/17, average daily volumes have been substantial, nearing and eclipsing 100,000 contracts each session. Units of measure are bushels, tons and metric tons, with yield being calculated as Bu/Acre, or bushels per acre.
Soybean Market Fundamentals:
● The winter season in North America typically brings mid to low range trading prices for the year, with January pricing challenging yearly lows. This year is a bit different, as Soybean futures are trading in the 50% range of 2016's high/low.
● Global production levels for 2016/17 is forecast down 152,000 metric tons to 337.9 million. Lagging production estimates for Bolivia, Uruguay and the U.S. have scratched a spike in production from Brazil, China and Russia. Brazil is projected to have a bumper 2016/17 crop, with estimates revised up 2 million tons to 104 million.
● Global consumption levels for 2016/17 have remained unchanged. Forecasts for global exports of soybeans remain unchanged at 2.05 billion bushels. Ending stocks are projected to double to 420 million bushels, revised downward 60 million bushels.
● U.S. production for 2016/17 is projected at a record 4,307 million bushels, down 54 million bushels from last month's estimates. Yield is estimated at a record 52.1 bushels per acre, down .4 bushels from last month's estimates.
● U.S. consumption levels are up modestly, with exports being reduced on lagging sales.
● Spot markets for No. 1 yellow soybeans in Illinois closed at $10.1950 on 1/27/17. This price is up from $8.7650 one year ago.
● For the period 1/17/17 to 1/30/17 soybean futures traded in a tight range off of the yearly high of 1080'0 down to 1043'2. 2016's high of 1135'4 made last June remains a key high water mark for March 2017 soybean futures.
Description: Coffee "C" futures
Front Month Contract: March 2017 (KCH7)
Coffee C is one of the featured commodities available for trade on the Intercontinental Exchange (NYSE:ICE). It is the global benchmark for Arabica coffee, with prices being a function of the warehoused supply of exchange-grade beans from any one of 20 countries of origin. Coffee C has traded with a lighter volume from 1/15/17 to 1/30/17, with an average daily figure between around 15,000 with a peak of 20,250 contracts on 1/26/17. USDA statistical reports for coffee are released on a biannual basis instead of monthly, leaving a degree of opacity to supply and demand levels.
Coffee Market Fundamentals:
● Seasonal trends in coffee pricing are complex due to the widespread geographical scope of production. Historically, January has shown strong participation in both the futures and spot markets. However, both markets typically peak in May and June, with January typically trading well below those levels. January 2017 has shown strength, trading off of the lows established in December 2016.
● World coffee production for 2016/17 is projected to be 3.7 million bags greater than 2015/16. However, record levels of output for Brazil Arabica have been largely offset by low Robusta production in Vietnam and Indonesia. June 2016 projections of global production have been revised downward 300,000 bags to 153 million, with ending stocks for 2016/17 lowered 600,000 bags to 34.8 million, a 5 year low.
● Global exports for 2016/17 have been lowered 200,000 bags to 112.6 million.
● Global consumption for 2016/17 is forecasted at a record 153.3 million bags.
● The U.S. is the second largest global importer of coffee beans. Forecasts for 2016/17 have been revised down 300,000 bags to 44.4 million.
● U.S. consumption for 2016/17 is projected to gain 200,000 bags to 25.3 million. Ending stocks are to remain relatively unchanged at 6 million bags.
● March 2017 coffee futures traded in a tight range of 149.2 cent/lb to 155.4 cent/lb from 1/17/17 to 1/30/17. The market has showed strength, rebounding from December 2016 lows of 133.5 cent/lb.
● 1/27/17 spot prices for Colombian, New York coffee, came in at $1.6860 per pound. This is up from $1.3756 per pound on the same date, year over year.
Description: Sugar No. 11 Futures
Front Month Contract: March 2017 (SBH7)
The global trade of raw sugar centers around the Sugar No. 11 futures contract for trade on the Intercontinental Exchange . For the period 1/15/17 to 1/30/17, volumes of Sugar No. 11 futures traded in the range of 25,000-50,000 contracts daily, with a high of 103,000 contracts on 1/19/17. Prominent growers of sugarcane are the countries of Central and South America, the Caribbean, tropical Africa, and the far East. The USDA report for the sugar industry is released on a biannual basis, in May and November.
Sugar Market Fundamentals:
● Seasonal trends in the sugar market largely depend upon levels of rainfall in production oriented regions. In both the futures and spot markets, prices typically cycle to yearly lows in late August through the end of September. January 2017 has shown a strong market, trading well above January 2016 levels.
● Global production for 2016/17 is estimated to be up 5 MMT to 171 MMT. Gains in Brazil and the countries of the EU largely serve to offset declines in India and Thailand.
● Global consumption for 2016/17 is projected to be at record levels, coming in at 174 MMT. Year end stocks are anticipated to be the lowest since 2010/11 despite a 4.1 MMT reduction in the worldwide sugar deficit.
● US cane sugar production for 2016/17 is reduced 29,236 STRV (short tons, raw value) based on regional industry reports originating in Louisiana and Texas.
● US imports for 2016/17 are reduced by 1,515 STRV tons, with ending stocks projected at 1.881 million STRV, with an ending stocks-to-use ratio of 15.4%.
