Pretty quiet close on the first day of the week in the cattle complex and a little tough to analyze in some aspects as well. The grain and oilseed sector was higher and live cattle were trading lower, yet the feeder cattle market still managed to finish higher on the day. Higher corn and steady to weaker fats should have pressured the feeders, but it didn’t. Part of that could be tied to the fact very few calves and feeders have changed hands in the Central and Southern Plains in the last two weeks with the nasty weather, so there is a chance for buying enthusiasm on the cash side. Last week’s total run of cattle based on the National Feeder Cattle Summary was just 31% of the year prior. There was less than 100k head that traded versus more than 300k last year. Two weeks ago barely made it up over the 200k head mark. I think we’ll see some monster runs with the sun back shining again and places thawing out and getting back closer to normal.
For the live cattle, last Friday’s mildly bearish On Feed report got a mildly bearish response for the market at the open yesterday, along with a mildly bearish close as well. Last week’s negotiated cash not being able to make it over the $114 mark, put a lid on Feb live cattle futures that have been trading closer to $116 lately than $114. The premium futures structure has also led to a whole bunch of deliveries against the Feb contract and the huge premium April is carrying over the February is the next concern for the market.
Cattle slg.__119,000 +40k wa +2k ya
Choice Cutout__239.98 +.75
Select Cutout__229.98 +2.08
Feeder Index:___141.12 +3.01
Lean Index.__77.74 +.31
Pork cutout___92.11 +.62
IA-S.MN direct avg__72.78 no comp
Hog slg.__497,000 +85k wa +2k ya
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In the grain and oilseed trade, everything closed on the plus side of unchanged and wheat led the charge with double digit gains in KC and Chicago. I’ll assume a big part of the push was funds being on the buy side, but there’s probably some carryover strength from the frigid temps on winter wheat the last two weeks as well. There’s irony in the fact futures prices for new crop wheat were higher in January than they are today after all that weather, but the trend is still undoubtedly creeping higher with higher highs and higher lows for a long stretch of days now.
Export inspections data was neutral to mildly bearish corn, coming in at 48.5 mln bushels. Corn needs 59.1 mln per week on average to hit USDA’s export target for the marketing year. The overall trend so far this marketing year is still bullish, but it also needs to improve some more given the fact it was below the average needed once again. Milo was in the same category as corn with 4.9 mln in export loadings versus 5.7 mln needed. Good, but not great and also not quite good enough to hit the average. Soybeans were bullish with 26.5 mln in shipments and we only needed 13.5 mln to keep up the pace needed.
USDA has some very lofty export numbers penciled into the demand side of the balance sheet. Granted, we’re not hitting the pace needed on some of these weeks, yet versus a year ago, fall crop market export inspections have been tremendous. Corn shipments are 80% ahead of last year, milo 161% ahead and soybeans up 77%. Big picture on these exports, soybeans and milo are still the most bullish, corn isn’t far behind and wheat is the ugly duckling. Wheat inspections yesterday were 11.9 mln bushels compared to 22.2 mln needed each week to hit USDA’s target. Currently we’re down 14.7% versus a year ago same time in total shipments. USDA says exports will end up 2% larger than last year by the last day of May, which is the end of the wheat marketing year.
Crop progress reports came out from some individual states yesterday. There was a soft wheat state included in the reports as well as Northern Plains, but I’m going to focus on Nebraska south, meaning the heart of HRW wheat areas. Nebraska wheat condition was 34% g/ex and 22% p/vp. Kansas was 40% g/ex and 26% p/vp. Colorado was 19% g/ex and 29% p/vp. Oklahoma was 48% g/ex and 14% p/vp. Texas was 30% g/ex and 31% p/vp.
Here’s the rub…, except for Colorado, conditions in all of these states are worse than they were a month ago. In Texas specifically, 22% of the wheat is headed. Temps hit single digits well south of Austin and south of Lubbock as well. That is terrible conditions for anything headed, or in the boot and probably a lot of what is jointed as well. Should be easy to assess freeze damage on a lot of the Texas wheat. It’s toast. Kansas and Oklahoma, only time will tell still, but 60+ degree days are going to start telling a lot really soon based on whether things start to green up or not.
Funds yesterday were estimated on the buy side of 5k wheat, 10k corn and 5k beans.
Old crop corn and beans didn’t make new highs yesterday, but new crop corn and beans were both trading into new contract high territory and they did it last night again as well. The battle for acres has officially begun!
6-10’s last night showed below normal temps from the High Plains and everywhere west. Central and east was normal to above normal. Moisture chances over HRW wheat country were above normal and that stretched through the Corn Belt. The far Northern Plains was below normal on precip.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell
www.loewenassociates.com