Sluggish start to the week for the meat complex. Live and feeder cattle futures traded some on both sides of unchanged, but finished in the red. Losses in the live market were just mild, but feeders had one contract down in the triple digits and a couple others pushing close to the $1 lower mark. Hogs closed lower on the front month August, but mildly higher across everything else, which was surprising given the fact pork cutouts were under very heavy pressure again and cash hog trade was sharply lower as well.
In the last two weeks, pork cutouts have lost almost $10 and the bulk of the downfall can be attributed to belly primals getting hammered hard to the downside. Yesterday’s quote was $12.18 lower in those bellies and in the last 10 business days, half of those have experienced losses in excess of $4 per day. Eight days ago those bellies were $46.77 higher in price, so it isn’t very hard to figure out where the weakness in product originated. What’s a little crazy though is last week’s hog kill being 11% less than last year at the same time and 17% under the previous week and zero support coming from that reduced harvest. Not a good situation for the hog market and one would think as bearish as this pork picture has been over the last 30 days, that’ll at some point spill over into the beef market to some extent as well.
Cattle slg.___117,000 +6k wa +7k ya
Choice Cutout__204.72 -.42
Select Cutout___197.98 -.29
Feeder Index:___149.20 -.37
Lean Index.__72.17 -1.29
Pork cutout___74.54 -2.43
IA-S.MN direct avg__61.01 -1.89
Hog slg.___ 436,000 +15k wa +16k ya
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Grain and oilseed trade yesterday finished with solid green across the screen and the wheat complex leading the charge with double digit gains in the KC and Chicago markets. Fund activity on the day was estimated at buyers of 7k corn, 6k beans and 8k wheat. One of the bigger stories of the day was a weather forecaster in Russia calling for their grain crop to be down 15%-20% from last year. Russia is our biggest nemesis in world export business with almost all of the Egypt business in the last year going to that region, although not exclusively just from Russia. There has been a lot of Ukraine and Romanian wheat filling those tenders as well. Last week the chatter was about reduced EU crop sizes and this week Russia caught some press
Export inspections that came out midmorning were just a touch on the bearish side for corn and soybeans and solidly bearish in wheat. To hit the projected USDA export number for the year in corn, we needed 73.2 mln bushels this week and the total came in at 65.3 mln. Close, just not close enough to call it neutral or friendly by any means. Soybeans needed 30.9 mln this week to keep the pace needed and they came in at 27.2, so a very similar situation to corn of being close, but no cigar. Wheat export loadings came in at 13.9 mln yesterday. The marketing year is still very young in wheat and the weekly pace we need to see to hit USDA’s export target for the year is 19.5 mln. Like I have said for a long, long time, give me 20 mln in export or inspections in wheat and I’ll call it bullish, but it isn’t possible with a sub-20 number. Plus, every week it doesn’t hit 19.5 mln, the weekly amount needed goes up. At some point if wheat can’t manage numbers better than the low teens, even a 20 mln number won’t be good enough to get called friendly.
After the close yesterday, crop progress and condition data was released. Corn conditions remained unchanged from last week at 72% g/ex. Last year at the same time it was 61% g/ex. Soybean conditions flip flopped a point from excellent down to good, but the overall total g/ex remained at 70% versus 59% g/ex at the same point last year. The very rapid progression to maturity continued with 60% of the soybean crop setting pods versus 41% normally at this time of year. The percent dough of the corn crop is 38% and normally we’d be at 20%.
Spring wheat harvest hit 4% complete which is right at the normal pace. Crop condition ratings were 78% g/ex, down 1 point from last week and still insanely better than last year’s 31% g/ex at the same time. Ironically, we have those wonderful crop conditions and yet last week’s spring wheat tour results showed yields only moderately better than last year and well below what USDA is currently showing in the crop production reports. That’ll be an interesting number to watch on August 10th when the next USDA report is released.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener / Alex Gasper
www.loewenassociates.com