Grains, livestock and the general commodity sector turned risk off Friday at the close. The Corona Virus with it’s second confirmed case in the US has traders running for safe havens like the US dollar, Japanese Yen and gold. John Payne, Daniels Ag marketing, believes the hype is somewhat over done and if recent headline trading is any indication markets will return in the coming weeks.
In the grains it has been one week since the US and China signed the Phase One Trade Deal and there have been no major purchases of commodities from China since the signing. This has the market in slow erosion, but traders are hesitant to build up short positions as the market could quickly come back on news of Chinese purchases.
Thursday saw 3 different sales of corn. USDA reported sales of a 114,000 tons of corn to unknown, 29,724 tons to Guatemala, and 114,224 tons to Guatemala. Many traders hope that the unknown destination was China though some believe it could be South Korea.
Friday morning saw a sale of 142,428 tons of corn sold to unknown.
South American weather is dry and helping soybean harvest. Agroconsult reported earlier in the week that farmers in Mato Grosso are positively surprised with soybean yields this harvest. Dry conditions though are not helping the corn in Argentina. The Euro model is showing above average dryness for the next 2 weeks in South America.
The outbreak of the corona virus in China and now two confirmed cases in the US has the outside and currency markets spooked. China is trying to stop the spread of the virus by outlawing the selling of live poultry in key provinces. The Chinese government is also canceling public events like the Chinese New Year Temple fairs. This could dampen some of it’s overall Lunar New Year Pork demand. International companies such as McDonald’s and Disney are closing Chinese locations to try and curb the spread of the virus.
On Thursday the weekly ethanol production and stocks were released. Ethanol production fell 4.2% or about 46,000 barrels per day to 1.049 mln b/d. That is a nine week low in US ethanol production. The four week average of ethanol production is 1.068 mln b/d.
Ethanol stocks jumped 4.5% to their highest levels since July 2019 at 24 mln barrels.
Live cattle and feeder cattle prices slowly eroded through midweek, but then saw a sell off start on Thursday with near limit lower losses in live cattle futures. Lean hog futures seemed to catch the buying end of the live cattle spread and steadily moved higher throughout the week. Both the beef cutout and pork cutout strengthened throughout the week. The choice select spread finally opened to more than two dollars. Bellies seem to be the strongest part of the pork cutout nearing $120.
In the country feeders set the asking prices early in the week at $127 live and $202 dressed. Packer inquiry kicked off Wednesday afternoon with 3,000 head trading in Kansas at $124 live. Thursday then saw another 1,500 head trade in Nebraska at a $124. Bids were limited on Thursday with only a few dressed bids in Nebraska at a $199.
Analysts point to packers buying on Wednesday as a possible signal that they are short bought and are needing cattle. That could mean another week of steady prices. However packer margin has eroded and this could cause packers to not run plants at full capacity.
Hog prices in China are up over 450% compared to US hog prices. The Corona Virus is causing major cities in China to go on lock down and cancel many public events.
The latest cold storage reports show beef, pork, chicken, and turkey in cold storage is up 3.2% compared to the same month last year and is 7.7% higher than the 5 year average.
The USDA cattle on feed numbers for January were closely aligned with pre-report expectations. Jerry Stowell, Country Futures, said, “If you were looking for a surprising USDA report you are going to have to look else where this report is very neutral.” Listen to Jerry’s full comments below.
|USDA Actual||Average Estimate||Range|
|On Feed Jan. 1||102%||102.2%||101.6-102.5%|
|Placed in December||103%||103.2%||100.5-105.3%|
|Marketed in December||105%||105.2%||103.9-105.8%|
Beef Cutout at Midday Friday
Choice dn 0.54 214.78
Select dn 0.76 210.44
C/S Spread 4.34
Carcass dn 1.24 77.60
Bellies up 0.13 115.52
hd today hd wk ago hd yr ago
hd today hd wk ago hd yr ago
- Corn dn 3 1/2 – 6 1/2
- Soybeans dn 4 1/2 – 8 1/2
- Chicago Wheat dn 4 3/4 – 7
- Kansas City Wheat dn 5 1/4 – 6 1/4
- Live Cattle dn 0.37 up 0.17
- Feeder Cattle dn 0.42 – 0.97
- Lean Hogs dn 0.90 – 1.90
- Class III Milk dn 0.08 up 0.05
Pre-opening Market Broker Commentary
Dan Smith, Top Third Ag Marketing, discusses overnight grains and what the trade may see today.
Jerry Stowell, Country Futures, discusses factors influencing the livestock trade today.
Mike Zuzolo, Global Commodity Analytics, shares his thoughts on the midday trade factors.
Closing Market Broker Commentary
Closing commentary with John Payne, Daniels Ag Marketing, and Jack Fenske, York Commodities.