Following Friday’s bullish COF numbers, there wasn’t any hint of fade the report-type action that sometimes goes on in the meat complex. The bullishness of the report came from placements last month being 3.5% lower than the trade estimates and 9 points under last year and that helped pull the On Feed total on September 1 down to 1% below last year at the same time. The reaction was a very appropriate day of strong gains that pushed the front three months in live cattle up over the $2 higher mark. Feeders were up more than $2 on all but the front end September contract. That rally left the front month October live futures $4.57 under where it closed the day of the Tyson fire, but it was also $8.45 off the lows in a market that has spent a significant amount of time under the $100 mark over the last 45 days. It’s now back in the hunt to potentially make a run for the gap that was left when the market crashed back in early August.
Monthly Cold Storage report data was released yesterday afternoon for August. Total frozen poultry supplies were reported to be down 5% from a year ago with total chicken stocks specifically down 3%. Total red meat in freezers was down 1% from last year. Beef supplies were down 6%, while frozen pork was pegged at 4% larger than a year ago. Versus the previous month, frozen pork was down 1%, beef up 4% and chicken was up 6%. For the record, 2018 August total frozen poultry was a record and so was frozen beef
Cattle slg.___ 116,000 -1k wa -2k ya
Choice Cutout__216.45 -.52
Select Cutout___190.84 -.88
Feeder Index:___139.68 +1.15
Lean Index.__55.13 -.67
Pork cutout___70.18 +1.03
IA-S.MN direct avg__45.14 +.75
Hog slg.___ 454,000 -33k wa -15k ya
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Grain and oilseed trade spent the early part of yesterday on the north side of unchanged and that was aided in part by more positive news chatter surrounding the US and China trade talks. This time the positive focus was coming more from the China side than the US, but it all still boils down to just lip service. Watch what China does, not what they say. The chatter also included some rumors of big US soybean purchases. Once again, if and when we see actual confirmation, it’s time to be positive, just don’t get too overzealous trying to buy rumors. We also need to be cognizant of the fact a sale can be cancelled. When it’s shipped and offloaded at Chinese ports is the only time it really counts. Closes had corn and soybeans higher, but wheat ended lower in KC and Chicago. MGEX wheat was up in the double digits and that’s being driven by torrential rains over the last week creating a significant amount of quality problems in spring and durum wheat. It’s good to see the fire lit under futures price, but it’s only a good thing for those farmers up north that are still meeting the milling specs and not taking discounts. Everyone else is suffering.
Funds were estimated buyers of 5k corn and 7k beans and sellers of 2k wheat.
Export inspections were mildly disappointing in soybeans and wheat, but solidly bearish corn. Corn export loadings were 9.2 mln bushels, which is less than 25% of the weekly pace needed to hit USDA’s export target. Soybeans came in at 33.9 mln bushels and that was less than ½ mln below the needed pace, albeit they key words of “below the pace needed” are why we still can’t call it friendly. Wheat was in the same boat, coming in at 17.5 mln versus 18.9 mln needed each week. As I’ve said many times, if we want to get bullish wheat, the export sales AND shipments need to be north of 20 mln bushels every week to build the kind of demand needed for a lasting rally in price coming from supplies decreasing. If we aren’t reducing stocks due to demand, it has to come from reduced production and we’re not doing a very good job of answering that call either.
Yesterday afternoon’s crop progress and condition data showed corn g/ex ratings improving by 2 points from the previous week, moving up to 57%. Last year it was 69% g/ex at the same time. Soybean condition ratings were unchanged from last week in the g/ex category at 54%. Last year they were 68% g/ex.
On the progress side of the report, last week there were quite a few key states that had a lot of soybean acres that had yet to start setting pods. This week that category was no longer listed and the only developmental maturity category posted was % of the crop dropping leaves. Nationwide, 34% of the bean crop is dropping leaves versus a 5 year average of 59%. Going through some key soybean states in the data; Illinois is 42% behind their normal pace, Indiana 38% behind, Ohio 33% behind, Iowa 32% behind, Minnesota 29% and South Dakota 43% behind. That’s a LOT of soybean acres susceptible to frost or freeze still and with daylight growing shorter, the photoperiod isn’t in favor either.
For corn, 4% of the US crop has yet to hit the dough stage versus a 5 year average of 100%. Included in that 5 year average, 5 of the top 18 corn producing states would still be shy of 100%. Yesterday’s data only showed 4 total states at 100% of the crop at or beyond the dough state and 4 of those 18 were less than 90% still. That’s a tremendous amount of corn that would be susceptible to damage with an early freeze. 79% of the nation’s crop was listed at the dent stage or beyond versus a 5 year average of 94%. In the big 4 corn producing states, Illinois is 20% behind normal, Iowa 13% behind, Minnesota 20% behind and Nebraska 5% behind. South Dakota, the state that use to be #5 is behind the normal pace by 21%. North Dakota is 30% behind normal. % mature nationwide was pegged at 29% versus 57% normal. I’ll get to the forecast in a moment, but with much colder air moving into the Dakota’s next week and 29% of South Dakota and 41% of North Dakota’s corn crops not even being at the dent stage, that puts a lot of acres at risk from that forecast.
On the weather side of things, three days ago there was a shift in patterns with colder air starting to enter the Northern Plains in the extended runs. Yesterday’s 6-10 showed below normal temperatures for all of North Dakota, all but the SE tip of South Dakota and the NW 1/3 of Nebraska. The rest of the Plains and the Corn Belt were still in the above normal temp category in that offering. Precip was above normal across all of the Plains and Corn Belt. From a HRW wheat perspective, that forecast is bearish price because above temps and above precip are positive for winter wheat seeding conditions. For corn and soybeans the moisture side of the forecast is friendly because of harvest delay potential. From a temperature standpoint, I don’t think it gets friendly until we see below normal temp forecasts across a broader section of the Corn Belt.
8am daily export reporting showed 200k mt’s of US corn sales to Mexico.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com