Meat complex trade was fairly erratic on Thursday with the live and feeder cattle markets closing mixed on both sides of unchanged. Oddly enough, some of the feeder months were up close to $1 in the face of a few contracts finishing lower on the day as well. Hogs were solid red at the close, with net changes ranging from single digits lower to as much as $1 lower on the December.
Weekly export sales data was crazy in both markets and along with some wild numbers, I don’t think either market showed even an ounce of reaction to the report. Case in point, net beef sales were a net negative 29,100 mt’s from more cancellations than new business. Net weekly pork sales for the 2019 marketing year were a solid bullish 31,300 mt’s, along with 2020 sales that were an insanely large 123,500 mt’s. Lean hogs obviously closed lower in the face of those monster numbers and hogs opened lower yesterday as well.
WASDE Supply and Demand report data had a solid bearish undertone from the standpoint of total red meat and poultry information, although some of the individual data wasn’t so bad. 2019 total beef production estimates were lowered 5 mln lbs from last month, imports were left unchanged, but exports were lowered 15 mln, meaning domestic available supplies were increased 10 mln. 2020 demand statistics in beef improved by 150 mln lbs versus last month with a 90 mln reduction in imports and 60 mln increased estimate versus the September data in exports. 2020 pork production forecast was raised 270 mln lbs and poultry went up 168 mln lbs in this year’s projection and another 360 mln lbs more in 2020 estimates. Combined that brought total red meat and poultry estimates up 631 mln lbs from the previous month, although quite a bit of that increase, but not all of it was absorbed by a 115 mln lb decrease in imports and 325 mln lb increase in exports.
Here’s the kicker though 2020 total red meat and poultry supplies are forecast to be 2.644 BLN more lbs than 2019. Granted, exports are forecast to increase 1.059 bln and imports decrease by 204 mln, but that only adds up to 1.263 bln less domestic supply versus 2.644 bln increase in production. We have another HUGE supply problem coming for US meats next year and I’ll also add that everyone talking about the market being broken and things should be much higher are completely ignoring and oblivious to how much meat is being produced as a whole in the US right now. It’s massive!
Cattle slg.__117,000 unch wa -2k ya
Choice Cutout__215.63 +1.03
Select Cutout__186.66 +.54
Feeder Index:___144.59 +.14
Lean Index.__60.65 +.53
Pork cutout___76.91 +.90
IA-S.MN direct avg__56.78 +2.00
Hog slg.__ 489,000 unch wa +13k ya
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Grain and oilseed trade yesterday was a big, steaming pile of desperation by the closing bell. The day started with export sales that were terrible in corn at only 11.2 mln bushels. Soybeans were solid bullish though at 76.9 mln and wheat pretty good at 19.2 mln. Obviously that was a strong positive for the soybean market in particular. We also had snow flying in the Dakota’s and western Minnesota, along with freezing temps from a huge cold front that was pushing into the Central Plains states. The growing season ending freeze predictions in a lot of areas from that cold air were solid positives for corn, beans and MGEX wheat in particular.
The final shot of bullish news regarding soybeans especially was Crop Production data coming out with a national soybean yield of 46.9 bu/ac versus 47.3 average pre-report estimates. Along with planted and harvested acreage dropping mildly, plus carryin from last year’s reduced stocks, soybean production was 33 mln lower than the trade guesses and ending stocks dropped all the way down to 460 mln bushels, compared to 640 mln last month. While that’s still a historically really big ending stocks number, it’s light years better than the 1 bln+ bushel ending stocks number we once faced with old crop. That data very easily could have been super bullish for beans in the knee jerk reaction following the report. The problem is, corn data from the report was a huge disappointment and corn ended up trumping everything by the time the final closing bell rang.
Corn planted and harvest numbers were reduced slightly, just like beans. Corn yield though had estimates pegged at 167.5 bu/ac going into the report. Last month USDA’s yield was 168.2. The yield number yesterday was 168.4, which was almost a full bushel above the trade estimates. The knee jerk reaction to that number was bad. Here’s the interesting twist for corn though…, with lower harvested acres, a bigger yield still resulted in production dropping 20 mln bushels from last month. Combined with lower carryin from the bullish Quarterly Stocks data we got back at the end of September, new crop ending stocks did drop below the 2 bln bushel mark to 1.929 bln. Granted, that was still well over the 1.784 bln average trade estimate before the report, but it’s a lot better than the 2.190 bln number we got in last month’s crop report.
We finished the day with corn down double digits, soybeans being pulled lower by corn and wheat was all in the red, but just with mild to moderate losses. I want to emphasize, sub-2 bln corn ending stocks, coupled with what’s going to end up being obvious yield and quality loss from this freeze event last night and tonight are not bearish corn, or soybeans. We found that out to some extent in the overnight trade as well.
Fund yesterday were estimated sellers of 8k wheat, 25k corn and 5k beans.
There’s no new sales announcements in the 8am daily reporting today. Two different days this week there were big bean sales reported to both China and unknown destination though, which should make next week’s export sales numbers look solid in soybeans again.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com