Live and feeder cattle futures trade finished fairly quiet yesterday, but the range of trade wasn’t so quiet. Feeder cattle moved more than $2 from high to low, but closed just mildly higher in most months. Fats were well over $1 from high to low and finished mildly weaker. The hog market is drawing the largest question marks in the meats. We have an index that’s trading over $120 and futures that are well below $110 on the front months and still dropping actively. Those stories don’t jive well fundamentally though and with some of the futures months $2-$3 lower yesterday, the pain being inflicted on traders that have been betting on hogs moving up towards the index is getting pretty intense. That brings to mind another age old adage regarding market speculators, which is, “The market can remain irrational far longer than most folks can remain solvent”. There’s a flush going on in the hog market, trying to root out any weak longs and it doesn’t make any rational fundamental sense, but that’s how markets act sometimes. In the end, the fundamentals will prevail. The interim can be painful though…
Cattle slg.__ 118,000 +2k wa +3k ya
Choice Cutout__321.20 -2.08
Select Cutout__281.46 -2.15
Feeder Index:___144.58 +1.13
Lean Index.__ 120.64 +.26
Pork cutout___120.76 +.11
IA-S.MN direct avg__131.72 -2.69
Hog slg.__468,000 -6k wa +17k ya
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Moving on to the grain and oilseed trade, in addition to weather being a driving force, export action got the attention of the trade yesterday morning as well. Friday’s big rally in beans was backed by a strong rumor that China was actively buying new crop beans, but those were still just unfounded rumors going through the weekend. 8am daily export reporting yesterday provided the confirmation though, with 120k mt’s of US new crop sold to unknown destination and another 336k mt’s of new crop beans to China. Markets were lower Sunday night and reacted initially at the day session open in a disappointing fashion as well, but as the day progressed, beans were able to push into positive territory. Corn and wheat rallied off their lows nicely as well, but the vast majority of contracts in those markets were still lower at the close. The exception being MGEX wheat that still has a big story to tell regarding dry conditions across a big portion of Montana, the Dakota’s and Minnesota spring wheat areas.
Weekend rains across spring wheat country were less than expected over a big portion of the region and 6-10’s show no relief in the extendeds either. Temps are pegged at above normal for all of the Dakota’s and most of Minnesota. From Texas up through all of Kansas and then angling to the NE catching the far SE tip of Minnesota, below normal temps were on tap for everywhere in those areas and to the east. Precip chances were below normal for all of the Panhandle region, the Central and Northern Plains and the vast majority of the Corn Belt. Southern Indiana and most of Ohio were the only exceptions in the Corn Belt with above normal rain chances in those areas.
Weekly export inspections data was pretty good in wheat and corn, but not good at all for milo and soybeans. Wheat was above the magical 20 mln bushel mark at 20.2. That compares to an average needed each week of 17.1 mln to hit USDA’s export target for the marketing year. Corn export loadings were 58.3 mln bushels. That keeps corn on pace to hit USDA’s export target. Milo was only 721k bushels versus 4.9 mln needed. Soybeans came in at 6.4 mln bushels and need 10 mln plus per week to hit USDA’s export target for the marketing year. The top destination in each commodity was the Philippines for wheat, China for corn, Somalia for milo and Indonesia for soybeans.
Funds yesterday were estimated sellers of 2k wheat, 5k corn and buyers of 4k beans.
Overnight trade in the grains finished___3-9 lower corn, 1-7 lower soybeans and higher across the wheat complex. KC and Chicago were very mildly higher, but the MGEX finished up 18-24c.
Crop progress and condition data has become an interesting topic to watch recently. Even more interesting has been the fact that when folks aren’t in agreement with the outcome of the data, there’s all kinds of claims that it’s worthless to watch, but when it fits their confirmation bias, it becomes accurate all the sudden. Now, while I’m not going to lay any claims towards accuracy of the data, it is something that’s talked about by the trade and also sometimes influences market direction for brief spurts. The biggest importance of the data is the general trends, which is what we hit on each week when we talk about the report and those trends have been consistent in recent weeks in the fact that conditions have been getting worse, not better.
Corn condition ratings came in at 65% g/ex, down 3 points from last week and 7 below last year at the same time. Illinois was down 3, Iowa down 4, Minnesota down 8 and Nebraska was down 1. Those are the four largest corn producing states in the US. Soybean condition ratings dropped 2 points out of the g/ex category nationwide, moving down to 60% g/ex. That’s also 10 points under last year at the same time. Spring wheat was the big mover this week though, dropping 10 percentage points out of the g/ex category to only 27% g/ex nationwide. 37% of the spring wheat crop is rated p/vp versus that 27% g/ex. If you look at MGEX price action last night, there’s your reaction to the crop ratings.
Current trade a/o 8:56a CST
Live Cattle
@LEM21 122.150 1.175
@LEQ21 122.375 1.350
Feeder Cattle
@GFQ21 156.575 1.475
@GFU21 158.950 1.575
Lean Hogs
@HEN21 108.325 1.275
@HEQ21 104.475 0.800
Corn
@CN21 660′ 4 1′ 2
@CZ21 547′ 6 -9′ 2
Soybeans
@SN21 1413′ 6 -1′ 2
@SX21 1316′ 6 -2′ 4
KC Wheat (HRW)
@KWN21 600′ 4 0′ 6
@KWU21 609′ 4 0′ 2
Chicago Wheat (SRW)
@WN21 658′ 4 -3′ 0
@WU21 663′ 6 -1′ 2
MGEX Wheat (HRS)
@MWN21 787′ 0 22′ 4
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell
www.loewenassociates.com
