Active day for the ag sector yesterday. It was an up day for the meats and up for wheat complex as well, but down in the fall crop markets of corn and soybeans. Even though the meats have been very erratic lately, testing contract lows in mid-May and then testing spring highs in some contracts just last week, cash fed cattle trade has been pretty stale since the $110 mark was hit the 3rd full week of May. June live cattle actually pushed up into the highest level it has traded since March at the peak yesterday. That was the biggest highlight for the meats. It also resulted in the basis gap narrowing down to just $1.70 versus the $110 cash that traded last week. That’s a massive narrowing of the spread and it has come at the expense of basis on hedged cattle, which isn’t a good deal. Great convergence in the deliverable month, but once again, not good for basis traders.
Fed Cattle Exchange trade had 568 head consigned this week and went back to zero sales. There were 5 total lots listed; three of those were no sales and 2 PO’d at $110. 5 out of the last 7 weeks have had zero sales in that trade. While it was good to see $110 bids since that’s close to par with last week’s cash, it would be much better to see a lot more cattle consigned and trading.
Weekly export sales were coming off of a monster week for beef in last week’s numbers and unfortunately didn’t follow through with another impressive number. Net beef sales were down 50% from last week at 15,600 mt’s and actual exports were 14,200 mt’s. I’ll call that bearish for beef. Not quite as bearish as the hogs though, since net pork sales were a new marketing year low at 8600 mt’s, down 60% from last week. Actual exports in pork were 19,300 mt’s, so this morning’s numbers were solidly bearish for hogs.
Cattle slg.___119,000 +1k wa +1k ya
Choice Cutout__226.97 -.61
Select Cutout___203.65 -2.20
Feeder Index:___139.21 +.18
Lean Index.__ 72.50 +.77
Pork cutout___78.24 -.29
IA-S.MN direct avg__73.71 +1.47
Hog slg.___451,000 -13k wa +9k ya
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In the grain and oilseed trade yesterday, higher wheat complex action was led by KC wheat and Southern Plains harvest reports that continue to disappoint from a quantity standpoint despite the fact it seems like test weights and protein levels are pretty good in a lot of the same stories. Wheat futures got pounded down pretty hard Monday, but have now gained it all back, plus some extra with the last two day’s increases and big overnight gains last night too. Corn and soybeans were disappointing and more so in corn than beans. Old crop July settled below $3.80 yesterday and new crop December closed below the $4 mark for the first time since March 28th.
6-10’s last night were still warm most places, but the moisture picture is significantly improved again for some areas as well. Temps in the Central and Southern Plains and Corn Belt were above to much above normal. Precip was normal to below for NW areas of the Central Plains and all of the Northern Plains. Normal to above precip was on tap for central and southern areas, as well as most of the Corn Belt, except the far eastern part of the Corn Belt. From Indiana east was below normal.
Weekly export sales for the gains were good in corn again, neutral to maybe a touch negative for beans and not good at all for wheat. Corn sales were 33 mln bushels old crop and 16.5 mln new. That brought the cumulative marketing year total sales up to 2.177 bln, although 642 mln of that is still just sales commitments and not shipped yet. That’s kind of a big number for unshipped. Milo sales were 500k old and zero new. Soybeans were 6.1 mln old and 1.3 mln new. Quite a few cancellations in that old crop business, but enough new stuff to garner a positive net number still. Wheat sales were 9.2 mln bushels, which was bearish.
There is 155.2 mln bushels of new crop wheat sales on the books for a marketing year that started on June 1. Last year at the same time there were 242.8 mln on the books. Unfortunately that’s a really bad start, coming off of an old crop year where ending stocks were on the north side of 1 bln bushels. As I have indicated many times over the last several months, bullishness is going to have to come from the crop being harvested right now, because last year’s picture ended very bearish.
Next Tuesday we get monthly crop production and S&D data out from USDA. Estimates for all wheat production in the US are down 1 mln bushels from last month at 1.820 bln bushels, but that’s also up 79 mln from last year’s crop. HRW wheat specifically has an average trade guess of 641 mln, down 6 mln from last month and 109 mln lower than last year’s crop.
Old crop ending stocks for wheat are expected to increase 9 mln to 1.079 bln. Old crop corn is projected down to 2.163 bln from 2.182 last month and beans 523 mln versus 530 mln last month. New crop projections are 1.642 bln corn, 435 mln beans and 957 mln wheat. That wheat and soybean number would be up from last month, but corn is slightly lower.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener / Alex Gasper
www.loewenassociates.com