Cattle complex futures were able to shake off the heavy spread trading that was prevalent on Wednesday and get back to more normal type trade. Both the live and feeder markets closed mildly higher across all contract months. Lean hog futures didn’t shake the spreading. Front month December closed mildly higher and the next month out was down over $1, then a lot of mixed closes in the deeper deferreds.
Actually pretty decent action across the meat complex aside from those Feb Hogs and it was all happening with cash hogs under pressure and product trade between the two markets under really heavy pressure. Pork product was already losing steam through October, but beef was moving aggressively higher. That came to a screeching halt when the calendar turned to November. Choice and select beef each lost more than $2 yesterday and it pushed the select back under the $200 mark.
Weekly export sales numbers that came out yesterday morning were a little on the bearish side for beef and bullish pork. Cattle all closed higher and pork mixed with some of lower quotes, so there was obviously very little interest in reacting to that data.
Cattle slg.___116,000 -4k wa unch ya
Choice Cutout__216.07 -2.15
Select Cutout___199.11 -2.66
Feeder Index:___152.23 -.65
Lean Index.__63.38 -.34
Pork cutout___71.57 -1.18
IA-S.MN direct avg__53.86 -.63
Hog slg.___ 473,000 -2k wa +11k ya
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Big day for the grain and oilseed trade since we all got to wade through one of the more contentious reports in a very long time. From the outset, it all looked bullish with corn yields dropping 1.8 bu/ac from the October report and soybean yield coming in 1 bu/ac lower. Both of those numbers were well under the pre-report estimates as well. It resulted in very bullish 1.736 bln corn ending stocks number, but soybeans stocks came up to a very bearish 955 mln mostly due to decreases in export projections. Wheat was still kind of bearish even though ending stocks dropped 7 mln bushels. It still ended up at a historical large 949 mln bushels.
The HUGE shocker for the day was 10 years worth of revised Chinese supply data that increased world corn ending stocks by almost DOUBLE, from 159 mmt’s up to 308 mmt’s. That immediately anchored the whole complex at lower prices that were still led by soybean losses. The good news is, nobody trusts Chinese government released, so by the end of the session the market had brushed it off and corn managed a higher close and everything else was well off the lows also.
Fund activity was estimated at buyers of 9k corn and sellers of 4k beans and 2k wheat.
Getting back to that report data from yesterday, I want to talk for a moment about the ending stocks forecasts versus historical data and also a little bit about export projections. Starting off with wheat, the export projection for this marketing year is slated to increase 124 mln bushels above last year’s level. Despite the fact exports and inspections for almost the entire marketing year have been very bearish and trailing last year by quite a bit, USDA didn’t lower the target any yesterday. Wheat ending stocks were pegged at 949 mln bushels here in the US with a stocks/use ratio of 43.7%. That’s still very bearish wheat and if exports are ever dropped, there’s also still a chance it could top 1 bln bushels by the end of the marketing year.
USDA did drop soybean export projections yesterday from what had been projected as a 69 mln bushel reduction from 2017’s total in the October report to a 229 mln bushel reduction after yesterday’s adjustment. There’s a very high probability that number continues to fluctuate based on forward or backward movement in US trade negotiations with China. Big picture though, ending stocks of 955 mln bushels with chances it could top 1 bln is really unprecedented in beans. It’s wildly bearish. Plus, from a historical perspective, the reality is that anything over about 450 mln is really bearish. Those that want to point the finger at Trump and the trade war really don’t have much of a platform to stand on because with a record Brazil bean crop last year, there’s still no way we could have exported our way down to sub-450 in carryout.
Corn in the big picture yesterday went from an October ending stocks projection of 1.813 bln, which was already bullish, down to a 1.736 bln number in yesterday’s report. They actually cut 25 mln from export projections too, which surprised me because the corn export and inspection pace overall this marketing year has been really friendly. Corn is bullish. The problem with corn is the anchors of soybeans and wheat dragging on it very heavily. I just hope corn can find a way to cut that anchor line and stand on its own legs at some point to prove that point.
6-10’s last night showed below normal temps over the central and southern Plains and the entire Corn Belt. The northern Plains were a mix of above normal west and below east. Precip was below normal everywhere. Good forecast for harvest progress finally, aside from the cold temps.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com