After Friday’s solidly bearish COF release, there were a lot of wishes and hopes that we’d see a fade the report-type trade yesterday and go up, not down, like the bearish data suggested. The numbers proved to be a little too heavy on the bearish side to avoid a selloff though and the result was some significant losses in most feeder cattle contracts and losses on the live side ranging from mild on the front end to heavy in the deeper deferreds. A record large inventory at the bunkline for August 1, placements up 11% from a year ago and marketings 1% under a year ago rounded out the trifecta of negative numbers. The result was a gap lower open in most contract months for the cattle and a lousy close.
$105 cash traded in the south yesterday with packers showing a lot of interest. That’s down $1 from last week. Kansas had bids of $104, but I think those were all passed. The bright spot of the entire cattle trade yesterday was the unblemished record of select beef cutouts pushing hard to the upside still. Select has been quoted higher every single day this month, which means 16 days in a row. 10 of those 16 have been more than $1 higher gains. Since last Monday, four different times it has included $2+ high trade. Choice was down twice in the first week of the month, but higher every other day. Several times the gains in choice were more than $3 a day.
Product trade has been really, really bullish and that’s tied to Labor Day wholesale buying early on in the rally. What helped sustain it, along with the cash rally this month is the hole we hit from a marketing standpoint based on Feb/Mar/Apr placements being down significantly. Not only have we worked through a big portion of the marketing backlog, but 120 days from the midpoint of that reduction in placements is August 27th. 120 days from the end of it is September 28. Granted, the hole was filled in some with backlogged and delayed marketings, but the numbers picture looks pretty good for the next 30 days or so. Beyond that it’s going to start to get ugly again.
Don’t lose sight of the fact demand as a whole across the meat complex is suffering from Covid-related hangover and as long as folks are still scared to leisure travel, eat out and seek entertainment outside of their homes, domestic demand is going to be sluggish. We’ll have to make up for it in exports.
Cattle slg.__117,000 +5k wa unch ya
Choice Cutout__225.94 +.56
Select Cutout__208.99 +2.68
Feeder Index:___144.04 +.14
Lean Index.__56.06 +.55
Pork cutout___74.57 +1.06
IA-S.MN direct avg__42.20 +.36
Hog slg.__ 480,000 unch wa +4k ya
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Grain and oilseed trade was downright depressing in wheat yesterday, but the corn and soybean markets were carrying a friendlier undertone. Crop tour reaction was part of the support, as was the current weather conditions of continued hot and mostly dry in some really key Corn Belt areas. Ironically, corn was better supported than soybeans and August is a more critical month for soybean development than corn, but both were acting decent.
Fund activity was estimated at buyers of 10k corn and 2k beans, along with sellers of 4k wheat.
Export inspections data that came out midmorning was bullish wheat and neutral for the rest. Wheat inspections were 20.9 mln bushels, which is great. Milo inspections were 2.8 mln bushels, corn 35.1 mln and soybeans 42.3 mln bushels. The top two destinations in each were; Yemen and China for wheat, Mexico and Japan for corn, although China was #4 on that list as well. China took the majority of the milo, accounting for 79% of the shipments. China was #1 in soybeans with 60% of the total headed there. The Netherlands were #2 on the soybean list.
The strength in the overnight trade came courtesy of crop ratings dropping hard yesterday. Corn condition ratings dropped 5 points out of the g/ex category, coming in at 64% g/ex yesterday. Illinois lost 4 points, Iowa was down 9, Minnesota down 1 and Nebraska g/ex ratings were down 7% from last week. That’s the big 4 corn producing states. P/vp conditions got two points larger this week, meaning the other 3 points went into the fair category. The biggest drop of any of the big corn states was Iowa.
Soybean ratings dropped 3 points out of g/ex moving down to 69% g/ex. Iowa was down 6 points from the previous week, but South Dakota was off 10% and that was the biggest drop in any of the major states.
Weather-wise, the 5 day forecast precip is still bone dry for Iowa, South Dakota, Nebraska, Kansas and most of Illinois, which is bullish for beans and corn. 6-10’s are bearish though, with above normal precip chances for the entire Corn Belt, Central and Northern Plains. About half of the Southern Plains are above normal and the other half below. Temps on the 6-10’s are below normal from the Northern Oklahoma and Arkansas, all the way into Canada. South of that line is above normal on temps.
8am daily export reporting was a barrage of new business. 408k mt’s of US corn was sold to China. 100k mt’s of US corn was sold to Japan. 204k mt’s of US soybeans were sold to China and another 142,500 mt’s of US soybeans were sold to unknown destination.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell
www.loewenassociates.com