There was a lot of green on the screen across the meat complex to start the week. Feeder cattle got a boost from a giant drop in corn on Friday and another fallout yesterday as well. That cheaper feedgrain picture helped back end contracts more than the front though with the August only up mildly, Sept was up less than $1 and then $1+ gains were the norm from the October and beyond contracts. Live cattle trade was higher, but only mildly and the front end August was the only red ink across the whole meat complex.
Hogs were coming off of what I would call a bearish Quarterly Hog and Pig report from Friday. The total inventory and market hog numbers were up 4% from a year ago. Breeding herd numbers were up 1%. In classic fade the report action though, there were $2+ gains from the August contract out through all the deferreds. July hogs were only up mildly and given the fact the market hog weight breakdown had 180+ lb hogs up 8% from last year, it would have been tough regardless to get that July Lean Hog contract to rally much.
Looking at the cash cattle scene, packers last week were buying for a holiday shortened kill week because of the 4th falling on a Thursday this year. This is a last major grilling holiday until Labor Day in September and it’s also traditionally much more important for the grind market via hamburgers and hot dogs. Choice and select beef have been sliding some, but choice continues to remain elevated near the $220 mark, while the select has fallen solidly below $200.
Cattle slg.___120,000 -1k wa +4k ya
Choice Cutout__219.72 +.06
Select Cutout___195.64 +.08
Feeder Index:___133.44 +.32
Lean Index.__74.97 -1.08
Pork cutout___73.28 -.56
IA-S.MN direct avg__68.97 -.09
Hog slg.___461,000 +13k wa -2k ya
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Grain and oilseed trade continued the aggressive slide that started with Friday’s bearish shocker in the corn acreage number in the June Final Plantings report. Granted, that report had more holes in it than swiss cheese from a believability standpoint, but the algos and funds ran with it and in the process, ran the market into the ground as well. Since Friday the funds have trimmed their corn long position considerably and added aggressively to wheat shorts. Yesterday’s estimated activity was on the sell side of 10k wheat, 35k corn and 14k beans. It pushed double digit losses in KC and Chicago wheat, along with the soybeans. Harvest pressure isn’t doing the KC wheat market any favors either as progress pushed all the way to the Nebraska border over the weekend.
Export inspections data that came out midmorning was solidly bearish corn, mildly bearish beans and actually bullish in wheat for a change. Wheat is still very early in the marketing year, plus USDA set the sights pretty low for the total export projection at 900 mln bushels. That would be 50 mln lower than the last marketing year. To hit that target at this point it takes 17.3 mln in export shipments per week. Yesterday we got 22.4 mln bushels in export loadings and that was impressive. Corn on the other hand was a polar opposite. Yesterday’s tally was 10.7 mln bushels versus a pace needed every week of 61.8 mln. That’s a terrible number for corn. Soybean inspections were 26.4 mln compared to 37.4 mln needed each week to hit their target between now and the last day of August.
I know it’s hard to comprehend the new onslaught of selling in corn that’s knocked 52 cents off the market since the 4.73 Dec corn highs a couple weeks ago. Funds are a big part of that fallout, but looking at the corn export sales and shipment numbers in recent weeks, there was definitely some demand rationing going on at those higher price levels. Ethanol has throttled back. Export shipments are down hard. Yes, there are some external factors not relating to price that’s helped encourage those things to happen, but it’s also all part of demand rationing. There’s a long summer ahead of this market and it’s hard to fathom corn continuing to drop, but it’s all part of the huge surge in volatility that we’re likely going to have to ride out over the next several months. I don’t think upside volatility is gone yet either…
Crop progress and condition report numbers didn’t include a corn planting pace yesterday thankfully. Emergence was pegged at 94% nationwide versus 100% normally. Several states are still below 90% on corn emergence and those are Wisconsin, Ohio, Missouri, Michigan, Indiana and Illinois. Just when we thought “knee high by the 4th of July” was an antiquated saying, this year some people are still waiting for the crop to see daylight for the first time in some areas. That’s also another reason why I don’t think we’ve seen the end of the corn market rally this year yet.
Soybean seeding gained 7 points last week to 92% done compared to 99% as the 5-year average. Basically the same states that are below 90% of corn emergence still are also below 90% on their soybean planting pace. In previous weeks, South Dakota was on the list of states that were way behind on progress, making it both an Eastern and Western Corn Belt dilemma. Now it’s pretty much confined to the Eastern Belt, aside from continued problems in Missouri and Illinois. Soybean emergence on yesterday’s date has a 5 year average of 95%. There is still 3 states in the 60’s percent-wise, along with another 3 in the 70’s. Nationwide, only 83% of the bean crop was out of the ground.
Winter wheat harvest moved up to 30% done versus 48% on average. Oklahoma is at 72% compared to 92% normal, Texas 81% versus 82% normal and Kansas was 28% compared to 61% normal.
6-10’s last night showed normal to above normal temps across most of the Plains and Corn Belt. The High Plains showed normal to below temps. Precip was above normal from the Panhandle through the Central and Northern Plains as well as all of the Corn Belt.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com