Lean hog futures had a fairly aggressive setback yesterday and the cattle complex was lower as well, but only mildly. Friday’s sharp jump in cattle and Monday’s early follow through broke some key technical barriers that are still in play on the bullish side. Cash last week moving $1 higher helped the cause as well. There’s a small bearish dilemma brewing with the product market heading south, but packer margins are still strongly positive, so I’m not overly concerned about that just yet.
The other supporting factor to the meat complex is cash hog values finally finding strong support and they have shot up more than $10/cwt since the start of the month. The spread between cattle prices and hog prices, especially in the product market had moved way out of line with beef grossly overpriced versus pork. That price discrepancy needed to realign badly and it’s good to see it isn’t all the beef side giving it up to the downside. Hogs have been coming up at a much faster rate.
On a few other notes impacting both the beef and the pork, Hurricane Florence is going to disrupt a lot of movement on the East Coast and historically, that’s usually pressuring to everything. Consumption and purchasing aren’t the only things disrupted though, because there are a LOT of hogs in North Carolina. There’s also a story out reporting China’s Ag Minster banning live hog transport in multiple regions throughout the country because of the African Swine Fever outbreak. That China saga continues to provide positive potential for US hog values.
Cattle slg.___119,000 +4k wa +2k ya
Choice Cutout__206.07 -.23
Select Cutout___198.31 -.62
Feeder Index:___152.09 -.55
Lean Index.__47.55 +.55
Pork cutout___69.24 +1.39
IA-S.MN direct avg__48.01 +3.12
Hog slg.___469,000 +6k wa +14k ya
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Grain and oilseed trade continues to see-saw around between quiet and aggressive trade in the fall crop markets. Wheat was up big two days ago and down quite a bit yesterday. Corn was quiet once again, but soybeans were hit with aggressive selling tied mostly to the prospects of a very bearish S&D report that comes out today. There was also a big 192k mt cancellation of US bean sales to unknown destination yesterday in the 8am reporting that added pressure.
Export inspections from Monday were negative in corn and soybeans and solid bearish in wheat. Corn inspections were 30.1 mln bushels and the pace we need to see in this new crop marketing year is 45.6 mln per week to hit the USDA export target. Soybeans inspected for export was 34 mln bushels. The soybean weekly target is 39.8 mln. Wheat export loadings were 15.8 mln and right now the pace needed is 21.5 mln per week. There continues to be a lot of chatter about wheat export potential picking up because of noted reductions this year in the EU, Russian and now Aussie wheat crops. That potential hasn’t shown any indication of becoming reality yet. It has a chance, mind you, but it isn’t happening and hasn’t happened to date…
Crop Progress and condition data that is supposed to come out Monday’s was delayed for some reason till yesterday. Percent dent in the nation’s corn crop is 11% ahead of normal at 86%. 35% of the corn crop is mature versus 21% normally. Harvest was at 5% done versus 3% on average for that date. North Carolina, in the path of the hurricane was at 43% complete, so there’s definitely some fall crop production at risk in that state, as well as those surrounding. May not add up to much, but they are in the top 18 nationwide. Corn crop condition ratings improved 1 point from last week to 68% g/ex nationwide. Last year it was 61% g/ex at the same time.
Soybeans dropping leaves was at 31% versus 19 on average. Crop condition ratings for beans got 2 points better, hitting 68% g/ex. Last year the bean crop was 60% g/ex on the same date.
At 11am central time we get the September Crop Production and S&D numbers released. The big items on the report will be corn and soybean yields in USDA’s second stab at actual surveyed figures for this year’s crop. The average corn yield guess is 177.4 bu/ac, down 1 bushel from August, but still up .8 from last year. That would result in a crop size of 14.506 bln. Ending stocks estimates off that crop size are 1.590 bln bushels, which is lower than last month by 94 mln. Part of that drop is from lower carryin with an old crop stocks estimate of 2.014 bln, down 13 mln from August. I think old crop stocks are going up, not down and I base that on corn exports and inspections data falling short of the old crop projection by 100 mln+ bushels. That will be an interesting number to watch.
Soybean yield guesses averaged 52.5 bu/ac, up .9 from last month and 2.4 bushels bigger than last year’s yield. Production is pegged at 4.659 bln, which puts new crop ending stocks at a whopping 836 mln bushels. The high end of the guesses is actually 1 bln bushels even. A lot of folks think an 836 carryout is already dialed into the futures price, but if it comes in bigger, the door won’t be wide enough to hit all the offers from the bears. Old crop soybean ending stocks are pegged at 418 mln, down 12 mln from last month.
Wheat ending stocks are estimated at 938 mln, up from 935 in August.
World ending stocks in the new crop forecasts are expected to decline mildly in corn and wheat versus last month and increase mildly in soybeans. Versus the old crop ending stocks guesses, new crop world corn stocks are estimated at 38 mmt’s smaller, which is bullish. Soybeans are expected to increase 12 mmt’s which is bearish. Wheat is expected to decline 15.5 mln bushels which is mildly supportive. We’re still staring at the 2nd largest world wheat ending stocks level and stocks to use level in the last 10 years. Last year was the biggest ever.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener / Alex Gasper
www.loewenassociates.com