The relentless beating of the feeder cattle market continued on Monday with triple digit losses across all of the contract months, some pushing close to $2 lower. Hogs were deep in the triples with most contracts down more than $3. Live cattle trade spent time on both sides of unchanged and managed a higher close on the front two months, but all the back months were mildly lower past the August. A lot of the feeder cattle contract months sunk to new life of contract lows, opening the door to a lot of thin air below. Plus, it wasn’t difficult to figure out another culprit in that selling either, because corn and the rest of the grain and oilseed trade was solid green on the screen. Higher feedgrain prices translate into higher ration costs for cattle, resulting in buyer’s potentially bidding less for replacement cattle. That’s why feeders have been so price sensitive to the corn market in recent weeks since corn started shooting higher.
Coming off of a fairly neutral to maybe slightly bearish COF report from Friday, it was good to at least see the front two months higher. Granted, we’re also creeping up quickly on expiration day for the June futures contract that finished over $3 under the $110 level yesterday and that’s where quite a bit of the cash traded last week. Looking back at the report data, the On Feed total on June 1 was up 2% from last year and the largest June count at the bunkline since the data series began in 1996. Placements in May were 3% under last year, but that was slightly larger than the 4.1% reduction from the pre-report estimates. Marketings were up 1% from a year ago last month and the expectations were for a .8% increase.
Cattle slg.___121,000 +1k wa +5k ya
Choice Cutout__219.82 -.08
Select Cutout___199.81 +.26
Feeder Index:___131.47 +.10
Lean Index.__ 78.65 -.49
Pork cutout___77.33 +.60
IA-S.MN direct avg__n/a
Hog slg.___ 448,000 -19k wa +14k ya
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Grain and oilseed trade caught a strong shot of fresh buying yesterday. Heavy rains over parts of HRW wheat country as well as soft wheat areas is obviously hampering harvest progress and helped push Chicago and KC up to the strongest gains across the complex. Funds were estimated buyers of 7k wheat, 15k corn and 6k beans. Funds are still net short beans pretty heavy, but their short wheat position is shrinking. The estimated long in corn got trimmed heavily by July option expiration last Friday. If I remember correctly, they were long around 170k going into Friday and that dropped below 100k at yesterday’s estimate, even with the net buy of 15k on the day.
Export inspections data that came out midmorning showed some interesting numbers for milo, plus, China was on the receiving end of a shipment of US corn. Milo export inspections were 4.4 mln bushels and that’s the biggest total we’ve seen in quite a while. 2.3 mln bushels is the weekly pace needed to hit USDA’s export target, so that was almost doubled. It also emphasizes what happens when China decides to buy. They took 4.3 mln of the 4.4 total. The sole reason milo exports have been so terrible all marketing year is because China hasn’t been in the market. That was great news yesterday for milo and hopefully we’ll see it become a trend and not a one week aberration. Current milo exports for a marketing year that began September 1 of last year sit at 62 mln bushels. The previous year at the same time it was 187 mln bushels.
Corn inspections were 24.3 mln bushels versus a pace needed each week of 56.9 mln to hit USDA’s export target for the marketing year. Big disappointment for corn. Soybean export loadings were 25.1 mln versus 36.5 mln needed every week. Not nearly as big a miss as the corn, but still a miss nonetheless. Wheat fit into that category as well coming in at 14.9 mln bushels compared to 17.4 mln needed each week.
Crop progress and condition data continued to provide more confusion than answers. The confusion comes from the standpoint of still not having a handle of total acres planted in either corn or beans. More confusion is added because of crop condition ratings being put out on crops with such a massive variation of planting dates. Of course at the end of this week we get a big slate of reports coming out with Quarterly Stocks and June Final Planted Acreage numbers. The surveys for acreage were conducted at the first part of this month and at the first of this month we were still way up in the double digits on millions of acres that had yet to be planted because of the record slow planting pace. I have emphasized many times that you have to continually feed a bull market and persistent excessive rain and the slow planting pace for corn and beans and slow harvest pace on wheat have provided the fodder for the bull. It will be interesting to see how the markets react if and when the sun decides to shine and things begin to dry out.
Planting progress numbers showed corn 96% complete, up 4 points from last week and behind the 100% number that’s the 5 year average. 8 of the 18 top producing states were sitting at 95% or less complete. Ohio is only 80% done still. Emergence nationwide was 89% and that’s a hard number to process when the planting pace is only 96%. Condition ratings in corn showed 56% g/ex and 11% p/vp. That g/ex rating was down 3 points from last week. Last year 77% of the crop was rated g/ex on the same date.
Soybean seeding was listed at 85% done, up 8 points from last week and well under the 97% 5 year average. Of the top 18 soybean producing states, 4 would typically be less than 90% done. Currently there are 11 states under 90% complete and 3 states are still less than 70% done. Ohio and Missouri are two of those states and both are major soybean producers. Emergence on beans was 71% versus 91% as the 5 year average. Condition ratings came out for the first time this year showing 54% g/ex and 10% p/vp. Last year at the same time the g/ex rating was 73%.
Spring wheat condition ratings showed 80% of the crop rated g/ex, which is down 2 points from last week and 3 points better than last year. Winter wheat condition ratings were 61% g/ex, 3 points better than last week and way above last year’s 37% g/ex rating. Harvest progress in winter wheat gained 7 points to 15% done. The 5 year average is 34%. Kansas is at 5% versus 36% normal, Oklahoma 43% vs 78% normal and Texas is 58% done compared to 72% normal.
6-10’s last night showed above normal temps over the Panhandle, Central and Northern Plains as well as all of the Corn Belt. Precip was below normal over most of HRW wheat country and above normal through the Northern Plains and the vast majority of the Corn Belt.
5 day precip forecasts remain fairly dry for the western half of HRW wheat areas, but wet in eastern areas.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com