In the face of the grain and oilseed trade getting kicked in the teeth on Friday following the report, meat complex futures were really pretty boring by comparison. Live cattle closed mixed and flat, feeders were mildly higher on everything and the hogs were mixed and flat, just like the live cattle.
One of the bigger surprises of the day was watching a live cattle market that was flat and a corn market down in the double digits and feeders not able to muster more of a pronounced rally. I thought it would be a gimme for feeders to hit triple digit gains with such a bearish reaction in corn.
According to the National Feeder Summary, calves and yearlings sold steady to $5 better last week. Negotiated feedlot trade had volume trading in northern areas from Tuesday through the end of the week, but the Southern Plains waited until the 11th hour once again and this time it didn’t pay off very well. Most of the Texas and Kansas trade was in the $111 range, which was $3 lower than the previous week’s top. Nebraska traded from $109-$112.50 Tuesday and $111.50-$112 late in the week with dressed trade ranging from $175-$178.
Cattle slg.___116,000 fri 52k sat wtd 645,000 +19k wa +9k ya
Choice Cutout__206.61 +.55 wtd +1.86
Select Cutout___197.77 -.32 wtd +.68
Feeder Index:___151.12 +.67
Lean Index.__ 60.04 -1.84
Pork cutout___71.07 -.38 wtd -.61
IA-S.MN direct avg__45.22 -.82
Hog slg.___425,000 fri 136k sat wtd 2.333 mln +13k wa +49k ya
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Interesting report on Friday with the release of the August Crop Production and S&D numbers. For starters, this was the first report release where there wasn’t a lockup for news media to compile the data into presentable format and release it at 11am CST right when the data hits the public. I really thought that was going to present a huge problem with websites locking up from heavy traffic, but it actually went pretty smoothly. From the farmer’s perspective, looking at the futures market action following the release was ugly. Everything was down double digits with a few wheat contracts down more than 20 and beans 40+ lower.
The only change made to old crop ending stocks was soybeans moving from 465 mln down to 430 mln. Wheat was left unchanged at 1.1 bln and corn unchanged from the July report as well at 2.027 bln. The bearishness came from a combination of new crop ending stocks and production totals in corn and soybeans, plus a bearish surprise in the spring wheat crop prospects.
Starting off with the corn and soybeans, USDA pegged the US corn yield at a whopping 178.4 bu/ac, which was 2.1 bu/ac above the pre-report estimates and it resulted in an ending stocks forecast for new crop of 1.684 bln, up 132 mln from last month. Average guesses for soybean yield were 49.8 bu/ac, but the actual total came in at 51.6 bu/ac. That puts USDA’s first stab at yield guesses 2.5 bu/ac larger than last year in beans and 1.8 bigger in corn. The new crop ending stocks forecast in soybeans off that yield was 785 mln bushels and that’s a monster stocks total for beans. Big picture, there’s no getting around the nastiness of the soybean ending stocks forecast. In corn though, there’s nothing bearish about 1.684 bln corn ending stocks. In my opinion, that’s a big picture friendly number and corn got sucked into the giant vacuum that soybeans created after the report.
Spring wheat yields were a big wildcard given the fact USDA was predicting big numbers back in July, but the Wheat Quality Council spring wheat tour number was considerably lower than USDA’s July number. The prospects of that tour indicating the crop wasn’t as big as earlier predictions had a strong bullish bias dialed into wheat. Instead, what we got was a 47.6 bu/ac record yield forecast for spring wheat and the 3rd largest production estimate in history. That’s what pushed MGEX wheat down over 20, while KC and Chicago were in the teens.
You can cuss and discuss the data all you want, but what came out Friday is what we get to live with for another month until the September estimates come out. A couple of bright spots from the data were world corn and wheat ending stocks forecasts coming in well below year ago levels. Soybean stocks were larger.
Fund activity Friday was estimated as sellers of 35k corn, 27k beans and 12k wheat.
8am export reporting showed 142,500 mt’s US new crop soybeans to Mexico, another 142,248 mt’s of US new crop beans to Mexico and a 71,124 mt total US 2019/2020 crop year beans to Mexico. Very interesting, because normally we wouldn’t see sales two crop years away, even though there’s only 18 days left in the old crop marketing year.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener / Alex Gasper
www.loewenassociates.com