There was a fairly broad range of trade yesterday in the cattle complex as strong gains early in the day gave way to a selloff heading into the close. Live and Feeder futures still managed to close on the plus side in everything, it was just well off their highs. Hog closes were mixed on both sides of unchanged and looked quiet based on the settlements, but there were some $2+ ranges throughout the day.
The hog market has a lot still riding on China’s African Swine Fever problems and the potential for continued export interest in US pork as a result, I wouldn’t expect volatility to leave that market anytime soon. The problem with developing too strong a bias on that situation though is the fact we seldom get accurate news out of China. There has been a wide variety of estimates thrown around on total losses to date with some reports citing their cull numbers are as large as the total US hog herd. IF that’s the case, we should be seeing continued increases in US exports of pork to China and we did get that three weeks ago. It just hasn’t happened again in large volume since… Hogs exploded higher for close to 30 days straight before dropping like a rock again starting not too long after that big export news. I’m not ruling out the potential for another run up, but it’s likely going to take Chinese business to get it done.
That isn’t just positive for hogs if it happens either. Pork product values shooting actively higher gave the beef market a lot of breathing room to stay elevated. When pork wat at the lows back in mid-February, from a competing meat standpoint it was a clear cut winner over beef, which meant the market needed to find balance or high beef prices weren’t sustainable. At that time, the beef to pork cutout value ratio was pushing up against choice beef being 3.5 times the value of pork. Historically, anything under 3:1 has been closer to fair market value. After the pork run, even with beef moving higher, we’re back in that sub 3 times area, which is good since it gives us a better shot at continued active beef movement.
Cattle slg.___115,000 -4k wa +12k ya
Choice Cutout__226.84 +.80
Select Cutout___219.33 +.44
Feeder Index:___142.42 +.68
Lean Index.__75.80 +1.93
Pork cutout___82.15 +.82
IA-S.MN direct avg__N/A
Hog slg.___ 476,000 +2k wa +158k ya
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In the grain and oilseed trade, the ugly beating the markets took on Friday based on bearish data on the quarterly stocks report thankfully didn’t last past that session. Soybeans rebounded with low double digit gains and that was aided by 8am daily export reporting that showed a massive 828k mt’s of US bean sales to China. Corn and wheat ranged from 3-5 higher, which for the wheat market meant regaining most of the losses back from Friday. Corn was a long shot from clawing its way back out of the cellar.
That was a nasty array of news for corn on Friday with planted acreage intentions up 3.7 mln from last year and quarterly stocks coming in 269 mln bushels higher than the average trade estimate. Not only is that a big jump in acres, but the stocks number leaves potential for a 2 bln bushel carryout in the next set of S&D’s. If you remember my commentary prior to the report release though, these surveys were conducted in early March, before the flooding across the Midwest and also before a much cooler and wetter than normal weather pattern. The moral to that story is there were a lot of storage bushels of corn and beans lost in the flooding that still haven’t been accounted for, plus planted acres are still very much a moving target based on very little field work getting done last fall and over the winter because of wet weather.
Weekly export inspections that came out yesterday morning were all above the expectations and for corn, it was the largest inspections number since last fall. However, versus the pace needed to hit USDA’s export targets, all of the numbers were in the bearish category. Corn inspections were 49.6 mln bushels versus 54.9 mln needed each week to hit USDA’s target. Soybeans were 26.9 mln versus 36.3 mln needed every week. Wheat inspections at 15.4 mln were just over half of the 30.4 mln needed every week to hit their target. Some consolation should be coming in the wheat market though during Thursday’s export sales report. Last week’s Egypt business, along with 300k mt’s to Iraq should show up in the business, so that’s good news.
Fund activity yesterday was estimated as buyers of 4k wheat, 15k corn and 7k beans.
National numbers on the crop progress and condition report came out for the first time this year yesterday afternoon. Winter wheat ratings showed the crop at 56% g/ex versus 32% g/ex at the same time last year. SRW wheat states were 41% g/ex, while the HRW wheat states were 57% g/ex. Texas is sitting at 41% g/ex, Oklahoma 69% g/ex, Colorado 66% g/ex and Kansas 55% g/ex. Corn and spring wheat planting pace was still not part of the data, although for corn there was some individual states reporting. Arkansas is 13% done, down 7% from normal, Louisiana is 87% complete versus 64% normal. Mississippi is 33% done versus 32 normal. Texas is 51% complete on corn planting with 25% emerged. Last year, emergence was the same, but they are 2 points shy of a year ago on planting pace.
6-10’s last night showed above normal temperatures for the entire Plains and Corn Belt. Above normal precip was in the offering over the entire Plains and Corn Belt as well. Given the wet forecast, I’d still view that as being more friendly than bearish from the standpoint of keeping farmers out of the field due to muddy conditions.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com