There was a lot of back and forth trade to start the week across the meat complex. At the close, feeders were mostly lower, aside from a couple of unchanged to higher months, hogs were mostly higher except for the front month December and the live market settled unchanged to higher in everything.
Last week’s negotiated cash trade was a disappointment with most of the trade lower in the Southern Plains than the previous week. Northern trade was closer to steady. If it wasn’t for Friday’s aggressive selloff in futures, everyone likely would have rung the bell at higher money.
Coming up on Friday this week we get monthly COF numbers to digest and the early expectations are positive. The analyst estimates for the On Feed total on October 1 range from 98% of a year ago up to 99.3%. Placements in September are expected between 97% and 104.2% with most of the estimates above the 101 mark. Marketings are pegged in a range from 100.3% up to 101.2% and with one less business day in September this year versus last, we can add about 4.5% to any number that comes out to adjust it to a daily marketing rate. That means if the monthly number comes in at 101%, the true daily marketing rate would be around 105.5%.
Cattle slg.__118,000 +1k wa unch ya
Choice Cutout__220.13 +2.09
Select Cutout__194.44 +1.40
Feeder Index:___145.96 +.36
Lean Index.__65.53 -.11
Pork cutout___78.53 +1.50
IA-S.MN direct avg__57.43 +2.16
Hog slg.__488,000 -3k wa +13k ya
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Grain and oilseed trade was covered in solid red ink at the close. The steepest losses were across the wheat complex, but nothing was too serious with everything still just down in the single digits. News flow in the wheat has had more positive influence than negative lately, so I’m not going to chalk yesterday’s losses up to anything more than funds being on the sell side and not enough willing buyers to keep the market from falling. Fund activity was estimated as sellers of 5k wheat, 9k corn and 2k beans.
Export inspections data was solidly bullish for beans, strong in wheat and terrible in corn and milo. That seems to be the plague the corn market can’t shake and that’s poor demand. Weekly export sales have been consistently poor and inspections have been bad as well and that was emphasized yesterday by a 20.9 mln bushels inspection total versus a pace needed each week of 39.1 mln bushels to hit USDA’s export target for the marketing year. Milo needs 2 mln bushels per week and only got 825k bushels yesterday. Soybeans on the other hand were impressive and that’s been the case in both sales and shipments most weeks. Yesterday’s tally was 47.6 mln bushels in export loadings versus 33.8 mln needed each week this marketing year to hit USDA’s target. Wheat hit 20.8 mln bushels, which was above the 17.9 mln needed.
Couple of notes to keep in mind regarding wheat and soybeans specifically; both of those markets are still faced with historically very large ending stocks forecasts with wheat over 1 bln bushels and beans well over 400 mln. That translates into not only the need to hit the export targets in those markets, but exceeding the targets on a consistent basis gives more chance for USDA to raise export targets, resulting in lower ending stocks potential. If we want sustainable rally potential, it has to come from lower ending stocks than the current estimates of 1.044 bln wheat and 460 mln beans. Demand has to increase, production needs to decrease, or a combination of the two needs to happen for those stocks to get down to more friendly levels. In the case of corn with a 1.929 bln ending stocks forecast, if we don’t see the export pace pick up, that number risks a move back over 2 bln. The corn market has a major problem and that problem is poor export demand.
Back to the beans for a moment though, the chatter overnight is that the Chinese government has granted permission for up to 10 mmt’s of US soybean imports duty free. That created a nice push higher in the overnight action.
Crop Progress data from yesterday afternoon showed 86% of the nation’s corn crop mature, down 11 points from the 5 year average. Illinois was 11% behind normal, Iowa 11%, Minnesota 8% and Nebraska 3% behind normal. In the northern states, Wisconsin is still only 61%, South Dakota 75% and North Dakota 65%. Harvest progress was 30% complete nationwide versus 47% average. I’m sure the lagging harvest pace is one of the reasons for stronger than normal basis thus far. Soybean harvest was 46% complete compared to a 5 year average of 64%. 6% of the soybean crop still hasn’t started dropping leaves. Condition ratings showed corn getting 1 point better in the g/ex category and soybeans were unchanged from last week.
6-10’s last night showed below normal temps for all of the Plains and most of the Corn Belt. From central Indiana east and south it was normal to above. In parts of the Northern Plains, including western Nebraska, those temps were much below normal. Precip was above normal for all of the Corn Belt and Plains, which included all of HRW wheat country, so let’s hope that comes to fruition.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com