As Monday’s trade starts to wind down there were a few bulls to mention, but there are plenty of bears still in the forest. The equities continue their rally with the DOW Jones up over 1,000 points on the day. The wheat complex seems to have bullish momentum, but as John Payne said in his afternoon commentary, “Wheat may have to rally alone.” Energies are still lower in the afternoon trade Russia and Saudi Arabia moved the next OPEC meeting date from today to Thursday. There’s also starting to be the concern of whether or not a 10 million barrel per day production curb will be enough given the global pandemic has caused a drop of between 20-30% in crude oil consumption.
Back to the positives and the bulls on the day. The equity rally started in the overnight trade with New York showing a possible peak in cases and deaths related to Covid-19. There were no major economic reports for Monday, but Tuesday will bring job openings and consumer credit. Thursday will bring the latest jobless claims which have continued to rise the past two weeks. These reports could bring the bulls back to earth, but if the peak trend continues across the country for the next ten days trader may fully shift focus from where is the bottom in this pandemic to recovery from the pandemic.
In grains wheat continues to feed the global supply and demand bull. Ukrainian wheat exports are down 50% from the previous week. Last week Russia’s Ag ministry also announced that they would be limiting wheat and other grain exports to just 7 MMT through June 1. The first nationwide NASS crop progress report will be dropped at 3 PM CST this afternoon and it will give the first look at how the US wheat crop looks as a whole. We will also get the first look at planting numbers in the delta and Texas. Weather forecasters are predicting more cold temps for next week with some possible light freezes. Depending on where NASS pegs the joint stage of the wheat as to how bad the cold may impact the crop. Traders are also aware of the record low wheat acres in the US.
As for corn it continues to battle poor technical signals and the anchor of ethanol. On Thursday we will get the latest supply and demand numbers from USDA and the World Outlook Board. This may give us the first glimpse of just how much ethanol demand has been destroyed. As for the technical picture on Friday May corn broke below the March 18th contract low of 3.32 to 3.28. This puts it back to a late 2017 low with the next level of support at 3.25 and the bottom bollinger band of 3.22. If corn was able to gain bullish momentum it wouldn’t have resistance to the upside until it’s 10 day moving average at 3.41 3/6. For Mondays trade it continued to chisel away lower.
Soybeans were able to make small gains on the day, but may not be able to hold them this week. Not helping the bulls is bottlenecks in Argentina’s shipping routes look to be starting to clear up. The May contract still has a ways to go before it starts to enter into the same downfall as corn. The contract low for May soybeans still sets at 8.21 which is about 34 cents away from the Monday settlement price. The ten and twenty day moving averages are also inverted with the twenty below the ten day. This could cause some traders to target those lines until they work back above each other. Another part of the soybean complex to keep a close eye on is the meal market. It settled either on or near it’s lows on Monday. Typically where the meal goes the beans follow. Monday was an exception to that rule, but how long can it last.
Livestock opened in the red, but mid afternoon rallied back to get almost the entire complex in the green. April and June live cattle were the only ones lower. April did settle limit lower and will likely mean expanded limits again on Tuesday. The trade is still trying to process the unknown of demand right now. Food service definitely taking a hit, but many food service businesses are offering take out and curb side service. Places like stadium concessions and food courts are shut down so there will be demand loss there. What and how much is the home consumer now buying is a big looming questions. Looking at the latest USDA retail meat prices pork and chicken may be more attractive to those out of work and stretching a dollar.
The latest USDA retail meat price report shows beef up a little last week. The 14-cut retail average was $5.42/lb last week compared to $5.18 the previous week. On a yearly comparison beef prices on the average are up only 3 cents a pound. As for individual cuts boneless rib eye roasts saw the biggest jump from $5.97/lb to $8.14/lb last week. Ground round and chuck were both up about 20 cents a pound last week. Ground round averaged $3.82/lb and ground chuck averaged $3.98/lb across the nation last week.
Cash was very light last week with most of the trade on Wednesday around the Fed Cattle Exchange at $112-$113 live. $180 dressed. $7-$9 lower than the previous week’s weighted average for both live and dressed.
At the time of this writing in the country is quiet. Bids and asking prices have yet to be established. Significant trade volume will likely be delayed until the second half of the week. New showlists appear to be mixed, higher in Texas, about steady in Nebraska/Colorado, and lower in Kansas.
Pork’s 4 cut retail average dropped about 15 cents a pound to 3.32/lb. 1lb sliced bacon jumped about a nickel a pound to $5.32/lb.
Chicken’s 2 cut retail average fell from $1.99/lb to $1.63/lb.
The big question this week is how short bought are the packers? They did little cash business last week. Monday slaughter numbers still look to be steady, but packers could be looking to throttle plants back as they try to navigate the uncertain demand times. Covid-19 is also impacting packers as several plants have had employees test positive or not show up for work due to Covid-19 concerns.
Slaughter numbers Monday
120,000 hd today 122,000 hd wk ago 120,665 hd yr ago
484,000 hd today 493,000 hd wk ago 475,656 hd yr ago
Midday Carcass Value Monday
Choice dn 0.70 229.74
Select dn 3.05 212.79
C/S Spread 16.95
Carcass up 2.01 59.38
Bellies up 2.45 36.55
- Corn dn 2 – 3 1/4
- Soybeans up 1 1/4 – 4 3/4
- Chicago Wht up 5 3/4 – 6 3/4
- Kansas City Wht up 3 1/4 – 4
- Live Cattle dn 4.50 up 2.30
- Feeder Cattle up 1.20 – 2.92
- Lean Hogs up 0.90 – 4.15
- Class III Milk dn 0.24 – 0.61
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. Gold likes to see wheat up in double digit territory in the overnight trade.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Equities are higher, but bids are lower for the open on livestock. Stowell thinks those will dry up by the actual open.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Zuzolo looks at how traders may still be positioning ahead of Thursday’s WASDE report.
John Payne, Daniels Ag Marketing, looks at the grain settlements. Payne wants to be a bean bull, but feels the market is to battered at the moment. Wheat may have to rally on it’s own.
Jack Fenske, York Commodities, looks at the closing market numbers. Fenske see’s corn and hogs as similar in the sell off nature. For that reason he is cautious to get into either market.