Somewhat of an interesting day in the cattle yesterday because the product and cash side of the equation were right about as expected, but the futures trade finished strong, which wasn’t expected. Futures are supposed to be tied to cash, not product and cash was lower.
I won’t beat the dead horse of talking about labor shortages in packing plants again, but I am going to reiterate the effects of what goes on when it happens. Shorter supplies out the back door of the plant mean higher prices in cutouts and it’s going to trickle down into higher prices at the meat counter as well. There’s no short supply of market ready cattle though, we just can’t find kill slots for them all and consequently, cash is going to struggle until the labor and chain speed problem is resolved.
Choice and select beef were both up over $2 yesterday. The last four consecutive days the choice has been up triple digits and gained almost $10 and the last time there was a lower quote in choice was on the last day of December.
On the cash side, Southern Plains negotiated trade ranged from $134-$137 yesterday. The top end, along with the bulk of last week’s trade was $138, so this is all lower week to week. Last week’s kill was 32k head shy of a year ago and through the first two day of this week we’re already behind a year ago by 5k head. When the On Feed supply is even with a year ago, those kind of slaughter numbers don’t work and they certainly don’t go hand in hand with higher cash. This cattle market’s gonna struggle for a while.
Cattle slg.__ 114,000 -3k wa -2k ya
Choice Cutout__278.22 +2.18
Select Cutout__268.63 +2.13
Feeder Index:___162.24 +.26
Lean Index.__75.13 +.43
Pork cutout___81.62 -4.80
National direct carcass__66.99 +1.10
Hog slg.__ 458,000 -9k wa -42k ya
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Moving on to the grain and oilseed trade, after making new recent lows on Friday, wheat rebounded for the second straight day. KC and MGEX managed double digit gains and Chicago was up, but it was also doggy by comparison. Technically, the charts still look solidly bearish in wheat, although even in down markets, you don’t go down every single day. Same goes for up markets. Corn and beans settled mildly higher in each and the chart technicals in both of those markets still look really nice and friendly.
That all stands to potentially change today with the release of USDA’s Crop Production and Supply and Demand numbers, along with Quarterly Stocks and Winter Wheat Seedings reports. That’s going to be a mountain of data to digest and with it comes pretty good chances for wild and volatile trade in one direction of the other. I kind of get a chuckle out of reading ag related social media posts, newswires and articles by ag pundits all trying to answer the question of whether the report is going to be bullish or bearish, or maybe more accurately stated, “whether the market is going to go up or down right after the report”. Hate to break this news to you, but that’s not a good question to ask and certainly one of the most ignorant questions for anyone to attempt to answer in my line of work as well. So why do so many folks in the industry want to talk about it?? The answer to that is because it generates commission and panders to the brainwashing of ag producers that price prediction is the only thing that matters from folks that nobody should be listening to in the first place. Think about that next time you see or hear those things talked about. Those folks aren’t trying to help you, they just want to take your money.
Anyway, here’s what causes markets to react immediately after reports; it isn’t really what the actual numbers say versus the previous month, or year. It’s what the report says versus the average of all the expectations. So here’s the expectations:
All winter wheat seedings were 33.648 mln acres last year and the average guess for the report is 34.255 mln. HRW wheat specifically is pegged at 24.034 mln versus 23.494 last year, which is an increase of 540k acres.
Corn and soybean yield average trade estimates are 177 and 51.3. The last time NASS put out yield estimates was in November and they were 177 and 51.2, so the only change expected is a .1 increase in beans.
Ending stocks for wheat are expected at 608 mln bushels, 1.472 bln corn and 348 mln beans. That’s up 10 mln in wheat from the December report, 21 mln lower corn and 8 mln higher beans.
World ending stocks are expected to be mildly higher in wheat, just over 1 mmt’s lower in corn and just over 2 mmt lower in soybeans and those lower guesses are being driven by reduction potential mostly in South American corn and bean crops. Corn and soybean production in both Brazil and Argentina are expected to decline versus last month’s estimates and of course CONAB came out yesterday confirming that for Brazil. We’ll see if USDA agrees in today’s data.
Funds yesterday were estimated buyers of 3k wheat, 2k corn and 1k beans.
8am daily export reporting showed 132k mt’s of US soybean sales to China and 100k mt’s of US beans sold to unknown destination.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell
www.loewenassociates.com