Crazy start to the week’s trade in the commodity world. Coming off of Saudi oilfields being bombed over the weekend, crude oil posted one of its biggest jumps in history and trade volume that was the largest since 2008. We were also still relishing in the China news from last week that they weren’t going to impose the latest round of tariffs on US Ag products. That brought a surge of buying into the hog futures last week and soybeans pushed hard to the upside as well. Ag market trade was a lot more subdued yesterday than a lot of the outside markets. Grain and oilseed trade was up, but not by much. Meat complex trade was mostly lower in the live and feeder cattle markets. Hogs finished very erratically mixed with the front month down almost $3 and the next month out up almost $2.
Coming up on Friday this week is the monthly COF report out from USDA. Early estimates are looking for an On Feed supply on Sept 1 that’s below last year’s level for the first time in a long time. The range of estimates is from 99% to 100% of a year ago with the vast majority of the estimates below that 100% mark. That lower overall supply at the bunkline is likely coming from lower placements in August and a marketing rate on a daily basis that was larger than last year. The range of estimates for August Placements are from 91% of a year ago up to 97.6%. Marketings last month are expected between 96.1% and 98.5%, but with one less business day this year in August versus last year, the daily rate with a 98% monthly number would be closer to 102%+ in actual terms.
The biggest news in the meat complex this morning is ASF being found in South Korea. Apparently it was at a farm that borders North Korea and they have had ASF in the north for quite a while. South Korea has a hog herd numbering over 11 mln head and they are also already a big importer of US meat. Bad news for South Korea obviously, but supportive news for US pork export potential.
China’s Ag Minister reported either yesterday, or over the weekend that their hog herd at the end of last month was down 38.7% from the same time last year, along with sow numbers down 38%. Keeping up with the common theme that we should believe absolutely nothing China says and watch only what they do, all we can obviously do is continue to watch weekly export sales and shipments in hopes they continue to be a big buyer of US pork. Also keep in mind they could theoretically purchase every hog raised in the United States and it still wouldn’t be as many hogs as what have reportedly been culled in that country already due to ASF.
Cattle slg.___117,000 +2k wa +5k ya
Choice Cutout__220.62 -.26
Select Cutout___196.57 -2.03
Feeder Index:___136.09 unch
Lean Index.__58.48 –1.23
Pork cutout___68.66 +.45
IA-S.MN direct avg__45.76 -.71
Hog slg.___ 487,000 +2k wa +73k ya
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Grain and oilseed trade finished on the plus side yesterday, although the bean strength was disappointing compared to wheat and corn. Funds were estimated buyers of 4k wheat, 10k corn and 2k beans.
Weekly export inspections data was disappointing in corn and soybeans and neutral to mildly negative in wheat. Just a little over a quarter of the way into the marketing year for wheat the pace needed each week to hit USDA’s export forecast is 18.7 mln bushels. This week’s report showed 16.9 mln in wheat shipments. Corn and soybeans started a new marketing year on September 1. We need to see 39.9 mln bushels in corn shipments each week and we got 16.6 mln yesterday, which is less than half of what’s needed. Soybeans were 24.5 mln bushels and the weekly pace needed in soybeans is 34.2 mln.
The top China export story last week was the reported agreement to purchase 600k mt’s of US soybeans. That story was out last Wednesday or Thursday. On Friday morning the 8am daily reporting showed 204k mt’s of US bean sales to China. Yesterday’s daily reporting showed another 256k mt’s of US beans to China. Those still don’t add up to 600k+, but it’s getting closer.
Crop condition numbers released yesterday afternoon showed 55% g/ex conditions in corn which is unchanged from last week, although excellent gained 1 point from good, meaning ratings did technically improve. Soybean condition ratings dropped 1 point to 54% g/ex. Versus a year ago at the same time, bean g/ex ratings are 13% lower than 2018 and corn ratings are 13% lower as well. Remember though, I think crop condition ratings are worthless, especially this year.
What’s important is progress numbers, due to the fact we had a record late planting pace in the fall crops and the biggest question mark this year is how much of the crop makes it to maturity before the first killing frost. With that in mind, 93% of the corn crop was listed in the dough stage in yesterday’s numbers, versus 98% as the 5 year average. Illinois is 5 points behind normal, Iowa 5 points behind, Minnesota behind by 4 and Nebraska was behind by 2 points. Kansas, which according to USDA could be the 5th largest corn producing state in the US this year is 2% behind in that % dough category as well.
Percent dent in corn was 68% nationwide versus 87% normal, which is more pronounced than the dough numbers. Illinois is 27% behind normal, Iowa 15% behind, Minnesota 29% behind and Nebraska 8% behind. Those are the big 4 corn producing states. Percent mature numbers were 14% in Illinois, 8% in Iowa, 2% in Minnesota and 19% in Nebraska. That leaves a lot of crop susceptible to frost or freeze if the forecast changes. For any hopeful bulls out there though, the forecast remains at above normal temperatures in the 6-10’s, so that continues to be a bearish forecast despite the bullish crop progress numbers.
In the soybeans, 95% of the crop is setting pods versus a 5 year average of 100%. Here’s some important bean states and equally important data to keep in mind…, Illinois still has 7% of their crop that hasn’t started setting pods yet, Indiana 9%, Iowa 4%, South Dakota 6%, North Dakota 2% and Wisconsin 12%. Every one of those states would normally have 100% of the crop setting pods by now. On September 16th that was a huge number of acres without any bean production potential still. Doesn’t mean they won’t make beans obviously, but I want to point out very clearly that with beans being photoperiod sensitive, even warm temps in the offering is going to create yield drag in those northern states.
8am export reporting showed another 260k mt’s of US soybeans sold to China. That puts the total well over the 600k tonne level mentioned last week.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com