More than a little irony behind all the commotion going on within the cattle industry with different producer groups butting heads and the common theme behind the madness is beef packers manipulating markets. I’m not going to choose sides in the producer group bickering, I’ll just casually observe from the outside looking in. The irony is based on the peak of that excitement being accompanied by a futures market that’s actually acting way more rational now than it has in months. Product trade is back to price levels that are really close to fair market value versus other competing meats like pork and poultry. Negotiated cash has been in a solid uptrend for several weeks and futures finally got back to levels over the last two weeks in both fats and feeders that were trading prior to the Tyson plant fire in SW Kansas. Negotiated cash last week ranged from $107 in the south up to a $109 peak in the north. October live cattle futures that are now into the delivery period were parked right smack dab in the middle of that cash range at yesterday’s close. Months and months of poor convergence between cash and futures. This go-round has had convergence before delivery potential even started…
Closes yesterday had Oct and Dec live cattle higher and all the deferreds mildly lower. Feeders were mildly lower on the front end and triple digits down on some of the deferreds. Hogs were down the $3 limit on Dec and Feb and actively lower everywhere else. That also means expanded limits up to $4.50 possible in today’s trade. That was the 5th consecutive lower close in Dec hogs yesterday, which is crazy given the outstanding export pace in recent months. Then again, it’s a delicate balancing act between aggressive US expansion in hogs and increasing export markets. The fact hog futures are much closer to contract lows than contract highs emphasizes the fact we’re still expanding production faster than exports.
Cattle slg.__116,000 -1k wa +2k ya
Choice Cutout__211.09 -.87
Select Cutout__185.91 -1.01
Feeder Index:___144.43 +.84
Lean Index.__59.22 -.01
Pork cutout___77.75 +2.58
IA-S.MN direct avg__50.06 -.30
Hog slg.__489,000 unch wa +16k ya
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Grain and oilseed trade was fairly quiet yesterday. Corn finished mildly higher, beans mildly lower and wheat was mildly lower in KC and Chicago, but up a little in MGEX. Not only does the US have a quality problem in spring wheat production areas of the Northern Plains because of it being way too wet heading into harvest, but now there’s some crazy big snowfall estimates showing up in the weather model runs that could ding production potential and quality even more. The result has been MGEX wheat pushing aggressively higher at times since the 1st of September. KC and Chicago have been much more lethargic in their willingness to follow.
Funds yesterday were reported buyers of 5k corn and sellers of 2k wheat and 2k beans.
8am daily export announcements yesterday included two BIG bean sales to China and obviously no reaction in futures given the lower close. No new sales this morning.
Export inspections data that came out midmorning was mildly bullish beans, mildly bearish wheat and really bearish in corn. Corn export loadings were 18.4 mln bushels versus a pace needed every week of 41.5 mln to hit USDA’s new crop export target for the marketing year. Milo was 3.5 mln versus 1.9 mln needed, so that was good. Soybean came in at 38.2 mln versus a pace needed of 34.1, which is why I called beans friendly. Wheat was 14.2 mln versus a pace needed of 18.8 mln bushels every week. China and Mexico were the biggest soybean buyers. Mexico and China were the top two in corn, in that order. The Philippines and Mexico were the top two in wheat.
Weather has been at the forefront of the news this week, although it really hasn’t dictated market direction much. 6-10’s are showing much below normal temps in the Dakota’s and Minnesota and below normal temps all the way to the Kansas/Oklahoma border. Precip in that 6-10 was below normal for most of the Plains and Corn Belt. The 5 day forecast precip run is really wet for Missouri, Iowa, Illinois and Wisconsin, along with the row crop areas of the Northern Plains and northern Corn Belt. Part of that 5 day precip run includes some major snowfall potential for Minnesota, South Dakota, SE North Dakota and northern Nebraska. They are talking feet, not inches in some areas.
That gets us to the crop progress report numbers yesterday, so we can get a gauge on damage potential in the cold and snow areas. Corn percent dent nationwide was 93% yesterday versus 99% as a 5 year average. 9% of the Illinois corn isn’t dented yet, 9% Indiana, 6% in Iowa, 6% in Minnesota, 9% in South Dakota and 16% of the corn hasn’t started denting yet in North Dakota. Normally they would be 98% dented. 58% of the corn nationwide is mature versus 85% normal. Between the Dakota’s and the big 4 corn states, North Dakota is only 22% mature, South Dakota 36%, Minnesota 39%, Iowa 52%, Illinois 59% and Nebraska 74%. That 22, 26 and 39% numbers between Minnesota and the Dakota’s is a lot of corn at risk for a killing frost. Additionally, 22% of South Dakota’s soybeans haven’t started dropping leaves, 8% in North Dakota and 20% in South Dakota. Iowa has 32% of the bean crop yet to start dropping leaves as well. Condition ratings declined 2 points in the g/ex category for soybeans this week. Corn condition ratings dropped 1 point.
There’s obviously a lot of friendly weather potential ahead of the markets this week. There’s also monthly Crop Production and S&D reports coming out Thursday morning. We already know old crop corn and soybean ending stocks numbers are going down because of the Quarterly Stocks data from last week. Yield estimates ahead of this report are trending lower than last month as well.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com