Monday was another crazy session for the cattle complex with a broad range of trade from high to low, especially in the feeders. The closes weren’t in any way a good depiction of the how the day progressed though, because feeders settled quietly mixed on both sides of unchanged and live cattle were mildly lower on everything except the front month.
That’s where the confusion developed. June live cattle traded close to $2 lower at one point and settled down $1.70, leaving an $8.22 disparity between where cash traded last week in the Southern Plains and that close yesterday. Then to top it off, there was also a light amount of negotiated cash trading at $113 in both Texas and Kansas, along with an unconfirmed report of $110-$113 for last week of June delivery. Even with that $113 trade being another $2 lower than last week it was still $6.22 premium to the futures close, or maybe more aptly put, a positive $6.22 basis for anyone selling hedged cattle. That’s the key statement too, because positive basis is what’s tripping some of these willing sellers.
All-in-all, it was a frustrating day for the live cattle in particular. Recent trade has had live cattle down hard on days when corn is up and then days like yesterday happen where cattle are lower when corn is lower. Just can’t catch a break from the relentless selling and it has created an incredibly oversold market again, but also one that looks terribly bearish on the technical analysis side of the picture.
Cattle slg.___121,000 +3k ya
Choice Cutout__223.20 -.01
Select Cutout___206.87 -.82
Feeder Index:___133.05 +.58
Lean Index.__81.28 -.64
Pork cutout___84.91 +2.23
IA-S.MN direct avg__77.12 -.49
Hog slg.___ 476,000 +35k ya
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Moving on to the grain and oilseed trade, the corn market took a little breather in yesterday’s action in anticipation of what might lie ahead in yesterday afternoon’s crop progress report and the corn planting number. Corn settled mildly weaker, soybeans were mildly higher and the wheat market found double digit gains to the upside. Funds were estimated buyers of 10k wheat and 2k beans and sellers of 6k corn.
Weekly export inspections data that came out midmorning was bearish for corn and soybeans, mildly friendly in milo and confusing in wheat. In the corn, we need 57.8 mln bushel per week in inspections on average to hit the USDA export target for the marketing year that ends on the last day of August. Yesterday we got 29.3 mln bushels. Soybeans need 39.8 mln per week and they came in at 18.3 mln yesterday. Milo needed 2.3 mln and we got 2.5 mln, so that’s a welcome change from the bearish picture we’ve seen for milo.
The confusion in wheat comes from the fact we needed to see 34.8 mln bushels in shipments to meet USDA’s 925 mln bushel export target for the marketing year that ended on the last day of May. The number released yesterday was 21.8 mln, which left us 14 mln short of the target. Granted, this week’s inspections data was valid through May 30th, so it didn’t include Friday’s data from the 31st. Another important factor is that cumulative inspections don’t always add up to what USDA puts out for the final export figures in a marketing year. Case in point, last year’s inspections were 25 or 26 mln shy of what USDA used for actual exports, so it’s plausible the number could go up and I guess that makes is possible to go down as well. The point is, we’re close and for a marketing year that was a major disappointment on the export demand side of our wheat balance sheet that also resulted in USDA lowering export targets repeatedly in the monthly reports, they might have actually hit it pretty close in the May S&D’s with the 925 mln bushel export forecast.
Crop progress and condition data didn’t quite meet the trade expectations for corn planting progress. It came in at 67% complete nationwide, up only 9 points from last week and way under the 5 year average of 96%. The trade was looking for something around 70% done. Of the 18 states reported each week, only 2 (MI, PA) have a 5 year avg of under 90% planted corn. That means 16 out of 18 would normally be 90% or better done right now. There are 5 states (IL, IN, MI, OH, SD) currently under 50% and only 3 states over 90% done (NC, TN, TX)
Soybean seeding was 39% complete, up 10 points from last week, but also well under the 5 year average of 79% for this calendar date.
Emergence was 46% in corn versus a 5 year average of 84%. Soybeans are at 19% compared to 56% normal.
The spring wheat crop is 93% planted, which is only 3 points behind the average pace. Only 69% is emerged though, versus 84% as the 5 year average.
Winter wheat crop conditions were another surprise, coming in at 64% g/ex and that’s 3 points better than last week’s rating, along with 27 points better than last year at the same time.
The slower corn planting pace compared to the expectations is likely what gave corn the boost last night. The better than expected winter wheat conditions is also what likely put the pressure on wheat price last night as well.
6-10 day weather forecasts last night showed below to much below normal temps from the Panhandle all the way up through the Northern Plains and included all of the Corn Belt. The deep south and southeast were above normal. Precip was normal to below in North Dakota, normal in Minnesota and mostly above normal for the rest of the Corn Belt and Plains States. Iowa was half and half normal to above normal on moisture.
Some of the 5, 10 and 16 day precip forecasts are looking really nasty wet for the eastern half of HRW wheat country as well as southern parts of the Corn Belt. Hopefully that keeps a friendly bias under the market.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com