The start of the week was a day filled with ups and downs in the meat complex. Thursday and Friday provided strong gains with Friday really stout in everything, so the expectations were friendly going into yesterday. Things started out a little rocky, but as the day progressed, hogs were right back on the bullish warpath and the majority of the live and feeder cattle contracts settled higher as well, but not all of them.
Lean hog futures are still trading the euphoria of the huge export sales tally to China from last week. Front end April futures have almost gained $20/cwt after posting contract lows on the 20th of February. $13 of that run has come in just the last seven days. New contract highs are within reach in today’s trading range, so things look really bullish in hogs at the moment, yet at the same time things are also looking tremendously overbought and due for a correction.
In addition to China, weather has been a strong focus for the meats as a whole. From cattle and hog losses due to flooding to the transportation nightmare created by the flooding and flash-thaw, there’s strong positive implications for everything coming out of this weather mess. It’s impacting the cow/calf segment from higher than normal losses in the late winter / early spring calving. It’s also pushing marketable fat cattle way down the line because of poor feeding performance over the last several months. That is taking what was destined to be a mildly bearish picture due to larger numbers than last year and turned it into a friendly picture from much lighter live and carcass weights keeping total production significantly more manageable.
Cattle slg.___115,000 -4k wa -3k ya
Choice Cutout__228.34 +1.34
Select Cutout___218.21 +.87
Feeder Index:___137.50 -.15
Lean Index.__56.54 1.14
Pork cutout___72.39 +3.50
IA-S.MN direct avg__57.51 +1.90
Hog slg.___ 463,000 -12k wa unch ya
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Grain and oilseed trade did a 180 from the solid green across the screen on Friday and everything except the MGEX wheat was under pressure yesterday. Losses were only mild, but it was once again back to disappointment watching things leak lower in the midst of all the soggy mess across the Plains and Corn Belt. This is one of the few times that the vast majority of the ag community is begging for it to stop being wet, but the current situation and unfortunately the forecast isn’t cooperating very well with those wishes. 6-10’s on Sunday night were wet across the entire Plains and Corn Belt. 6-10’s last night were still showing above normal precip for the entire Corn Belt, Central and Southern Plains. From central Sodak and the northern 2/3 of Minnesota north though, it was normal precip. Thankfully, temps were still showing above normal over all of the Plains and Corn Belt.
Export inspections that came out midmorning yesterday were a solid bearish disappointment in corn and wheat and mildly bearish in soybeans. Corn export loadings were 31.3 mln bushels versus a total needed each week of 54 mln bushels to meet the export forecast listed in the S&D’s. Soybeans were 30.9 mln bushels yesterday versus 35.7 mln needed each week. The marketing year for corn and soybeans ends on the last day of August, so there’s still time for improvement. Wheat is running out of time quickly though and yesterday’s 13 mln bushel tally in the face of 27.7 mln needed each week between now and the end of May was a slap in the face for the old crop wheat balance sheet.
In the March report, USDA dropped wheat export estimates from 1 bln bushels down to 965 mln. If the sales and shipment pace don’t get better really quick, ending stocks that were raised up to a very bearish 1.055 bln bushels in the last report are going to get even bigger. Just keep in mind, every time those old crop stocks increase, it takes more of the bullishness away from the reduced acres in HRW wheat states and the late planting date a lot of those acres were put in on. Yes, that’s bullish for new crop, but it’s a lot less bullish every time old crop ending stocks increase.
Funds yesterday were estimated sellers of 3k wheat, 6k corn and 3k beans.
Individual states crop condition ratings came out yesterday for HRW wheat. Texas conditions improved significantly. G/ex conditions were up 5 points to 33% and p/vp dropped 7 points to 23%. The corn planting pace in Texas was 26% done, up from 11% last week and also up from the 5 year average which is 23%. Oklahoma improved mildly, moving to 60% g/ex, up 4 points from last week. The p/vp rating was 5% poor and zero very poor. 20% of the Oklahoma wheat is jointing, which is 4 points behind normal. Kansas wheat was rated 49% g/ex and 11% p/vp. I don’t have last week’s numbers for comparison.
Pete Loewen
Loewen and Associates, Inc.
Pete Loewen / Matt Hines / Doug Biswell / Matt Burgener
www.loewenassociates.com