The start of the week brought active selling to the lean hog futures that resulted in $2+ losses in quite a few contract months. Interesting setup in the hogs, because deferred futures all develop strong premiums based on the anticipation of continued strong Chinese purchases of US pork. We get good export numbers and inevitably the closer we get to expiration of these hog futures month, the more active the selloff becomes. So, demand potential builds the premium, demand shows up and the premium goes away before the contract expires. Crazy trade.
Active expansion is still going on in the pork sector and the balancing act between increased exports and increased production has generally resulted in production outpacing those exports still. Daily and weekly kill numbers and production totals are incredibly large. Yesterday’s 493k head slaughter tally is the biggest I think I’ve ever seen for a daily number. The only sure thing for the hog market looking forward is that volatility is NOT going away anytime soon.
Live and feeder cattle trade had a mildly higher closes across everything but the front month December live cattle. That contract is still a couple weeks away from first notice day for deliveries, but it’s also holding a $3.70 premium to last weeks negotiated cash trade levels, which were around $115 live from north to south.
On Friday we get monthly COF numbers released and the expectations are looking for some solidly bearish numbers in a couple of categories. The On Feed total has been below year ago levels for the last two months, but placements through October are expected to come in on the north side of 110% of a year ago. That is likely going to bring the total inventory at the bunkline up to around 1%-2% bigger than last year on November 1. A few of the analyst estimates on placements were over 115%, along with the bottom end number being 107.3% in the survey. Marketings are expected in a range from 99.3% up to 102%. Not enough to keep the On Feed total below a year ago…
Cattle slg.__118,000 +6k wa -2k ya
Choice Cutout__239.12 -1.68
Select Cutout__215.59 +1.26
Feeder Index:___146.69 -.43
Lean Index.__ 59.24 -.27
Pork cutout___89.14 +1.01
IA-S.MN direct avg__41.90 -.50
Hog slg.__493,000 +49k wa +15k ya
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Grain and oilseed trade was impressive across the wheat complex yesterday, but depressing for the fall crop markets of corn and soybeans. I’m still in awe over how many bullish things have been thrown at the corn market in particular this year with late planting, a lot of prevent plant acres, too wet in some areas over the summer and too dry in others, an early freeze and now a huge amount of corn still sitting in fields up north that’s showing no indication of wanting to dry down enough to get harvested. Some of that happening because of the freeze hitting those fields when they weren’t very close to being mature yet, which creates quality and test weight issues on top of everything else. There’s two key things missing, or maybe more aptly put, things that are being overlooked in all that bullish banter though; exports and ethanol use. Both of those numbers are down from the previous few years and in the case of exports, there’s a strong chance it’s going to go down even more. So, even with corn prices now very solidly below $4, we’re still not seeing increases in corn exports. They are actually getting worse.
Export inspections data yesterday confirmed it with 25.1 mln bushels in corn loadings versus a weekly pace needed to hit USDA’s target of 39.9 mln bushels. Wheat was depressing as well with 16.5 mln in export inspections versus an 18 mln bushel weekly pace needed. Granted, that might not sound like it’s off the target very much in wheat, but wheat also still has an ending stocks forecast that’s over 1 bln bushels. That means we need BIGGER exports and inspections than what’s needed, not at or below like what we get each week lately. Soybeans were the bright spot yesterday with 56.3 mln in export loadings versus 31.8 mln needed each week.
8am daily export reporting showed 191k mt’s of US corn sold to unknown destination.
6-10’s last night showed normal temps in the Northern Plains and most of the Corn Belt. Central Plains states were a mix of normal to below and the Southern Plains and Delta were below normal. Precip was above normal over most of HRW wheat country and through all of the Corn Belt and Northern Plains. Central Texas into SC Oklahoma were below normal.
Crop progress numbers yesterday had corn harvest advancing 10% up to 76% complete. North Dakota is only 23% done, South Dakota 53% and Wisconsin 44%. Soybean harvest was 91% complete, up 6% from last week. Winter wheat condition ratings dropped 2 points in the g/ex category to 52%. Last year it was 56% on the same date. 14% of the crop is p/vp versus 10% last year.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com