Coming off of three day holiday weekends often brings with it a lot of nervousness and volatility potential in trade. Add in the factor of the 4th hitting in the middle of summer and weather pattern changes and for the grain and oilseed markets in particular, Independence day has signaled some major changes in trend historically.
Meats had a great day at higher money on Monday, pushing up to $2+ gains at times in live cattle. Both the live and feeder markets finished with quite a few contract months up in the triple digits higher. Hogs were mild to moderately higher at the close.
Recent technical analysis trends in the cattle complex have turned the corner towards bullish, but that’s very counter to the fundamentals. Technicals had live and feeder cattle coiling in recent weeks, preparing for a breakout in either direction, which decisively started last week with a bullish breakout higher. Fundamentals in no way point to positive though with weekly slaughter totals in both cattle and hogs back very close to pre-Covid levels and the marketing delays the Kung Flu caused, still very much backlogged in the country. Add to that the fact choice beef to pork cutout ratio is still north of 3:1 and it definitely emphasizes the divergence of paths between bullish technicals and bearish fundamentals. Of course, being fundamental analysts by trade, it gets hard to explain action like what happened yesterday. Don’t get too bulled up on cattle until Covid isn’t a word you hear in the news anymore.
Cattle slg.__119,000 -2k wa unch ya
Choice Cutout__205.4 +.02
Select Cutout__196.97 -1.79
Feeder Index:___128.88 unch
Lean Index.__n/a
Pork cutout___64.34 -2.12
IA-S.MN direct avg__28.66 -.60
Hog slg.__452,000 -16k wa -31k ya
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Moving on to the grain and oilseed trade, great push to the upside again for everything coming out of the weekend, even though the gains faded some as the day progressed. New crop beans pushed up to the highest levels trades since March. Corn still missed last week’s highs by a few cents. Wheat still isn’t very far off the lows and doesn’t look nearly as salty as the corn and soybean markets.
Export inspections data was delayed a little bit yesterday due to technical difficulty, but eventually came out. Given the bearish numbers, we’d have been better off not seeing it though. Corn inspections were 37.9 mln bushels versus a weekly pace needed of 50.4 mln bushels to hit USDA’s export target for the marketing year. The corn, milo and soybean marketing year ends on the last day of August, whereas wheat just started a new marketing year back on June 1. Milo export inspections were 2 mln bushels and needs 5.9 mln a week to hit USDA’s target. Soybeans came in at 19.2 mln bushels versus 32.7 mln needed. Wheat was 12 mln bushels and needs to see 18.2 mln each week. In reality if you want to see a friendly wheat number it needs to always be over 20 mln bushels, especially after getting the rude awakening at the end of June in the Quarterly Stocks report that wheat ending stocks for old crop are going to be over 1 bln bushels here in the US.
The top destinations for export loadings were China for milo. Mexico was the top taker in wheat, corn and soybeans.
Fund activity was estimated at buyers of 2k wheat, 10k corn and 9k beans. That left funds short an estimated 221,900 contracts w/ options included. Two weeks ago they were short around 350k. If we can keep seeing funds in liquidation mode of those shorts, corn probably goes up regardless. If they flip the sell switch back on, it will get nasty again. Once again, nobody can predict the funds, yet that’s a very important part of the recent action.
Crop progress and condition report data yesterday afternoon showed nationwide corn conditions down 2 points in the g/ex category to 71%. Last year it was 57%. Illinois dropped 6 points, Iowa was unchanged, Minnesota was up 1 point and Nebraska was down 2. That rounds out the top four corn producing states. Soybean condition ratings were unchanged from last week at 71% g/ex. Last year they were 53% g/ex at the same time. Spring wheat condition ratings were 70% g/ex, up 1 point from last week, but down 8 from a year ago same time.
Winter wheat harvest moved up to 56% complete, which was a gain of 15% from last week and 1 point under the 5 year average. Kansas is 80% done, Oklahoma 100% and Texas 98%. Nebraska has 16% of their crop out.
6-10 day weather forecasts last night were blazing hot for the Central and Southern Plains and actually showed above normal temps for the entire Plains and Corn Belt. Precip chances were below normal central and south, but above normal for the Dakotas and from central Iowa up through all of Minnesota.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell
www.loewenassociates.com