Poor start to the week for the meat complex. Feeder cattle and lean hogs both had contracts down in the triple digits at the close, while the live cattle were just mild to moderately weaker. Another disappointment was an end to the three consecutive weeks of advances in the negotiated cash feedlot trade. $124 traded from north to south Friday, along with $200 dressed in Nebraska. A relatively new month still and new contract cattle to pull kept packers on the defensive and also resulted in just light to moderate negotiated numbers trading at that steady money with the previous week.
It probably doesn’t help matters that beef packer margins have eroded very aggressively in the last month from a combination of choice and select moving down closer to the $200 mark, as well as cash prices they are paying for market ready cattle steadily increasing. $200 dressed in eastern Nebraska versus a $209-$210 average for choice and select is still a positive, but it’s not even in the same zip code as the $230+ cutouts and $190 dressed trade that was happening not that long ago. That tide started to change very rapidly about the time the Tyson plant came back online in Western Kansas.
Looking at the chart technicals in the meats, front month Lean Hogs broke through uptrending support at yesterday’s low, making the sideways trend from recent months look bearish. In live and feeder cattle markets, prices rallied aggressively from September to November and have been choppy and sideways since. Most of the feeder cattle contracts tip-toed into new recent highs during the big rally Friday, but prices obviously set back hard yesterday. Live cattle are still chopping sideways. Fats looked a lot better in the Sep-Nov rally than feeders, but this short term trend of feeders touching new recent highs and fats not getting it done, favors feeders on the charts at the moment now. We’ve seen some BIG swings at times in the cattle complex daily net changes over the last two months, but they have been in both directions. Big picture this is still very much a sideways market that’s searching for direction.
Cattle slg.__121,000 unch wa +2k ya
Choice Cutout__210.55 +.51
Select Cutout__208.23 +1.68
Feeder Index:___146.46 -.35
Lean Index.__58.99 -.37
Pork cutout___72.24 +1.74
IA-S.MN direct avg__50.81 +1.18
Hog slg.__498,000 +1k wa +37k ya
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Grain and oilseed trade managed to stay supported in corn yesterday, but wheat and soybeans were struggling to find willing buyers resulting in a mildly lower close in those markets.
The first full week of reporting in the weekly export inspections and then on the export sales numbers coming out this coming Thursday should have brought some optimism to the grain trade. We waded through two weeks in a row of major holidays that were parked right in the middle of the week, which meant reduced numbers in those reports and big expectations for this week. Nothing but disappointment came in the corn and wheat totals yesterday morning in the inspections data. Soybeans on the other hand were pretty good and should be viewed as bullish. Granted, based on closing futures quotes it looks like no one paid any attention to the inspections data anway.
Corn inspections came in at 18.1 mln bushels versus a weekly pace of 42.3 mln bushels needed to hit USDA’s export target for the marketing year. Soybeans need a weekly average of 27.8 mln bushels to hit their target and we got 41.8 mln in bean inspections yesterday. Wheat needs 20 mln per week and yesterday’s 17.4 mln total missed that mark. Milo needs 2.5 mln per week and got less than half that at 800k bushels. More than half the soybean shipments were destined for China. Mexico was the big taker in corn. South Korea, Mexico and the Philippines were very close to equals in wheat.
Funds were estimated sellers yesterday of 2k wheat and 3k beans and buyers of 10k corn.
Egypt announced another tender for wheat yesterday, so we should get the results of that sometime this morning. They bought 5 cargos last week in their last tender, which was a mix of Russian, Romania and Ukraine wheat. The US didn’t even participate in the last offers because we weren’t competitive on price. The irony behind the US price and these Egypt wheat tenders has been the steady rise in prices that wheat is trading at in recent months. Analysts are using world wheat values rising as reasoning for US wheat values rising. While I understand some of the logic behind wheat being a world market and rising world values should economically influence US prices as well. The problem with that theory is that what the US needs is more wheat exports so we can trim ending stocks more, making higher US wheat values legitimately tied to increasing demand and decreasing ending stocks.
Tomorrow at 10:30 am CST the US and China are expected to sign a Phase One trade deal. One of the absolute worst things you should fret about between today and tomorrow morning is “what happens to the markets after the trade deal is signed”. Nobody knows and it really is just as simple as that answer.
8am daily export reporting showed 120k mt’s of US soybeans sold to unknown destination.
6-10’s last night were showing above normal temps for eastern Colorado and most of New Mexico. High Plains HRW wheat areas outside of that were normal and then it was below normal everywhere east, north and south through the Plains and Corn Belt. Precip chances were normal to above normal through most of the Plains areas from north to south and above normal specifically in Kansas, Oklahoma and Texas wheat country. The eastern 1/3 of Kansas and the Corn Belt was all below normal on precip.
8:45am CST current trade
@LEG20 126.850 0.300
@LEJ20 127.575 0.050
@LEM20 119.475 -0.025
@LEQ20 117.075 -0.025
@GFF20 145.525 -0.500
@GFH20 145.550 -0.300
@GFJ20 148.550 -0.250
@GFK20 150.100 -0.100
@HEG20 66.650 0.750
@HEJ20 73.900 0.525
@HEK20 80.000 0.275
@HEM20 85.925 0.450
@CH20 389′ 4 0′ 0
@CK20 396′ 2 0′ 0
@CN20 402′ 4 -0′ 2
@CU20 402′ 2 -0′ 6
@CZ20 404′ 2 -0′ 4
@SF20 932′ 6 3′ 4
@SH20 947′ 4 5′ 2
@SK20 960′ 4 5′ 0
@SX20 972′ 6 3′ 0
@KWH20 499′ 6 7′ 0
@KWK20 507′ 0 6′ 4
@KWN20 514′ 6 6′ 4
@KWU20 522′ 6 6′ 2
@KWZ20 532′ 4 4′ 6
@KWZ20 532′ 4 4′ 6
@WH20 571′ 6 9′ 4
@WK20 573′ 2 8′ 4
@WN20 574′ 6 8′ 0
@WU20 579′ 6 7′ 0
@WZ20 588′ 0 6′ 2
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com