● For the period of 1/15/17 to 1/30/17, March 2017 No. 11 Sugar futures traded in a tight range of 20.18 to 20.98. Price remains at strong levels due to high global consumption, and is poised to challenge 2016's highs of 23.81 made last October.
Product: Live Cattle
Market: CME Globex
Description: Live cattle futures
Front Month Contract: April 2017 (LEJ7)
The trade of Live Cattle futures provides producers, large and small consumers, as well as the public, an avenue by which to hedge risk or speculate on future prices. For the period of 1/15/17 to 1/30/17, Live Cattle futures rolled from the February 2017 contract to the April 2017 contract. Daily traded volumes have been in the 19,000 to 23,000 range, with varying degrees of split between Feb/April. The USDA will release its semiannual "Cattle Report" on January 31, 2017, which should shed some light on future supply and demand levels.
Cattle Market Fundamentals:
● Seasonal trends in beef valuations vary between the futures and spot markets. Futures trade of the Live Cattle contract regularly experience an increase in pricing during November and December, with somewhat of a reset during January. Spot markets typically see yearly highs in April and May, with markets in January traditionally weak. This year is different in that January has shown a strong market for April 2017 Live Cattle, approaching 2016's high of 123.000 established one year ago.
● International production of beef is led by Brazil, the EU, China, India and Argentina. For 2016/17, foreign production of beef is projected to expand to 49,510 thousand tons. Beef exports are projected to increase 3% to 9.7 million tons. Australia has undergone a period of "herd building," with annual slaughter rates to decline for third straight year, and exports are expected to decrease as well.
● The 2016/17 projections of International consumption levels are led by China, the EU, and Brazil. Consumption levels are expected to increase 500,000 tons to 47,550 thousand tons.
● US production for 2016/17 is forecast to be up 4%, to 11,808 thousand tons. Exports are expected to increase a modest 73,000 tons, with shipments to South Korea, Japan and Mexico driving demand.
● Trade of April 2017 Live Cattle futures for the period of 1/15/17 to 1/30/17 have been relatively strong, trading in a range of 116.75 to 120.325. For the week of 1/23/17 to 1/27/17 experienced a correction, but still trades well into positive territory for the year. The release of the "Cattle Report" by the USDA on 1/31/17 will influence volatilities greatly.
● The 1/27/2017 spot prices of choice and select beef (600-900 pounds) came in at 180.28 and 175.79 respectively. Both values are down from last year's numbers of 203.35 and 199.43, but as stated earlier, the supply numbers released in the USDA's Cattle Report will likely influence prices substantially.
Product: Lean Hogs
Market: CME Globex
Description: Lean Hog futures
Front Month Contract: April 2017 (HEJ7)
The trade of pork products is a largely international undertaking, with China, Brazil, Russia and the United States being the key players. For the period of 1/15/17 to 1/30/17, Lean Hog futures contracts have made the roll from the February to April contract. Daily traded volumes have been split, trading between 12,000 and 20,000. USDA reports are released quarterly, March, June, September and December.
Pork Market Fundamentals:
● Seasonal divergence is present in the spot and futures pricing. Spot prices typically cycle upwards in the North American summer months and down in the winter months. Trade of Lean Hog futures show a gradual appreciation over the course of the calendar year, spiking in late September and October, while tapering off in December and January. January 2017 has shown a relatively strong Lean Hog futures market.
● Global production for 2016/17 is projected to be up 3% to a record level of 111 million tons. This increase is attributable to a spike in output from China, as well as gains in Brazil and Russia. Exports are forecast to rise 1% to a record of 8.6 million tons.
● Foreign consumption levels for 2016/17 are projected to rise 2330 thousand metric tons. China is the global leader in pork consumption and imports, with a projected 2,300 thousand metric tons. As a result of increased consumption, ending stocks for 2016/17 are projected to decrease 32,246 thousand metric tons, or 4.5%.
● US production for 2016/17 is forecast to be up 4% to a record 11.7 million tons. Exports are also expected to increase 4% to 2.4 million tons, with much of the stock going to satisfy demand in China.
● US consumption for 2016/17 is also expected to rise nearly 4% with a value of 359,000 tons. In contrast to the foreign projections, stocks are expected to increase 1,006 thousand tons.
● Overall, a 5% year over year increase in the September-November pig crop was realized for 2016, with the pending slaughter likely in the second quarter of 2017. This spike in supply may in fact lead to depressed pricing during the Spring months.
● For the period 1/15/17 to 1/30/17, April 2017 Lean Hog futures have traded from a low of 66.625 to a high of 70.575. Still very tight daily trading ranges, with a substantial sell off occurring on 1/26/17. Key technical level is 2016's high of 72.700 posted last June.
● 1/27/17 spot prices for Iowa-South Minnesota hogs settled at $66.33 cwt, up from last year's price of $61.98. With the pending slaughter of the increased hog crop, a depreciation in the spot market may become prevalent in the coming weeks and months.
This article contains general information and does not represent trading advice.
Disclosure: I am/we are long RICE, SUGAR AND WHEAT FUTURES.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.