Little bit of a sour start to the week yesterday with live and feeder cattle both finishing lower. Coming off a major up move from Friday though, the mildly weaker finish wasn’t too alarming. What was alarming was negotiated cash last week only being able to manage steady money with the previous week in the Southern Plains at $119, despite Nebraska and the western Corn Belt gaining a little. Especially odd was Dec fats trading over $122 at the close Friday versus that $119.
The stout gains Friday turned a quietly lower futures trend back into a nice looking bull market on the charts. Dec live cattle made new recent highs, but is just a shade shy of the contract highs from back in April. Feb live cattle pushed solidly into new contract highs and had the best looking technicals by far across all the cattle months going into Friday, but I think April took that crown away. April fats had stalled out twice near the old contract highs, so the rally there took out some really strong resistance.
Feeder cattle charts are still looking sluggish versus the fats with a long way to go to get anywhere near the April contract highs. In the front month January feeders, Fibonacci retracement points have been heavy resistance and Fridays run higher didn’t even push the market into new recent highs above what was scored in November. It’s the same story in the March and April feeder cattle contracts. May and August, which are the next two months traded, did in fact push into new contract highs, so they look really good on the charts with no resistance points above the market.
Cattle slg.__120,000 -1k wa +10k ya
Choice Cutout__217.08 +.79
Select Cutout__205.51 +1.27
Feeder Index:___144.61 +1.21
Lean Index.__59.81 -.07
Pork cutout___79.56 -2.32
IA-S.MN direct avg__47.59 -.18
Hog slg.__492,000 +1k wa +12k ya
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Moving on to the grain and oilseed trade, unlike the cattle that rallied hard Friday and set back yesterday, the grains all enjoyed a second day of good upward movement in price. Between wheat, corn and beans, corn was the only commodity still in single digits higher at the close. KC wheat was actually pushing close to 20 higher at the settle after trading over 20 better during the day.
Export inspections that came out midmorning were once again absolutely terrible in corn. They were good in milo, really good in soybeans and mildly bearish wheat. Breaking it down by the numbers, corn needs 41.7 mln bushels per week for the rest of the marketing year to hit USDA’s export target of 1.85 bln bushels. Yesterday, corn only hit 65% of that mark with 27 mln bushels as the tally. Milo exceeded the 2.2 mln needed each week with a 3.1 mln total. Soybeans hit 46.3 mln bushels and only needed 29.1 mln, so that was solid bullish for beans. Wheat needs to be 19.4 mln bushels every week and the total came in at 18.6 mln. Close granted, but it still missed the mark by a little bit. The #1 destination for wheat and corn in the inspections data was Mexico. China was the top taker in milo and soybeans and they were responsible for 54% of the soybean total and 94% of the milo we shipped.
It was the China news on Friday that propelled the big gains across all of the Ag’s. With funds going into that news heavy short in corn beans and wheat, the bottleneck to switch, or lighten up those positions has been good for price. Those funds were estimated buyers yesterday of 10k wheat, 15k corn and 12k beans. That put the fund estimated position as a small net long wheat, but still solid short corn and beans.
Regarding the China news and the agreement “in principle” on Phase One, this isn’t the first rodeo on a Phase One agreement. This is the second time around with the first attempt not ever being signed. What I’m getting at is…, don’t get too comfortable in the thought process that this is a done deal. Nothing has been signed as official yet, which means there’s still potential it could blow up in our face. Hope for the best is all we can do at this point, along with being proactive at taking pricing opportunities if they are presented with this rally.
6-10’s last night showed above normal temps for all of the Plains and Corn Belt states and that included much above normal temps for all of HRW wheat country, extending into Missouri and SW Iowa. Precip was above normal for HRW wheat areas and most of the core Corn Belt. The Northern Plains were normal to below on precip.
Current trade a/o 9:30am CST
@LEZ19 122.425 0.125
@LEG20 127.100 -0.150
@GFF20 145.975 0.725
@GFH20 146.225 0.625
@HEG20 70.125 -0.375
@HEJ20 77.375 -0.075
@CH20 388′ 2 0′ 2
@CK20 395′ 2 0′ 4
@CN20 400′ 6 0′ 4
@SF20 924′ 4 2′ 4
@SH20 937′ 6 1′ 6
@SK20 951′ 6 1′ 6
@KWH20 465′ 2 3′ 2
@KWK20 473′ 0 3′ 2
@KWN20 479′ 0 2′ 6
@WH20 552′ 6 3′ 0
@WK20 554′ 6 3′ 4
@WN20 554′ 4 3′ 2
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com