After a stellar, bullish close to last week’s cattle complex futures trade, it was a surprisingly dull session yesterday. The daily range from high to low was still more than $1 in most contract months in the live and feeder markets, but the closes were mixed and very quiet on the net changes versus Friday’s finish.
Chart technicals across the cattle look really, really bullish with a lot of new highs last week and a few months pushing lightly into new highs again yesterday at the peak. Those technical bullish signs are coming in the face of fundamentals that are pointed the opposite direction though, given total meat supplies across the board. If funds and managed money want to keep hitting the buy button and remain oblivious to those fundamentals, I’m certainly not going to complain.
One bright fundamental note for the cattle, at least in the short term is that Hurricane Florence brought an abrupt halt to the monster hog slaughter and pork production totals, freeing up some shelf space for beef. The reason I’m quoting that as a short term influence is the fact that picture changes the moment those East Coast plants come back on line. I’m guessing we’ll see some monster totals on slaughter and production when that point hits. Average weights on hogs are going to spike when it happens as well. That’s running under the assumption there wasn’t an insane amount of death loss from the flooding. Backing hogs up 2-3 weeks is adding a lot of weight.
Cattle slg.___119,000 unch wa +8k ya
Choice Cutout__206.04 +1.77
Select Cutout___197.38 +.91
Feeder Index:___153.38 +.67
Lean Index.__53.48 +1.63
Pork cutout___76.02 +1.49
IA-S.MN direct avg__51.67 +2.46
Hog slg.___416,000 -43k wa -32k ya
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Grain and oilseed trade was kind of depressing again yesterday, although the losses were big by any means, everything was still lower aside from MGEX wheat that squeaked out a higher finish. There were quite a few tidbits of news on both sides of the table for the bulls and bears. More chatter about limits on Russian wheat exports, freeze damage on Australian wheat and more US tariffs in the China/US trade war to name a few. Green Plains energy temporarily closing a couple of ethanol plants in Iowa because of poor margins was a downer for corn. Soybeans had some bearish news coming in the form of NOPA August soybean crush coming in at only 158.9 mln bushels versus expectations of 163 mln. That was down about 9 mln from July, but it was still up considerably from last year’s 142.4 mln number at the same time.
Export inspections were bearish across the board and worse in wheat than anything else. Wheat inspections were 14.9 mln bushels versus 21.6 mln needed each week to hit the USDA export estimate for the marketing year. Corn export loadings were 40.6 mln and that’s below the 46.7 mln needed each week to hit the corn target. Soybeans came in at 28.8 mln bushels and we need 40 mln in beans each week to hit USDA’s export target in the S&D’s. On a really sour note, milo inspections were 52,202 bushels versus 3.5 mln needed.
Fund activity yesterday reported as sellers of 12k corn, 5k beans and 7k wheat.
Crop progress and condition data yesterday showed corn condition ratings at 68% g/ex, which was unchanged from last week and up from 61% last year at the same time. 9% of the crop is harvested and that’s up 3 points from the average pace. Soybean harvest was listed at 6% complete versus 3% normally. Condition ratings in the beans were 67% g/ex, down 1 point from last week and 8 points better than last year at the same time. Spring wheat harvest is 97% done and winter wheat planting was listed at 13% done, up 5 points from last week. Kansas is 7% done, right at the average, Oklahoma is 12% planted, one point ahead of normal and Texas was right at their average pace at 13% complete.
6-10’s last night showed below normal temps in North Dakota and northern Minnesota and above normal temps everywhere south all the way to the Gulf. Precip was above normal for all of the Corn Belt and all of the Northern, Central and far Southern Plains. The Panhandle, far western Kansas and eastern Colorado were normal to instances below normal on precip.
There were no new 8am daily export announcements. Egypt is in for wheat again with another tender. Like every other time in the last year+, odds are 100% of it goes to Russia or Black Sea region origin. Let’s face it though, all demand is good demand! If Russia keeps exporting, they keep depleting supply, which should eventually lead to better demand for US wheat. Hopefully sooner than later…
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com