Kind of a sour week for the cattle complex trade with the futures losing ground most days, cash feedlot trade, as well as cash feeder and calf market action lower and product was trending lower, meaning all aspects of the market were under pressure.
On the cash side of that spectrum, negotiated feedlot trade averaged right at $2 lower than the previous week live. Feeders sold $4-$8 lower according to the National Feeder Cattle Summary and calf market trade was noticeably lower as well. Unweaned or short weaned cattle took the brunt of the hit, as usual and with the current weather situation, it isn’t very hard to figure out why.
After the futures closed on Friday, Monthly COF numbers hit the press. The expectations going into the report were bearish and we can probably assume a lot of downside potential had already been baked into the market with the lower futures trend. The data turned out to be a little more bearish than expected with a couple records set on Placements and the On Feed total.
COF October 1 came in at 4% larger than a year ago, versus an average trade guess of 103.3%. Cattle placed in feedlots in the month of September were up 6% from last year and that was against an average estimate that was looking for a 2 ½% increase. Marketings last month were up 6% as well, which smoothed out a little bit of the bearishness with that friendly data, although that was only .1% bigger than the pre-report estimates.
That’s the 4th straight month of bigger year-over-year feedlot in-movement, but it followed 5 straight months of lighter placements, highlighted by the bullish March/April drop off of 23% and 22% respectively. Keep in mind though, 150 days on feed from the end of April is September 27th, so the hole is way back in the rear view mirror.
Another important note is the placement weight breakdown showed the largest percent gains coming from 700-1000 lb cattle hitting the feed bunk. That means placed against the Jan/Feb and maybe early March timeframe.
Cattle slg.__103,000 fri 60k sat wtd 643,000 -11k wa +3k ya
Choice Cutout__207.49 -1.37 wtd -2.54
Select Cutout__191.40 +.32 wtd -2.12
Feeder Index:___134.01 -1.52
Lean Index.__78.54 -.06
Pork cutout___93.25 -5.59
IA-S.MN direct avg__61.06 -1.62
Hog slg.__486,000 fri 244k sat wtd 2.679 mln -9k wa -11k ya
Weekly closes in the meats had October live cattle down 3.80, December down 5.05, October Feeder Cattle down 4.57, November down 5.37, December Lean Hogs down 2.77 and February lean hogs were down 4.02.
Moving on to the grain and oilseed trade, this may sound a little bit like a broken record, but “the trend is your friend” continued to be the safest bet in the fall crop markets on the last day of the week. Soybeans made new contract highs again on Friday. New crop corn made a new recent high and closed around a nickel off of contract highs. Wheat finished things off Friday on a nice positive note, but there were times wheat struggle pretty hard versus corn and beans throughout the week. In fact, Friday’s gains being close to double digits salvaged a higher weekly close. Without that strong finish, wheat would have been close to unchanged on the weekly charts.
Last week’s world export trade in wheat was highlighted by Egypt tendering for the first time in almost a month. World wheat values have been climbing fast and as a result, they were a little picky and didn’t buy as much as some had expected. Russian wheat filled it all in three cargoes and prices jumped $22.10/mt higher than what it was a month ago.
To some extent, US wheat values will follow world wheat, meaning in a general sense, when exports like this are offered higher, US cash export wheat and US futures are higher as well. The dilemma though, focuses on the fact US exports don’t increase along with the price rise. We go up just enough to keep exports in the bearish sub-20 mln bushel range on a weekly basis. If we want sustainable higher wheat prices, we have to trim ending stocks lower than current levels. To do that, we have to export more, feed more, eat more or produce less. Ending stocks are headed in the right direction since the current estimate is 883 mln bushels versus last year’s 1.028 bln number. If you want a shot at sustaining $6+ wheat futures though, it’s going to take sub-800 carryout, or maybe a corn market that’s on fire to the upside and wheat coat-tailing it higher. The latter of those two isn’t very sustainable though and doesn’t fix an ending stocks issue. It usually makes the stocks situation worse.
Funds on Friday were estimated buyers of 5k wheat, 6k corn and 6k beans.
Weekly Closes in the grains had December Corn futures up 17 ¼, March up 13 ¼, November Soybeans up 33 ¾,, January up 30 ¾, December KC wheat up 11, July KC Wheat up 9 ½, July Chicago up 9 and September MGEX wheat up 8 ¾.
6-10’s last night went back to normal to above temps and below normal precip over all of the Plains and Corn Belt states. The 5 day forecast precip maps show some pretty good chances for continued moisture in some form over HRW wheat country. That’s probably what helped pressure wheat overnight.
8am daily export reporting showed 120,700 mt’s of US soybean sales to unknown destination.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell
www.loewenassociates.com