Meat complex futures enjoyed a strong positive day in the hogs and feeder cattle and most of the live cattle contracts. There was a big exception to the rule on the front end of the live trade though and that came from the April contract being down the $4.50 limit, which pulled the June contract down a little too. Everything past those two months was up nicely and the Dec fats even finished up $2.
Besides the fact there were some folks caught up in April live cattle option expiration that may have had a tough time unwinding things because of two limit lower closes, which in turn may have added even more to the weakness, there are other explanations that make better sense in my opinion. We all knew there was potential looming that beef and pork slaughter or processing was at risk to slowing down or stopping in some plants if Covid hit one of the plants. Well, yesterday Tyson shut down their Columbus Junction, Iowa pork plant when they found out more than 2 dozen workers were sick. The JBS beef plant in Grand Island cited 13 workers that had tested positive, although they aren’t shut down I don’t think. Tyson’s Tama, Iowa beef plant had cleaning and maintenance scheduled soon, that includes a shutdown and they opted to move the schedule up due to Covid fears. Tack on JBS and Tyson reportedly slowing chain speed at several plants by 40%-50% and all the sudden, this perishable commodity standing at the feed bunk in the form of finished cattle and fat hogs have found fewer willing buyers. That’s a recipe for disaster in the cash markets.
Granted, coming into this mess the average daily cattle kill was running around 118k-121k head and hogs from 492k-498k head/day. Yesterday’s F.I. slaughter totals were 110k head in cattle and 477k in hogs. I was expecting numbers on the lighter end of those figures with the announcements of chain speed reductions, but that wasn’t the case yesterday, which is good. Still though, when cattle and hogs are ready to hit the plant, one quickly runs out of choices on what to do when all of the sudden there aren’t as many willing buyers for the finished product. I was shocked hogs still finished higher yesterday and the weakness in fats actually made a lot of sense. IF in fact, kills are reduced quite a bit, cash is headed lower. Mind you, that doesn’t mean April live cattle futures have to move a lot lower. At yesterday’s close, those April fats were well over $20 discount to even the lowest negotiated cash that traded at the feedlot level last week. That market is a hedgers dream right now.
Cattle slg.__110,000 -7k wa -11k ya
Choice Cutout__230.44 -2.20
Select Cutout__215.84 -6.28
Feeder Index:___119.38 –1.69
Lean Index.__57.65 -3.00
Pork cutout___57.69 +.32
IA-S.MN direct avg__40.31 -3.53
Hog slg.__477,000 -14k wa +1k ya
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Moving on to the grain and oilseed trade, corn closed under mild pressure yesterday, but the soybean and wheat trade finished mildly higher in everything. Funds yesterday were estimated sellers of 6k corn, but on the buy side of 4k wheat and 2k beans. Yesterday also marked the 7th consecutive lower close for May corn futures. Crude oil tanking and gasoline demand being crushed have been terrible for the ethanol market. Basis collapsed first at those plants and futures have followed. 40% of last year’s corn crop was earmarked to be used for ethanol. Every plant that slows down or shuts down because of this fiasco is going to make ending stocks go up, little by little.
One factor that has a chance to temper the ethanol bearishness is if exports increase above the current USDA forecast. Export inspections data that came out yesterday morning was bullish corn with 50.1 mln bushels of inspections versus a weekly average needed to hit USDA’s target of 44.8 mln bushels. Milo, soybeans and wheat inspections were bearish. Milo inspections were 359k bushels versus 3 mln needed. Soybeans came in at 11 mln versus 30.4 mln needed each week. Wheat was 11.8 mln compared to 27.7 mln needed each week.
On Thursday it’s possible those USDA export forecasts change some, because we get Monthly Supply and Demand report data released this week. Average analyst estimates for US ending stocks have corn at 2.004 bln bushels. The USDA March number was 1.892 bln. Soybean ending stocks estimates are 430 mln compared to a 425 mln USDA number last month. Wheat is pegged at 940 mln bushels, which is unchanged from a month ago.
Crop progress and condition data came out for the first time this season yesterday. Planting progress only listed milo in the row crop grains and oilseeds. 14% of the crop is in the ground nationwide and 100% of those acres are in Texas that now sits at 46% planted versus 41% as the average for that date. While the national summary didn’t list corn, Texas individually in their state release showed corn planting at 57% complete, up 7 points from last week. It’s also 8 points ahead of their average pace.
Winter wheat condition ratings had 62% of the nation’s crop in the g/ex category versus 60% a year ago. 9% was rated p/vp and that’s the same as last year. Kansas wheat dropped 1 point from g/ex, moving down to 49%. Oklahoma got 3 points better, moving to 73% g/ex and Texas got 6 points better, moving up to 62% g/ex.
6-10 day weather forecasts last night showed below to much below normal temperatures through the Corn Belt, Central and Northern Plains. Southern Plains areas were below normal. Precip was below normal from Central Iowa, through Minnesota and most of the Dakota’s. South of those areas it was all above normal on moisture chances.
Futures prices a/o 9:25am
@LEJ20 88.325 4.500
@LEM20 84.800 4.500
@LEQ20 89.325 4.500
@LEV20 94.825 4.500
@LEZ20 98.850 4.500
@LEG21 103.300 4.500
@GFJ20 114.925 4.500
@GFK20 113.800 4.500
@GFQ20 121.000 4.500
@GFU20 122.500 4.500
@GFV20 124.025 4.500
@HEJ20 44.125 3.000
@HEK20 48.375 3.000
@HEM20 52.650 3.000
@HEN20 57.775 3.000
@HEQ20 60.850 3.000
@CK20 335′ 2 7′ 4
@CN20 340′ 2 6′ 6
@CU20 344′ 6 5′ 4
@CZ20 353′ 2 5′ 0
@CH21 364′ 2 4′ 6
@CN21 374′ 2 4′ 4
@CZ21 372′ 0 4′ 0
@SK20 856′ 4 1′ 0
@SN20 862′ 6 1′ 4
@SQ20 865′ 4 1′ 4
@SU20 865′ 4 2′ 2
@SX20 867′ 6 2′ 4
@SH21 856′ 4 5′ 6
@SX21 854′ 4 7′ 4
@KWK20 474′ 2 -1′ 4
@KWN20 480′ 2 -1′ 4
@KWU20 488′ 0 -1′ 6
@KWZ20 500′ 0 -2′ 6
@KWH21 511′ 6 -2′ 2
@KWZ20 500′ 0 -2′ 6
@WK20 552′ 0 -3′ 6
@WN20 547′ 4 -3′ 4
@WU20 550′ 0 -2′ 6
@WZ20 557′ 4 -2′ 4
@WH21 563′ 0 -3′ 2
@MWN20 [10] 536′ 0 -2′ 0
@MWU20 [10] 544′ 2 -2′ 2
@MWZ20 [10] 554′ 4 -2′ 4
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com