Great action yesterday again in the cattle complex. Following a strong push into new or recent highs on the last day of 2018, it was followed up by four consecutive days of losses to ring in the New Year. Monday was a big turnaround day for cattle with some bullish key reversals on a few contract months and yesterday the front month February Live Cattle outperformed everything else with a giant $2+ higher push back into new contract highs again. That put the close at $125.30, which is $2.30 premium to last week’s Southern Plains cash trade. Definitely brought a lot of optimism into the mix for a higher potential for cash this week finally as well.
Even with a product market that is showing signs of struggling, beef packers have super solid margins still. That should keep them hungry for numbers and with the adverse weather from two weeks ago stifling performance some, I still think that should translate into higher cash yet in the near term. Don’t confuse that with being bullish for the long haul though, because 2019 feedlot inventory and beef production are still going to be higher than 2018 numbers. Along with continued expansion in pork and more than adequate poultry supplies, there really isn’t any room for a raging bull market.
The closes yesterday had triple digit gains in most of the feeder cattle contracts, plus two contract months in live cattle. Hogs finished mixed with a few more positive quotes than lower quotes.
Cattle slg.___119,000 n/a week ago +1k ya
Choice Cutout__213.98 -.30
Select Cutout___207.26 -.95
Feeder Index:___145.63 -.43
Lean Index.__ 54.85 +.35
Pork cutout___70.16 -.40
IA-S.MN direct avg__50.81 +.91
Hog slg.___ 480,000 n/a wa +26k ya
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Grain and oilseed trade managed to squeak out higher closes in wheat yesterday, but the fall crop markets of corn and soybeans finished a little lower. 4 out of the last 5 sessions in soybeans had closed higher, so beans were due for a correction. Kind of odd that correction came in the middle of the rumors of fresh new Chinese purchases, along with a positive vibe from US and China trade talks over the last several days. Those meetings started Monday and were extended for a day, which I thought was a good sign of willingness to hammer out some issues. In the meantime, we caught some tidbits about lifting restrictions on some GMO varieties and also some reports of some daily sales of soybeans, corn and wheat to China between Friday and this week. Granted, we don’t get USDA daily announcements or weekly export sales data because of the shutdown, but it’s still positive news, even though it’s being reported privately. Obviously we’d like to see confirmation by USDA, but that isn’t going to happen yet.
Funds yesterday were reported buyers of 4k wheat and sellers of 7k corn and 6k beans.
In export related news today, or maybe more aptly put “rumor” since we don’t get daily reporting. Egypt announced a new wheat tender yesterday. Traders are also trying to digest the weekend rumors of China buying 5-8 mmt’s of US corn. It was also reported yesterday they bought 1 mmt’s of soybeans, making the bean total somewhere north of 5 mmt’s for JFM shipment. There’s also rumors they have purchased US wheat.
Even with no crop report coming out this week, analyst surveys have been conducted. I saw one set of data yesterday that showed corn yield estimates at 178 bu/ac, which would be down .9 from the last USDA numbers that were released in November. Soybean yield was pegged at 51.8 bu/ac and that’s down .3 from the November USDA actual. Winter wheat seedings guesses have HRW at 22.727 mln acres, down 196,000 acres from a year ago and also making it the lowest planted acres on record. SRW wheat acre estimates are 6.019 mln, down 57,000 from last year. White winter wheat ispegged at 3.486 mln, down 50,000 from last year.
6-10’s last night showed above normal temps for most of the US. Precip was still below normal for the Northern Plains and normal to below for the northern and eastern Corn Belt. Central and south was all above normal.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com