Following a decisively bearish Quarterly Hog and Pig report from Friday, the initial reaction yesterday morning was appropriately bearish with quotes in the vicinity of $1 lower, but the end result based on the futures close was polar opposite. Front month October hogs were just mildly higher, but the Dec and Feb contracts were up more than $2 and April was over $1 higher. The total inventory was up 3% from last year, breeding herd numbers were up 2% and market hog totals were up 4%. All of those numbers were also above the pre-report estimates, along with it being the biggest Sept 1 inventory since Hog and Pig reports started being released. There was a daily kill tally last week of 490,000 head and the weekly total was 87,000 head bigger than a year ago. The result…, October hogs are still floundering around not too far off the lows, but the December made new recent highs yesterday and settled more than $14 above the low water mark from September 10th. That was great trade yesterday in the hogs and hopefully a precursor to better things yet to come, especially in a market that had carcass cash trading in the mid-$40’s just two weeks ago, which translates into mid-$30’s live. That cash was up close to $5 off its lows yesterday as well.
Live and feeder cattle trade didn’t share the same enthusiasm. Even after a sizable jump in the negotiated feedlot trade late last week, October and December live futures finished mildly lower yesterday. The next four contract months were up a little. Feeders found triple digit losses on the front two months and milder losses beyond. Those losses being aided by strong double digit gains in corn coming on the heels of bullish Quarterly Stocks data for the grain and oilseed markets.
Cattle slg.__117,000 +1k wa unch ya
Choice Cutout__212.44 -.14
Select Cutout__187.11 -2.75
Feeder Index:___142.51 +.74
Lean Index.__56.43 +1.09
Pork cutout___73.73 +.47
IA-S.MN direct avg__49.93 +.82
Hog slg.__489,000 +46k wa +39k ya
Since we officially closed out the month of September yesterday, let’s take a look at some of the monthly movement in prices. October live cattle were up $5.65 for the month, October feeder cattle were up $11.60 and October lean hogs were up $1.92. Choice beef cutouts were down $19.33 and select was down $25.16. Kansas negotiated cash feedlot trade was unchanged to $1 lower. Pork cutouts were up $1.42 and Ia-S. Mn carcass cash was down $6.29.
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Stellar action in the grain and oilseed trade yesterday with strong double digit gains in corn, 20+ cent gains in soybeans and wheat showed mild to moderate gains in KC and Chicago, but MGEX finished lower. Reasoning behind the weakness in MGEX was tied to the Small Grains Summary data that gave us what was supposed to be the final wheat crop production estimates of the year. Problem is though, spring and durum wheat harvest is way behind normal, so we really got what should be considered as inconclusive data on those two crops. All wheat production was 1.962 bln bushels, which was 9 mln below the average trade estimate, but it’s still 78 mln bigger than last year’s crop. Versus the expectations, HRW wheat was 833 mln bushels, down 11 mln from trade guesses, SRW wheat was 239 mln, which was down 17 mln from the estimates, spring wheat was 600 mln, up 15 mln from the estimates and durum was 2 mln above the estimates at 58 mln. Given the fact MGEX wheat had rallied hard in the month leading up to the report and KC and Chicago were up, but still lagging that spring wheat strength, getting somewhat bearish report data versus the estimates, kept a lid on those MGEX gains yesterday.
Quarterly Stocks data was also released and for corn and beans, these numbers end up being the old crop ending stocks totals. Corn stocks were 2.114 bln bushels, which was 26 mln less than last year, but it was 322 mln bushels below the trade estimates, which is what helped corn rally so much yesterday. Soybean stocks came in at 913 mln and that was 67 mln bushels below the trade estimates, albeit also 475 mln larger than last year’s Sep 1 stocks. The fact it came in well under the pre-report estimates helped beans push higher as well.
Weekly export inspections data was solidly bearish corn yesterday and mildly bearish wheat and soybeans. Corn inspections were 15.7 mln bushels, versus a weekly pace needed of 41 mln. Soybeans were 30.1 mln compared to 34.2 mln needed each week. Wheat was 17.1 mln compared to 18.7 mln needed each week. The market obviously ignored inspections data in favor of the big report numbers being released.
Monthly closes in the grains had December corn up 18 1/4c, Nov beans up 37c, Dec KC wheat up 17 ¾c, Dec Chicago up 33 ¼c and Dec MGEX up 47 ¾c
Crop progress and condition data that came out yesterday afternoon showed corn g/ex ratings at 57%, which was unchanged from last week, but down 12 points from last year’s 69% rating at the same time. Soybeans were 55% g/ex, 1 point better than last week, but 13 points under last year at the same time.
Progress data had percent dent in corn at 88% nationwide versus a 5 year average of 98%. Illinois is 14% behind normal, Indiana 13% behind, Iowa 8% behind, Minnesota 10% behind normal, North Dakota 20% behind and South Dakota 13% behind. Only 43% of the nation’s corn crop is mature versus 73% normal. Illinois is 46% behind average, Iowa 38% behind, Minnesota 45% behind and Nebraska 20% behind. Only 15% of the Nodak crop is mature and South Dakota is at 29%. Wisconsin is 16% mature. That’s a LOT of crop vulnerable to frost/freeze yet with a long way to the finish line. Soybeans dropping leaves were at 55% versus a 5 year average of 76%. Indiana is 31% behind normal, Illinois 35% behind, Iowa 28% behind, Minnesota 25% behind, South Dakota 30% behind and North Dakota 7% behind. That’s a lot of bean acres vulnerable to weather still as well.
That being said, if frost or freeze is in the cards, it’s going to need to happen this week, because next week was normal to above in most areas in the 6-10 two days ago. Last night’s 6-10 was above normal everywhere east of central Illinois and from the Panhandle south. Below normal temps were on tap for central Kansas up through Nebraska and ½ of the Dakota’s and normal everywhere else. So, it looks like the western Belt and fringe areas are still treading on thin ice, but the central and eastern Belt still skates by from the cold temp potential. Moisture-wise, it stays wet in the Corn Belt though, so harvest pace will be slow.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com