Date: August 20th, 2018
Cash feedlot trade was steady to $1 lower than the week previous at $109 to $111 live and $174 to $175 on a dressed basis. Cattle futures bottomed out early last week and beef prices were higher for the week. Fed cattle supplies through August and September should remain plentiful and at this time there seems to be limited positive news to encourage cattle futures and interest in moving the fed cattle market higher. Lean hog futures have now been gaining for the past 7 days with the prices sharply higher to end the week. African swine fever continues to spread across eastern China although they claim the outbreak in the region is now under control. This is the third confirmed outbreak with 615 hogs infected since last Wednesday.
NATIONAL FEEDER & STOCKER CATTLE SUMMARY – W/E 08/17/2018
RECEIPTS: Auctions Direct Video/Internet Total
This Week 157,200 53,700 7,100 210,300
Last Week 158,200 73,000 231,700 462,900
Last Year 148,900 41,500 0 190,400
Compared to last week, steers and heifers sold steady to 3.00 lower. Year-to-Date auction receipts on this report are 7.7 percent larger than the previous five year average even though receipts had tracking at a lower pace than a year ago. June and July this year have wiped out any decline that usually would’ve been ho-hum for receipts during the summertime. Drought conditions culminating in low water levels and poor hay production would be the major culprit in motivating producers to sell cattle at this time year. Not only are feeders making their way to town as well, but mature cattle as well. Producers are trying to hold cow herds together that they have spent generations improving genetics. With the generation interval being so long on cattle, breeding improvements take a considerable amount of time. Missouri is the epicenter of drought in the Midwest as parts of the state have had very hot and dry weather in recent weeks and months, and some parts have been dry for the last year or longer. As of the latest report near 98 percent of the state is showing on the drought monitor. Ratings continue to worsen each week and there is now 5.5 percent that has been designated in the exceptional (D4) category which is the highest or worst rating. Approximately 30 percent of cattle inventory is within an area that is experiencing drought. Forages were dormant in central Missouri, leaving producers to feed hay or find other food sources. According to August 12 USDA reports, 45% of the corn crop, 37% of the soybean crop, and 76% of the pasture and rangeland in Missouri were in poor to very poor condition, and 79% of the topsoil and 80% of the subsoil was short or very short of moisture. Conversely to that, most of the South was wetter and cooler than normal this week. Heavy rain fell from central Texas to southeast Oklahoma and much of Arkansas and reports of 4 inches or more of rainfall were common. The Panhandles of OK and TX have received some recent rainfall and are priming to plant wheat as soon as the calendar gets closer to September.
Producers are needing to have good wheat emergence followed by timely rains so stocking rates of wheat pasture can get back to a normal year.
For the week, Friday August 10th to Friday August 17th, August Live Cattle +$1.17, October +$1.62, August Feeders +$1.05, September +$2.30, October Lean Hogs +$7.42, December +$7.80. Compared to last Friday, Choice closed the week 5.32 higher at 211.38 and Select closed 2.83 higher at 200.92
Cattle slaughter from Friday is estimated at 119,000 head, up 3,000 from the week previous and up 2,000 from a year ago. For the week, 660,000 head, up 15,000 from the week previous and up 25,000 from a year ago. Hog slaughter from Friday is estimated at 445,000 head, up 20,000 from the week previous and up 26,000 compared to a year ago. For the week, 2,459,000 head, up 126,000 from the week previous and up 119,000 from last year.
Boxed beef cutout values higher on Choice and weak on Select on moderate to fairly good demand and light offerings for a total of 88 loads sold.
Choice Cutout__211.38 +2.28
Select Cutout__200.92 -.54
CME Feeder Index:__149.59 -.70
CME Lean Hog Index.__52.94 -1.27
Pork Carcass Cutout__66.77 -.86
IA-S.MN Wtd Avg Live__ 30.33 no comp, Wtd Avg Carcass Base__40.13 -1.42
National Wtd Avg Live__ 31.25 -1.44, Wtd Avg Carcass Base__40.52 -.86
August live cattle recent high back on August 6th at $111.10 with the higher trend still in place since mid-May. Support at $107 with the next resistance level around $112. August feeders still carrying a lower trend for over a month now finding support last week just above $148. September looks similar with support at $147.35 and resistance at $153.50. October lean hogs finishing 6 out of the last 7 days higher, 3 of those at $3 higher. Support around $51 with resistance up at $60.
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Over in the grains, managed money have been buyers mostly since the crop report. Soybeans and corn look to test resistance levels again this week. News about negotiations with China and NAFTA nearing completion supported the grains last week. World wheat stocks declining and the possibility of curbed exports this year from the Black Sea Region shot U.S. wheat futures higher last week as well.
Midday Friday, the WSJ published an article reporting that the US and China have been working on a road map for talks to bring an end to the ongoing trade dispute. This comes ahead of planned meetings between the two administrations at multilateral summits in November. The timing makes sense for both sides with US mid-term elections in November and the lack of soybean coverage in China from fall into February when the first Brazilian new crop beans start coming on line.
The headline early Friday morning that started the excitement was talk about a meeting between the Russian Ag Ministry meeting and grain exporters to discuss trading volumes next year. Initially, at least from the traders, was that the Ministry was thinking about curbing wheat exports next year to 30 MMT but no decision had yet to be made. After the news broke, the Russian Ag Ministry quickly tried to defuse the situation by saying that they did not discuss curbs on grain exports next year in its meeting with the grain exporters. But by then the damage had already been done. US wheat futures rallied 25 cents, and even the European wheat contract rallied more than six Euros. Regardless of whether you believe the headlines that came out early this morning, or the Russian Ag Ministry that tried to walk back those comments later, the production reductions around the World this past summer will have an effect on next year’s exports and the US should benefit the most from it. Keep in mind, this was an almost identical headline and subsequent response we heard a few weeks ago coming out of Ukraine.
For the week, Friday August 10th to Friday August 17th, September Corn +$.06 ½, December +$.07, September Soybeans +$.30 ¾, November +$.31, September KC Wheat +$.05 ¼, December +$.07, September Chicago Wheat +$.13 ¾, December +$.10 ¼, September MPLS Wheat -$.00 ¼, December -$.00 ¾, September Soybean Meal +$8.40/T, December +$9.10/T.
Overnight, grains were mixed with soybeans 11 higher, corn steady and wheat 7 to 10 lower.
Conditions are expected to improve in the USDA crop progress report coming later this afternoon. Steady rains moved through the Central Plains over the weekend and now moving through IL today. The heaviest rains over the next 7 days forecasted for the Upper Midwest. The latest 6-10 day outlook now showing below normal precipitation for the Plains, above normal in the north. Temperatures are forecasted above normal for all expect the PNW.
September corn with support around $3.52 and resistance at $3.74. December corn with a low last week at $3.66, resistance at $3.88. 50% retracement from the high in May to the low in July is right at $3.90, 62% just above $3.99. November soybeans down to $8.51 ¼ for a low last week with resistance at $9.14 and $9.22. September KC wheat with support at $5.35, resistance up at $5.68 then $5.98. September Chicago wheat with support around $5.30, resistance up at $5.63 and $5.93.
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener / Alex Gasper
www.loewenassociates.com pete@loewenassociates.com matt@loewenassociates.com
866-341-6700