Meat complex futures continued along the path of least resistance on Monday which meant really steep losses in the live and feeder cattle trade at times and limit lower trade in hogs for most of the session. That also means expanded limits today for the hogs.
In the beef complex, the technical analysis continues to point towards an extremely bearish picture, albeit an extremely oversold picture as well. In most contract months, retracement levels of support have been exceeded for several sessions already and a lot of months are into new life of contract lows as well. 12 days ago, every feeder cattle month from the August beyond was sitting at life of contract highs and are now solidly into new contract lows. That means we have to go back to spot month continuation charts to look for areas of support and those areas are just under $132 and then around $130. May feeders closed at $136.02 yesterday. For the record, those support levels I listed are also the lows from last year in the spring, meaning we were actually trading lower than today’s levels a year ago, even after a $19 drop in some of these futures contracts off their highs. May 2018 feeders expired just one tick away from yesterday’s closing price and had a low that was more than $6 lower.
June live cattle expired at $107 a year ago and traded as low as $97.07. Yesterday that June contract closed at $112.27, still $5+ over last year.
What I’m trying to point out is while the hog market screaming higher this year has helped cattle tremendously, along with a brutal winter from a cattle performance perspective…, we’re still trading premium to year ago levels in some of these contract months! Markets often run too far for fundamental explanation at the peaks and too low for fundamental explanation in the valleys. The cart just might have been too far ahead of the horse at the highs in March and April.
We can attribute some of the premium once again, to the winter feeding weather. The highs though, came courtesy of a crazy rally in hogs and a huge fund long position in the cattle. I have no idea where the lows are going to be, but rest assured, volatility is here to stay for a while, especially with the word “China” being thrown around with reckless abandon every day in the news.
Cattle slg.___119,000 -1k wa +1k ya
Choice Cutout__227.00 -.36
Select Cutout___213.98 +.69
Feeder Index:___137.41 -3.79
Lean Index.__79.98 -3.04
Pork cutout___82.89 +.88
IA-S.MN direct avg__80.55 -.95
Hog slg.___ 470,000 -2k wa +23k ya
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Yesterday’s grain and oilseed trade started out as a complete bearish disaster after a Trump tweet on Sunday night regarding trade talks falling apart again sparked double digit losses in a lot of different markets. If I’m not mistaken, the tariff’s Trump is talking about instituting were supposed to go into effect at the beginning of March, but they were put off because of progress. If that’s the case, I’m not sure we should have seen such a steep reaction yesterday, especially given the fact, if he helps win this deal in the end it could result in a boom for US ag markets. Regardless, it was an incredibly ugly day for the entire ag sector, right up until late in the session when markets found a bid and managed to squeak out a higher close in KC wheat and closes in corn and beans, along with the rest of the wheat complex were well off the lows of the day.
Weekly export inspections were solidly bearish across the board. Corn came in at 38.5 mln bushels versus a pace needed each week of 52.8 mln to hit USDA’s export target for the marketing year. Soybeans had 22.1 mln in export loadings versus 40.8 mln per week needed to hit their target. Wheat is very quickly nearing the end of it’s marketing year on the last day of this month and needs 35.3 mln bushels of shipments every week to hit USDA’s target. Yesterday we got 17.6 mln bushels. Big disappointment for wheat.
During the session yesterday, funds were estimated buyers of 2k wheat and sellers of 15k corn and 8k beans.
6-10’s last night showed a big change in the moisture picture, but not much change in temps. Temperatures were normal to above normal from Nebraska through the Northern Plains. From the SE corner of Nebraska and all of Kansas south and east the temps were below normal still and that included Iowa and the eastern half of Minnesota. Precip was above normal from central Oklahoma through all of Texas and east through the SE US. From northern Oklahoma through the Central and Northern Plains, as well as the Corn Belt, precip was forecast at below normal. Unfortunately, that forecast is a little bearish to the corn market IF Iowa, South Dakota and Minnesota are able to throttle up their planting pace.
As of yesterday’s crop progress report, those states were way behind normal on corn planting. Iowa is at 36% done versus 51% normally. Minnesota was 6% complete compared to 42% on average for that date. South Dakota was at 0% compared to 29% done normally. Illinois was 10% done versus 66% on average for that date. Nationwide we were 23% planted on corn versus 36% last year and 46% as the 5-year average.
Winter wheat condition ratings showed 64% of the crop rated g/ex and 8% p/vp, which is all unchanged from last week. Good gained 3 points though with excellent dropping 3. HRW wheat states specifically were down 1% to 65% g/ex. 29% of the winter wheat crop is headed versus 41% normally. Spring wheat seeding is now 22% done versus a normal pace of 49%. Still huge delays in the Dakota’s, Minnesota and Montana because of wet conditions.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com