Cattle complex futures continued in their effort to bounce higher yesterday. Live cattle finished the session mild to moderately higher. Feeders were up over $1 in everything except for the front month May contract and it wasn’t far off that mark.
After losing $3.55/cwt last week on the front month June live cattle, steady to only mildly lower Southern Plains cash feedlot trade didn’t feel as bad as you’d think. When April futures went off the board it was trading double digits premium to the June and then June promptly lost $4-$5 to widen the gap between cash and futures even more. Hedged cattle are enjoying the much wider than normal basis for May sales, but the size of the drop in futures still has a lot of folks baffled. I don’t think very many traders had expectations of well over a $10 drop from the spring cash high to the summer low, but that’s exactly what’s being traded at the moment. Actually what’s being priced is $10 lower than last week’s cash, which was already well off the spring high.
If you look at a June futures chart and ignore cash fundamentals, the drop gets a little easier to explain. There are a lot of gaps on the cattle charts that were created on the way up, but none were as big as the gap in early April. The bottom of that gap in the June live cattle contract is $160.10. Last Wednesday’s futures low was $161.20, so the gap still isn’t filled, but yet futures bounced off of uptrending support and turned higher that day and hasn’t looked back. The bottom of that gap is still key support, so I wouldn’t rule out futures trying to fade back to that mark. I’m hoping it doesn’t happen, but the chart technical definitely leave it as decent potential.
The National Feeder Cattle Summary that came out yesterday afternoon cited feeders in the SE market 1-4 higher last week and the Plains states mixed with a range from $3 higher to $3 lower.
Cattle slg.__126,000 +3k wa +7k ya
Choice Cutout__308.56 -.63
Select Cutout__285.12 -3.04
Feeder Index:___200.01 +.55
Lean Index.__74.42 -.09
Pork cutout___81.94 +.07
Hog slg.__468,000 +19k wa +9k ya
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Moving on to the grain and oilseed trade, definitely some funky action yesterday in wheat. Chicago spent some time close to double digits lower while KC was trading double digits higher. Odd trade no doubt, but also very fundamentally explainable trade given the disaster of a HRW wheat crop in so many places in the Plains versus much better conditions in SRW wheat.
General consensus was that rains across the Southern Plains the last couple weeks were too late for a big chunk of the crop and USDA crop condition ratings yesterday confirmed it. Kansas g/ex conditions dropped another 2 points, moving down to just 11% of the crop and p/vp gained 4 points to 68% of the total. Colorado dropped 6 points to 22% g/ex and 47% p/vp. That bottom end category got 10 points bigger in one week. Oklahoma came in at 7% g/ex down from 9% last week. P/vp increased by 3 points to 64% of the crop. Texas split with g/ex moving up 1 point to 29%. P/vp ratings were 44%, up from 42% last week. Nationwide, 29% of the winter wheat crop is rated g/ex, which is 1 point better than a week ago and emphasizes my comments about HRW vs SRW wheat I made earlier. The breadbasket got worse, but nationally things improved and most of it came in SRW areas. 32% of the Kansas crop was listed as headed and after traveling across a fair chunk of west and central parts of Kansas over this past weekend, I think that percentage increases a BUNCH in next week’s report.
Weekly export inspections were bearish wheat and corn, neutral milo and mildly friendly for soybeans. Corn inspections were only 37.9 mln bushels versus a weekly average pace needed of 44.7 mln bushels to hit USDA’s export target for the marketing year. That’s a Census adjusted total also, which isn’t so important yet for fall crops, but it is for wheat since the wheat marketing year ends on the last day of this month. Fall crops end in August. Wheat inspections were 7.7 mln bushels and need to average 18.7 mln per week. Milo came in at 1.95 mln, which was just above the 1.7 needed. Soybeans were 14.5 mln bushels and that was comfortably over the 11.9 mln needed each week to hit USDA’s target. Granted, we get a crop report this week and USDA might make some changed to export projections. If they do, these averages needed are going to change. Biggest chance for change in anything is probably in corn and it likely isn’t for the better.
Planting progress numbers were aggressive last week. Nationwide corn acreage seeded jumped 23 points up to 49% complete. The average pace for that date is 42%. Of the big 4 corn states, Iowa, Illinois and Nebraska were all ahead of their average. Minnesota was 1 point behind the normal pace. Emergence is 12% nationwide and that’s 1 point ahead of normal. Milo planting is 24% complete which is right at the average. Spring wheat is 24% done versus 38% normal. Soybeans came in at 35% complete and that was a gain of 16% in one week and it’s also 14 points over the average pace. Emergence in beans is at 9% versus 4% normal.
8am daily export reporting full of bad news this morning. China cancelled another 272k mt’s of previous corn sales. This is the third big cancellation in the past three weeks.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Tyson Loewen
www.loewenassociates.com