The relentless pounding of the hog market continued on Monday with $2+ losses across most contract months. Cash has been on a steady course to the downside over the last month plus and the product market is working lower in tandem. Oddly enough, it was African Swine Fever in China that led to the giant rally from March to the April highs, but as the disease spread into other Asian countries and other parts of the globe we’ve seen a drop in the futures market that has taken prices below the levels that were trading when the rally started.
In the process, the US has logged six major pork export sales to China and they continue to make the top 5 list on new purchases and actual shipments on a near-weekly basis. Last week they didn’t make it on the buy side, but they were top 5 in actual shipments. There’s also estimates out that ASF has led to the culling of close to half their herd, although I never put much credibility in what folks “say” is happening in China. The proof is in what they “do” and with China oilseed imports down hard and pork imports from the US very good over the last several months, there is without a doubt a major problem. Why it has resulted in such an incredibly bearish picture in US pork prices is beyond me. Granted, US pork production is monstrous now and has been for months, but cold storage data isn’t eluding to any major backlog either.
Tough balancing act when apparently we have expanded US pork production at a rate that was too fast for the market to handle, even in the face of total hog culls in China far outpacing the total number of hogs we produce here in the US, according to most folks who claim to be in the know.
Cattle complex futures actively traded on both sides of unchanged yesterday, but settled just quietly mixed on both sides of unchanged.
Cattle slg.___120,000 unch wa +2k ya
Choice Cutout__217.46 -.21
Select Cutout___194.41 -.39
Feeder Index:___134.37 +1.16
Lean Index.__71.92 -.91
Pork cutout___71.88 -1.29
IA-S.MN direct avg__67.11 no comp
Hog slg.___ 479,000 +28k wa +26k ya
*****************************************************************************
Grain and oilseed trade had a higher day in the fall crop markets and a lower day for the wheat. Funds were estimated buyers of 3k wheat, 5k corn and 3k beans, which leaves them as a small net short on wheat still, an active long in corn and still short a lot of beans.
There is still a lot of confusion going on in the analytical side of the market from an acreage standpoint and now from a reversal in the weather pattern as well. Sunday’s extended run was hot and drier, which some see as a threat and others as a good thing from increasing heat units in an already late developing crop. My opinion of that forecast is that hot and dry will be good for a while, but if it becomes a lasting trend it goes from good to bad in a hurry. The second side of the confusion comes from this upcoming Crop Production and S&D report hitting the press on Thursday this week. Specifically, corn and soybean acres are the big questions. USDA was proactive in dropping corn planted acres in the June Production report, but then stomped on the market with much higher than anticipated corn acreage number in the June Final Plantings number a few weeks later. They also indicated in this month’s report they were going to be proactive in adjusting soybean acres, which they didn’t do in June. Lots of questions and not many answers, just speculation. I have a feeling we’ll have even more questions and no good answers after Thursday’s report.
Export inspections that came out yesterday morning were really good in wheat, really bad in corn and mildly bad in beans. Just so I don’t confuse anyone, I’ll repeat that wheat statement…, yesterday’s export inspections were very bullish wheat! The weekly inspections pace needed to hit USDA’s export target for the marketing year is 17.1 mln bushels. Yesterday’s export loadings in wheat were 22.4 mln. Milo was above the pace needed as well. There were 2.8 mln bushels inspected for export in milo versus 2.2 mln needed each week to hit the target. Corn export loadings were 27.7 mln bushels versus a pace needed of 66 mln per week. Bad news for corn. Soybeans missed their target as well, coming in at 27.8 mln compared to 38.6 mln needed each week.
Crop progress and condition data yesterday showed the soybean planting pace at 96% complete versus 99% as the 5 year average. There was only one state left with a pace below 90% and that was Ohio, which is a major soybean producer. They are sitting at 88%. Illinois and Indiana were each 93%, when normally Ohio, Indiana and Illinois would be 99%-100% right now. Condition ratings in beans were 53% g/ex nationwide, down 1 point from last week and well below the 71% g/ex rating at the same time last year.
Corn emergence is at 98% with a 5 year average of 100%. Here comes the interesting part, 8% of Ohio’s corn crop still hasn’t emerged, 5% of Illinois, 7% of Indiana and 6% of Wisconsin’s corn crop still isn’t out of the ground either. July 8th and all that corn hasn’t emerged yet… That is NOT bearish.
Condition ratings in corn were 57% g/ex, which is 1 point better than last week and way under last year’s 75% g/ex rating. In the big four corn producing states, Illinois g/ex ratings dropped 5 points, Iowa was down 3 points, Minnesota was down 2 points and Nebraska got 2 points better.
Winter wheat harvest jumped 17 points nationwide to 47% done, versus 61% on average. Oklahoma is now 95% done, Texas 92% and Kansas 61%. Normally Kansas is 84% complete. Colorado is sitting at 10% compared to 30% done normally.
Spring wheat is 56% headed, down from 73% as a 5 year average.
6-10’s last night were calling for above normal temps over all of the Plains and Corn Belt states. Precip was below normal through all of HRW wheat country, most of Nebraska, as well as a narrow band through the southern half of Iowa, central and southern Illinois and southern Indiana and Ohio and that included most of Missouri as well. Arkansas down into the Delta was above normal on precip and all of Minnesota, Wisconsin, North Dakota and half of South Dakota was above normal on precip as well.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com