Big week for the meat complex from the standpoint of an overdose of news flow. Hurricane Florence and the flooding aftermath crippled the pork and poultry industry along the East Coast. Poultry loss numbers are all over the board, but I think it’s safe to say the losses were somewhere between 2-4 mln chickens and turkeys. Hog losses were minimal, but slaughter and processing plants that were shut down ahead of the storm still aren’t full online yet. The hog kills two weeks ago were down sharply from normal levels. Last week’s kill looked to me like maybe 1/3 to ½ the capacity that was lost was back up. We’ll find out from today’s slaughter total if there’s anything else online yet.
African Swine Fever continues to spread across Asia and the EU. That keeps the prospects alive that US pork exports could see a big uptick in coming months. When you couple that with the sharp reduction in US production because of the hurricane, hogs had the perfect recipe for a sharp rally. It will be interesting to see how the hog market handles the giant supply surge that’s going to hit when US slaughter capacity is fully functional again. Pork exports have potential to increase, but reality hasn’t happened yet based on last week’s export data. Without an uptick, this bull market could start to show signs of maturity pretty quick.
Negotiated cash feedlot trade waiting till almost report time on Friday afternoon before picking up the pace. Prices were mostly unchanged from the previous week in the Southern Plains at $111 live. Nebraska was unchanged in the dressed trade at $175, but around $1 lower live at $110.50.
The report I’m referencing is the COF report that came out Friday afternoon. Unfortunately, that report was bearish as well. COF supplies on Sept 1 were 6% larger than last year at the same time and .7% above the average trade guess. That was also the biggest head count at the bunkline since the new data series began in 1996. Placements in August were up 7% from last year, which was 3 points bigger than the average trade guess. Marketings were even with a year ago and that was down .1% from the trade estimates. In the weight class breakdowns of placements 800-1000lb in-movement was down mild to moderately from last year, but the over 1000 lb placements, plus all classes below 800 lbs were up well over 10%. The Kansas on feed total is up 4% from last year, Nebraska is up 8% and Texas is up 3%. Placements were up 5% in Kansas, 2% in Nebraska and 8% in Texas. Nothing bullish about the report. In fact, in the last 18 consecutive months, placements into feedlots have been higher than the previous year 15 of those months, unchanged one month and down only 2 months.
Cattle slg.___119,000 fri 65k sat wtd 657,000 +5k wa +19k ya
Choice Cutout__204.80 +.28 wtd +.53
Select Cutout___194.71 -.20 wtd -1.76
Feeder Index:___156.29 +1.83
Lean Index.__59.09 +1.65
Pork cutout___79.18 +.23 wtd +4.65
IA-S.MN direct avg__60.24 +1.03 wtd +11.03 month-to-date +22.72
Hog slg.___ 442,000 fri 190k sat wtd 2.341 mln +26k wa -155k ya
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Grain and oilseed trade had a good showing for corn on Friday, but soybeans and wheat finished mildly weaker. Funds were the big driver once again, buying an estimated 12k corn and selling 3k beans and 3k wheat. Despite the weakness in wheat and beans, the weekly closes across everything were higher and that’s a good thing considering corn and soybeans actually made new life of contract lows early in the week. Wheat hit new recent lows two weeks ago, but wheat is thankfully still a long way from contract low territory.
Last week’s weekly export sales were poor in wheat, a little weak in beans and good in corn. Soybean trade out of the US is a tangled web of misdirection right now. There’s rumors Canada is buying US beans to re-export to China. Brazil and Argentina are at the forefront of the bean export rumor mill as well. There was talk that Argentina bought 4 cargos last week and could be in the market for as much as 4 mmt’s. AgroConsult estimated Brazil would buy 1 mmt’s of US beans to arbitrage into China as well. The Oct/Nov timeframe is typically when that South American pipeline starts to run dry for Chinese buying. Odds are Chinese importers are going to find some crafty ways to buy US beans without actually buying US beans (if you know what I mean)…
8am export reporting showed 162k mt’s of US soybeans sold to unknown destination.
6-10’s last night showed above normal temperatures from southern Nebraska and Iowa to the Gulf Coast. North of that line was normal to below temps. Precip was above normal for most of the Corn Belt and all of the Central and Northern Plains. From Oklahoma and southern Missouri to the Gulf the moisture outlook was normal to below.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com