With product and cash back on the heavy defensive, it’s been good to see live and feeder cattle futures continue the bounce higher after falling hard during the last half of August. Live cattle finished yesterday’s session up more than $1 on all but one contract month. Feeders were up triple digits in everything, including the October contract that settled more than $2 higher.
Then, there was the hog market… Germany confirming ASF in hogs last week and South Korea immediately banned all German imports. China was a little slower to respond, but they banned them as well. Germany is the largest pork producer in the EU, so the potential from this is the US picking up even more of the world export trade and hog futures prices have responded accordingly. That is, until yesterday. October Lean Hog futures rallied $12 already from early August to early September. They jumped another $8 on the ASF news, but yesterday they flopped and fell hard. Did anything change? No. Hogs were just ripe for a correction and we got it.
On the cattle side, I’ll attribute the recent strength to mostly technical and spec buying. Fats bounced off of uptending support twice and never decisively broke through to the downside. Feeders still look much weaker on the charts, but they were strong yesterday as well. Negotiated feedlot cash, product trade and calf and feeder cash trade have continued in the steady to lower trends. Feedlot cash dropped $2-$3 last week, auction prices across the country were within $2 on either side of unchanged from the previous week and product has been weak. The beef to pork cutout ratio is at 2.73:1 though, which puts beef on equal footing with pork through wholesale channels and promotions. That’s a good thing, because beef spent a good portion of the year so far price at more than 3:1 versus pork. If pork exports jump because of the Germany deal and cutouts respond higher, beef cutouts will bottom as well.
Cattle slg.__120,000 last week was Labor Day +1k ya
Choice Cutout__217.12 -2.68
Select Cutout__207.76 +.66
Feeder Index:___141.47 +.48
Lean Index.__64.55 +1.27
Pork cutout___79.71 -1.54
IA-S.MN direct avg__60.91 +7.54
Hog slg.__486,000 -4k ya last week was Labor Day
Moving on to the grain and oilseed trade, closes were on the plus side of unchanged in everything except the MGEX wheat yesterday. Gains at times were good, but most things settled closer to the lows than the highs. Dec corn pushed up and over the $3.70 mark for the first time since mid-March. Nov beans completed their 13th higher close out of the last 14 sessions. Both of those markets look very salty on the charts. Then there’s the wheat market. It looked great through the latter part of August and not so great since.
Weekly export inspections data that came out mid-morning was a little on the negative side for corn and milo and bullish for soybeans and wheat. Corn export loadings were 34.6 mln bushels versus 44.7 mln needed as the weekly pace to meet USDA’s export projection for this new marketing year. Milo was 2.9 mln and needs 5 mln per week. Soybeans came in at 47.2 mln and only needed 40.3. Wheat was a healthy 23.4 mln bushels and needed 17.9 mln. USDA’s export estimates on the S&D balance sheet has all the targets for these commodities (which for corn, milo and soybeans just started on the 1st of September) at; 560 mln bushels larger than last year in corn, 55 mln bigger in milo, 445 mln bigger in soybeans and 10 mln higher in wheat. That’s some lofty goals, but if China continues to willingly buy US Ag commodities, it should be attainable.
Countries in the top destination spot for everything yesterday were; China in soybeans, milo and corn, although China shared the top spot in corn with Mexico. Indonesia was #1 in wheat and China was #4 on the wheat list.
Funds yesterday were estimated on the buy side of 4k wheat, 3k corn and 6k soybeans. Their estimated net position is a small long in wheat and corn and long close to 160k soybeans versus their record long position in beans of 225k. That length is getting a little long in the tooth.
Crop progress and condition data yesterday showed corn g/ex ratings dropping 1 point from the previous week, down to 60% g/ex. Soybeans dropped 2 points, moving down to 63% g/ex. Last year on the same date, corn was 55% g/ex and beans 54%.
6-10’s last night were showing above normal temperatures everywhere west of a diagonal line drawn from the Panhandle up through all of Wisconsin. There was a small strip of normal east of the line and below normal everywhere out to the East Coast. Precip was mostly normal to below normal in the Plains and Corn Belt. The exception to that was Minnesota and Wisconsin with some areas of above precip.
8am daily export reporting showed 120k mt’s of US corn sales to unknown destination, 132k mt’s of soybean sales to unknown and 132k mt’s of US beans to China.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell
www.loewenassociates.com