Coming off on Monday’s nasty bearish reaction to an ugly COF report, yesterday’s trade looked a lot better for the hopeful bulls. Feeder cattle futures all finished mildly higher. Live cattle spend time at higher, but ended with the front four months down a little bit and the feb and beyond contracts up a little.
In the product trade, choice cutouts have now been down 14 out of the last 15 sessions, which means beef packer margins are tightening, but they are also still very solidly in the green. That doesn’t necessarily mean they will be willing to pay up for cattle this week, but it does mean they have wiggle room to do it if they feel the need. Unfortunately with a reduced kill coming up next week over the Independence Day holiday, the “need” likely isn’t going to be there in this round. Odds are that means a little more pressure this week on cash. If clearance on the 4th is good, the restocking effort following could give us a bump in cash. Ideally the 4th would fall closer to the weekend for better clearance instead of in the middle of the week, but there’s always hope!
Cattle slg.___115,000 -5k wa -2k ya
Choice Cutout__216.83 -.86
Select Cutout___201.57 -.32
Feeder Index:___141.75 -.53
Lean Index.__ 85.63 -.57
Pork cutout___87.41 +.97
IA-S.MN direct avg__77.61 -.70
Hog slg.___ 447,000 -1k wa +7k ya
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Grain and oilseed trade found consistent pressure selling across the wheat complex and soybean markets, but corn squeaked out a higher close. Fund activity was estimated as buyers of 5k corn and sellers of 9k beans and 6k wheat.
Trade war continues to be a hot topic, but some of the news stories yesterday included positive developments. Canada announced plans to impose steel tariffs and quotas on China, which is a step closer to being on the US’s side in this ordeal. The other factor was the big fallout starting to happen with China’s economy. Their equity markets are off around 20% from the highs and the government is throwing capital at banks to plug holes in the dam. Ag-wise, the key thing to keep in mind is that China probably doesn’t have any interest in starving their people and with South American production down this year, it’s doubtful they’ll operate very well without US beans and other ag products in the mix. I still don’t think we can rule out the potential for as much upside momentum as what we have witnessed to the downside. I’m in no way calling that as a forecast, but the potential is certainly there.
Friday is the big day for the Quarterly Stocks and Final Planted Acreage reports from USDA. For wheat, this will be the ending stocks figure for the old crop marketing year that ended on the last Day of May. The average trade guess for wheat is 1.091 bln bushels, which would be down 90 mln from last year at the same time. In my opinion the stocks number might come in on the high side of those guesses though given the poor export performance in the last quarter for wheat. Corn stocks are pegged at 5.268 bln bushels, which would be up 39 mln from last year at the same time. Soybeans have an average trade guess of 1.225 bln and if that number is hit, it would be 259 mln bigger than last year at the same time. That’s a big jump.
Acreage estimates for corn and soybeans have a broad range of guesses. For wheat, the acres won’t be the most important topic this summer, it will be how many wheat acres across HRW wheat country weren’t harvested versus what was planted. There were a lot of failed, grazed and abandoned acres from Kansas down through Oklahoma and Texas that still haven’t been accounted for in the last crop production report. Total wheat acres have an average guess of 47.124 mln. That’s down 215,000 from the March estimate, but it would be up 1.1 mln compared to what was planted in 2017. All of that increase, plus a little more is coming from spring wheat seedings that are estimated at 12.431 mln this year versus last year’s 11 mln acre total.
The average estimate for corn acres is 88.6 mln compared to 88 even in March. If that estimate is hit, it will still be 1.6 mln fewer corn acres than we planted last year, which in my opinion, still carries pretty bullish implications for corn IF any moderate hiccups happen with this year’s crop. “Moderate”, meaning any chances at sub 170-type yield nationally. There’s a lot riding on this corn number because the March intentions at 88 mln meant we really needed to be in the mid 170’s yield wise to maintain any comfort in the carryout. Adding a half million acres like the intentions suggest eases that need slightly. If we added quite a bit more than the estimates, these current prices become warranted pretty quickly.
Soybean acreage guesses are at an average of 89.691 mln, which would be up 709,000 from the March intentions and 451,000 less than last year. The range of estimates wasn’t nearly as wide in beans compared to corn and I don’t think there’s much friendly potential in the bean number either. I think corn will be the big number to watch on Friday morning.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener / Alex Gasper
www.loewenassociates.com