Morning Ag Markets
Pete Loewen
After seeing the largest single week negotiated cash feedlot trade volume in five years last week blow prices up to $5+ gains over the previous week, it was an assumed “given” that we’d see a big rally in futures on Monday. What we learned though was it’s not safe to assume anything in the ag sector futures trade these days. Live and feeder futures were hit with triple digit losses at times, but it wasn’t unique to just the cattle. Hogs got thumped even harder to the downside and the grain and oilseed trade was under active pressure as well. Based on the selling being so widespread, I think we can attribute the weakness in cattle specifically to forces outside of just the meats. It was money flow that drove the trade and trumped all the positives from the cash euphoria.
Big divergence going on between feedlot cash and the calf and feeder cattle trade versus the product market. Cash is up, but product has been in a tailspin that shows no signs of stopping anytime soon. Choice was quoted lower 18 out of 21 business days in June and all five business days so far this month. From the last day of May to yesterday’s quote, that drop knocked $21.28 off the choice quote and now has that market almost knocking on the door of sub $200 trade. Select dropped below the $200 mark on the last day of June. Even with product in a sharp downhill slide, packer margins were still strongly positive last week, despite paying sharply higher cash prices. The strong positive basis that cash created is also going to encourage active marketings which should keep weights in check and feedlots current.
Cattle slg.___119,000 +3k wa +1k ya
Choice Cutout__ 206.92 -1.11
Select Cutout___198.62 -.09
Feeder Index:___146.48 +1.33
Lean Index.__82.11 -.13
Pork cutout___85.39 -.13
IA-S.MN direct avg__76.85 +.50
Hog slg.___ 444,000 -19k wa +7k ya
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In the grain and oilseed trade, soybean futures looked like a disaster yesterday. We were coming off of a giant rally from Friday that produced a bullish key reversal higher on the charts, so the expectation was for good follow through technical buying based on that formation. No such luck though, as futures in the Sunday night trade opened lower and accelerated to the downside leading to 20+ lower closes in beans. Corn was moderately lower and wheat mildly lower, aside from MGEX that was hit with double digit losses on new crop. Fund activity yesterday was estimated as sellers of 18k corn, 11k beans and 4k wheat.
Export inspections data that came out midmorning was bullish corn, neutral to maybe a touch bearish beans and ugly in wheat. Corn export loadings were 57 mln bushels, which was well above the 39.8 mln from the same week last year. Back when the calendar turned 2018 the cumulative shipment pace in corn was close to 20% below last year at the same time. Yesterday that gap had narrowed to 5% under last year’s pace with USDA projection to end the year .3% higher in total exports. We only need 55.2 mln bushels per week to hit that projection, so the 57 mln from yesterday certainly keeps that target in the sights.
Soybean exports were 24.1 mln bushels yesterday which was up from last year’s 17.5 in the same week. We need 27 mln a week to hit the USDA target for the marketing year, so that mark was missed narrowly making the tone from the number neutral to just a touch negative. Definitely not 20 cent losses negative though, which is what happened at the close.
Wheat export inspections were ugly at 9.9 mln bushels and we need twice that number to hit the target for marketing year exports. The wheat marketing year just started on June 1 though, so there’s a lot of time. Problem is, there just isn’t a lot of incentive for the numbers to get higher given the fact we still aren’t price competitive in the world trade. We weren’t in the last marketing year either, which is what pushed final ending stocks up to the 1.1 bln mark, which is what we got on the Quarterly stocks tally from the report on the last day of June.
Crop progress and condition data yesterday showed corn condition ratings at 75% g/ex, down 1 point from last week, but 10 points better than last year at the same time. The big 4 corn states have Nebraska rated the best at 86% g/ex, unchanged from last week, Illinois was number two at 81% g/ex, although that was down 4 from last week, Iowa was 77% g/ex, down 1 and Minnesota was 79% g/ex, up 4 points. The biggest gainers were South Dakota that improved 9% and North Dakota that got 4 points better.
Soybean condition ratings came in at 71% g/ex, unchanged from last week and 9 points better than last year. The expectations was for a 1 point drop.
Spring wheat condition ratings hit 80% g/ex, up 3 points from last week. Last year at the same time we were 35% g/ex, so if you want to know why MGEX wheat is struggling, look no farther than the condition ratings.
8am daily export reporting showed a 113k mt sale of US corn to Egypt with 60k mt’s in this marketing year and 53k new crop. There was also a BIG 152k mt milo cancellation to Mexico.
6-10 day forecasts showed above normal temps still from the Panhandle up through Kansas and then angling northeast to central Minnesota. West of that line was normal to below on temps in parts of the High Plains. Precip was below normal from central Oklahoma south and normal to above from Kansas north, east and west. The exception to that was from NW North Dakota through the PNW that was below normal.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener / Alex Gasper
www.loewenassociates.com