Kind of rough start yesterday in the cattle complex, especially for the first session following a bullish Cattle Inventory report from Friday. Futures started pretty flat in the live and feeder cattle, traded both sides of unchanged for quite a while and then rallied into the closing bell. One live cattle contract was up triple digits while the rest were just mildly higher. Feeders found triple digit gains from the May contract out through the deeper deferreds, but were just mildly higher on the front two.
The bullishness of the inventory data came from a little more active liquidation than what was expected in the beef cattle herd. Beef cows and heifers that have calved were down 1.1%. Beef cow replacement heifers were down 2%. Those replacement heifers expected to calve this year were down .9% from a year ago. Another bright note from the report data was the numbers of cattle grazing small grains pasture this winter in Kansas, Oklahoma and Texas. That was down 15% from last year, or around 290k head less. Assuming a good number of those cattle hit the feedlot earlier than normal since they couldn’t be grazed and that helps account for the 2% increase in the On Feed total on January 1. Fewer heifers being retained has been increasing that On Feed total as well. Big picture, the report was friendly. At the open yesterday you sure couldn’t tell it, although the close looked pretty good.
Couple of fun facts from the report, the top five beef cow states this year ranked starting with the most were; Texas, Oklahoma, Missouri, Nebraska and South Dakota. All those states have well over 1 mln head of beef cows. Texas is over 4 mln, Missouri north of 2 mln and the rest were below. The only three that aren’t listed in that top five that have over 1 mln head were; Kansas, Montana and Kentucky. Two other states have more than 1 mln head of cows in a single category that will calve this year, but they are dairy cows and its California and Wisconsin.
Cattle slg.__121,000 -1k wa +3k ya
Choice Cutout__211.56 -1.44
Select Cutout__207.42 -3.24
Feeder Index:___141.98 -.40
Lean Index.__61.41 -.95
Pork cutout___69.84 +.27
IA-S.MN direct avg__53.68 +.53
Hog slg.__496,000 -2k wa +27k ya
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Moving on to the grain and oilseed trade, the corn market was unable to find many willing buyers yesterday and the result was yet another day of lower action. December corn futures came within ¼ penny of matching the contract low that was put in back in December. It bounced off that low and thankfully didn’t push into new contract lows. For the time being, that becomes very solid support for new crop corn and a potential double bottom.
Soybeans made another new recent low, adding more misery to the 30 day slump in futures that has erased more than 90 cents off price since the 1st trading day of the New Year. For the front month March and for new crop Nov beans, we’re sitting at the lowest levels traded since May of last year.
Export inspections that came out midmorning were solidly bearish for wheat and corn, but bullish soybeans. That has been a common theme most weeks in this trend of consistent good soybean sales and shipments. Oddly, soybeans have also been the hardest hit, futures-wise over the last month. Wheat and corn occasionally see decent sales and exports, but have been more consistently bearish than bullish. Corn export loadings were 22.1 mln bushels yesterday versus a weekly average pace needed to 44.4 mln bushels to hit USDA’s target for the marketing year. Milo was 256k bushels and needs 2.5 mln per week to hit USDA’s target. Wheat inspections were 15.2 mln compared to 20.2 mln needed each week. Soybeans were a bullish and hefty 49.8 mln bushels, which was almost double the 26.2 mln needed each week to hit their target.
Funds yesterday were estimated buyers of 2500 wheat, 4k beans and sellers of 5k corn.
Yesterday there was a story that hit the Bloomberg wire regarding China asking for consideration or lax on the Phase One deal while they work to contain the Coronavirus. At this point, any truth to that story is just speculation and rumor. I still have yet to see any official government announcement to back up the claims. That agreement was inked two weeks ago and becomes officially valid mid-February.
6-10’s last night showed above normal precip chances for the entire Plains and Corn Belt. Temps were below normal in the Northern Plains and the High Plains region of the Central and Southern Plains states. There was a wide band of normal temps that ended at the central Corn Belt and everything east was above normal.
South American crop weather remains bearish, which means good weather and good crop production potential. Also starting to hear more banter about planted acreage potential in US corn and soybeans this spring. A lot of bearishness in that talk as well, provided all the acres that didn’t get planted last spring, can be planted this spring.
Overnight trade shook off the bearish trend and pushed higher. Equity markets are up sharply, energies up and metals down.
Current trade a/o 9:44am
@LEG20 122.100 0.425
@LEJ20 121.275 0.550
@LEM20 112.475 0.475
@LEQ20 110.450 0.300
@LEV20 113.500 0.150
@GFH20 137.125 0.475
@GFJ20 138.550 0.200
@GFK20 140.900 0.100
@GFQ20 148.125 0.175
@GFU20 150.000 0.325
@HEG20 57.475 1.175
@HEJ20 63.750 1.025
@HEM20 79.050 0.775
@HEQ20 79.300 0.050
@CH20 382′ 6 4′ 0
@CK20 388′ 0 3′ 4
@CN20 392′ 4 3′ 0
@CU20 389′ 2 2′ 4
@CZ20 392′ 4 3′ 0
@CH21 402′ 0 3′ 0
@CZ21 403′ 2 0′ 6
@SH20 882′ 0 5′ 0
@SK20 895′ 6 5′ 0
@SN20 909′ 4 5′ 0
@SQ20 915′ 0 5′ 4
@SU20 916′ 0 5′ 4
@SX20 920′ 6 4′ 2
@KWH20 474′ 0 7′ 2
@KWK20 481′ 2 7′ 6
@KWN20 487′ 6 7′ 2
@KWU20 496′ 6 7′ 4
@KWZ20 507′ 4 6′ 6
@KWZ20 507′ 4 6′ 6
@WH20 561′ 6 6′ 2
@WK20 559′ 4 5′ 6
@WN20 559′ 0 5′ 4
@WU20 564′ 2 4′ 6
@WZ20 572′ 2 4′ 2
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com