Pretty amazing start to the week for the entire meat complex. When news hit the press that the US wasn’t going to slap tariffs on Mexico, it sparked a huge rally across all three of the meat contracts. Hogs were up over $3 at times and finished with everything except the front month June at $2+ in the net changes. Feeders were up over $2 on everything and traded strongly over $3 higher at times. The live cattle trade finished with the August contract up the $3 limit and the rest of the months strongly in the triple digits higher as well.
We can chalk the gains up to a Mexico trade-led rally based on news sources, but I don’t see things changing much with Mexico and meat trade. They already typically make the top 5 buyers or takers list on the weekly export sales numbers in both beef and pork. I suppose this news might help ensure they remain in the market, but they were probably going to anyway given the strong freight advantage from sourcing from the US versus other foreign countries.
Another strong, positive note from yesterday was the fact corn traded close to steady all day and feeders still rallied almost as much as the live market. I think that proves the feeder market finally ignored corn for a session in the midst of several weeks of taking strong directional pull from the feed side of the crush equation.
Cattle slg.___121,000 unch wa +3k ya
Choice Cutout__221.66 -.65
Select Cutout___208.79 +1.87
Feeder Index:___132.26 +.42
Lean Index.__n/a
Pork cutout___84.06 +.98
IA-S.MN direct avg__n/a due to confidentiality
Hog slg.___ 477,000 +10k wa +33k ya
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Grain and oilseed trade closed quietly higher yesterday. Fund activity was estimated as buyers of 3k wheat, 2k corn and 4k beans and the closes reflected that light net change in position.
Export inspections showed slim pickins across the board, even though a lot of the numbers came in above the expectations. Personally, I don’t put much credibility in expectations for export data. Instead, I like to view just the raw data against the pace that’s needed to hit USDA export targets on a weekly basis. In corn, we need to average 59.9 mln bushels in inspections every week between now and the last day of August, which marks the end of the corn and soybean old crop marketing year. Yesterday we got 33.5 mln, which was 26.4 mln shy of what’s needed. Soybeans need 40.9 mln in actual exports each week to hit their target and they fell short yesterday as well, coming in at 26.3 mln.
Wheat inspections yesterday totaled 17.1 mln bushels and the data included the one remaining day in the old crop marketing year from the last day of May. There were 14.7 mln bushels of new crop and 2.4 mln in old crop inspections, which brought the total up to 913.34 mln bushels in total export loadings for the marketing year based on these Monday reports, versus USDA’s 925 mln bushels export target for old crop. Inspections often times don’t match up with census or actual total shipped bushels though, which means we very well might see the target met in today’s report data. For the new crop year that started June 1, we need 17.4 mln bushels per week, so yesterday’s 14.7 mln missed the target by a narrow margin. Versus what’s needed, wheat actually had the best day yesterday between it, corn and soybeans. It also had the best closes for the day in the futures trade.
Crop progress and condition report numbers added a lot of confusion to the mix yesterday. The corn planting pace gained 16 points, moving up to 83% complete versus 99% as the 5-year average. The confusion comes from not knowing what total in that mix comes from producers finally giving up and taking Prevent Plant, which technically moves any of those acres into 100% complete, skewing the total. Versus the intentions, that also leaves 16 mln acres of corn unplanted and way late for what most would consider optimal yield potential. According to the 5-year averages between the 18 states reported, only one should have a pace of less than 95% complete. Yesterday there were 15 states at less than 95% done, and 4 were less than 70%. 3 of those 4 under 70% included Ohio, Indiana and South Dakota, which are major corn growers. Emergence was 62% nationwide versus 93% on average.
Yesterday was also the first look at corn condition ratings and we opened up the season with 59% of the crop rated g/ex compared to 77% a year ago.
Soybean seeding gained 21% compared to a week ago, moving up to 60% done. The 5 year average is 88% complete. That’s very concerning as well, particularly since we’re 9 days past the high in corn futures and 6 days into a bean market slump off the highs.
Winter wheat conditions were 64% g/ex and that’s unchanged from last week. HRW wheat states gains 1 point and SRW wheat states lost a point. Nationwide, 4% of the wheat crop has been harvested compared to 10% normally. HRW wheat states progress showed Texas 27% done compared to 42% as the average pace and Oklahoma was 4% done versus 32% normal.
USDA Crop Production and S&D numbers come out at 11am this morning. Old crop ending stocks forecasts show the average analyst estimate at 2.165 bln in corn versus 2.095 bln last month. Soybean estimates were 1.01 bln compared to 995 mln last month. Wheat is pegged at 1.113 bln versus 1.127 bln last month. New crop ending stocks estimates have corn at 1.731 bln compared to 2.485 bln last month, soybeans at 987 mln versus 970 last month and wheat at 1.115 bln versus 1.141 in May. World ending stocks for old crop are all expected mildly lower than last month. New crop stocks are estimated moderately lower in corn and wheat and mildly higher in soybeans.
Wheat production estimates averaged 1.891 bln for all wheat, which would be up 7 mln from May. HRW wheat specifically was pegged at 766 mln bushels versus 780 mln last month.
6-10’s last night showed below normal temps for the Central and Northern Plains as well as all of the Corn Belt. Precip was above normal for the majority of the Plains and Corn Belt states with the far north and far south normal to below.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com