Somewhat of a disappointing start to the day yesterday for the cattle complex, but it turned into a decent finish for the futures market at least. Live cattle and feeders were quietly higher and hogs were up on everything except one contract month.
Fundamentally, there was a mix of good and bad news to digest. On the positive side, the cattle kill yesterday was the largest one day total since March 31st, coming in at 119k head, moving packers yet another step closer to what I would consider full recovery in chain speed at kill plants. Pork packers have been slower to recover, although yesterday was also the largest hog slaughter tally since April 10th, coming in at 457k head. Given the current oversupply situation of market ready cattle and hogs, a full daily slaughter total in each should be in the low 120k head range for cattle and bumping up on 500k head in hogs. To start getting current with marketings, we need to see totals closer to those ranges, or like I mentioned last week, kill enough on Saturday’s to make up for the daily lag.
The flipside of the positive developments in slaughter are the negative aspects of product trade that continues to sink lower and lower in both markets. Choice beef cutouts have been quoted lower every single day since the 12th of May. Pork cutouts have been consistently lower, but not as persistent as the cattle. The ratio of choice beef cutout to pork cutout was 3.58:1 yesterday and that ratio still needs to be south of 3:1 to consider beef as competitive price-wise relative to pork.
Negotiated cash feedlot trade had a very light amount of trade happening in the country yesterday. Kansas traded a very small number at $98-$100, Texas at $100 and Nebraska $159-$167 dressed. On one hand, I have liked seeing actual cash trade on multiple days each week recently, but on the other, the trend has been consistently lower. Tough to argue for higher when technically, numbers are still backing up.
Cattle slg.__119,000 +2k wa -1k ya
Choice Cutout__228.61 -2.03
Select Cutout__214.35 -4.92
Feeder Index:___128.51 -1.07
Lean Index.__ 48.38 -.59
Pork cutout___65.46 -4.53
IA-S.MN direct avg__29.71 -1.23
Hog slg.__457,000 +13k wa -17k ya
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Moving on to the grain and oilseed trade, the fall crop markets of corn and soybeans were under mild pressure at the close, along with KC wheat. Chicago and MGEX managed to squeeze out a mildly higher finish. I’m guessing the weakness in KC versus the other wheat markets was harvest pressure related. Funds were estimated buyers of 2k wheat, but sellers of 3k corn and 2k beans. That puts the corn short within about 7k contracts of a record. The record short is 334k contracts. A) It’s hard to fight that much money banking on the short side, but, B) it’s also something to take into consideration on how hard the market could potentially run higher if they were given the incentive to switch from short to long. It would probably take something pretty significant weather-wise, or world production or trade-wise to spark that flop from short to long and the weather aspect isn’t in the picture at the moment.
Export inspections data that came out midmorning was bearish in everything but milo. Wheat inspections were 16.3 mln bushels, versus an average pace needed of 18.3 to meet USDA’s export target for the marketing year. Soybeans came in at 13.8 mln bushels and they need 28.1 mln every week to hit USDA’s export target. Corn was 35.8 mln versus 49.7 mln. Milo was the only bright spot, coming in at 8.8 mln bushels compared to 5.5 mln needed each week. Thank you China, for the milo numbers! 6.8 of the 8.8 mln were headed to that destination. The top destinations in the rest were Philippines for wheat, Japan for corn and Egypt for soybeans.
Corn also bumped up against 4 higher on the front end last night. That strength was coming from crop progress and condition numbers released yesterday afternoon. Expectations were for unchanged or improving corn ratings and nationwide g/ex conditions actually dropped 4 points from last week down to 71%. While that’s still far better than last year’s 59% g/ex number on the same date, it was still a week-to-week decline and the market reacted accordingly, by adding a little weather premium last night.
Soybean condition ratings were 72% g/ex, which was unchanged from last week. Last year they still weren’t putting out condition ratings yet and that was likely tied to the fact only 49% of the soybean crop had emerged at that point. This year 81% of the beans are up and running, along with a planting pace that hit 93% done. That was up 7% from last week, 5% ahead of normal and 21% farther along than last year in the same week.
Winter wheat condition ratings were 50% g/ex, down 1 point from last week and 13 points under a year ago. Harvest moved up to 15% done. Texas reported 68% of the acres cut and that’s 16% ahead of normal, Oklahoma is 40% done, which is down 3 points from normal. Kansas was 9% harvested, which is 1 point ahead of normal.
Spring wheat condition ratings dropped 1 point this week to 81% g/ex.
Yesterday in USDA’s 8am daily export reporting, there was a 390k mt sale of US new crop soybeans to China. Today there was nothing new.
6-10’s last night showed the Corn Belt at normal to below normal temps. The Northern Plains were normal to above, which was the same for the Southern Plains. Kansas and Nebraska were a mix of normal to below east and normal to above west. Precip chances were normal to mostly above normal everywhere except the Dakotas and Minnesota, which were mostly below normal on rain chance. Given the fact the Crop Moisture Index is incredibly dry in the Panhandle, Eastern Colorado and SW Kansas, I certainly hope that above normal rain chance confirms.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell
www.loewenassociates.com