- Summed up in one word YUCK
- Rains in South America
- Lack of rains here in the U.S.
- Beans back to pre-report prices
- Basis to remain unchanged-short term
- Cattle welcomed lower corn
- Why the down markets the past two days?
- What is the takeaway?
- What’s going on in SA weather & their crops
- Latest with wheat, but they are pulled down by corn & beans
- Are there more export taxes being talked about?
- Money supply in the long term
- Cattle futures disappointed in Texas trade
- Hogs pushed some green on the screen
The future has finally come to fruition this week as the Biden Administration takes the oath and officially assumes the Presidency. The equities continue to lick their chops on coming fiscal stimulus. While there is the concern what happens with Covid-19 under the new administration and growing cases around the globe.
The week was fairly light on economic data with nothing Monday or Tuesday. Towards the end of the week though the housing data available is fairly strong. Housing starts rose to an annualized rate of 1.669 million units in December, beating analyst expectations of 1.558 million. Furthermore, November starts were revised to 1.578 million, up from the 1.547 million originally reported. Permits for new housing starts rose to 1.709 million in December, up from 1.635 million the previous month and beating analyst expectations of 1.610 million.
Back to the topic of the next round of federal stimulus. All the information around the stimulus plan to this point has been that it will be around 10% of the US GDP or 1.95 trillion dollars. Even with this strong shot into the economy there is no plan for the Federal Reserve to back down from their current stimulus plans. The Fed is currently pumping $120 billion per month into the economy. That makes the Fed balance sheet $7.3 billion, up 77% over the past year. M1 money supply is at $6.7 billion, up 70% year-on-year. The nation’s fiscal debt sits at $27.8 trillion. It’s that fear of debt overload that is keeping equities in check. The incoming debt has also taken it’s toll on the US dollar. The US Dollar Index continues to trade around 90.10 which is basically a multi year low.
Before the official transition of power rhetoric against China in the US heated up. With both the outgoing Trump administration firing it’s final volley at China and the incoming Biden administration making strong statements. Treasury Secretary pick Janet Yellen said she would take a stiff stance against China in her senate confirmation hearing. Then the State Department labeled the Chinese government’s policies targeting ethnic Uighur Muslims and other minorities in the northwest region of Xinjiang as “genocide.” China’s foreign ministry has fired back telling AP, “Outgoing U.S. Secretary of State Mike Pompeo is a “doomsday clown” and his designation of China as a perpetrator of genocide and crimes against humanity was merely “a piece of wastepaper.”
The major concern for most traders and analyst is that China will use it’s most powerful economic weapon and not purchase exports from the US. However that hasn’t happened yet as China appears somewhat dependent on US commodities as South America gets off to a slow harvest.
USDA announced in flash sales of 136,000 MT of soybeans, and 132,000 MT of soybeans to China this week. China was also the destination for 46.8 million bushels of US soybeans last week.
Not helping China stop buying from the US is the South American supply is still slow in coming to the ports. Mato Grasso Brazil’s soybean harvest as of Monday was estimated to only be 1% complete. That was 4% behind the 5 year average. Argentina is now experiencing a truck driver strike and Stone X is reporting that only 10% of the normal truck traffic is moving commodities to the ports in Argentina.
With all of this in mind the grain market was lower though out the week. The lower prices started last Friday and momentum traders made sure to stay in the market through Thursday. Corn was able to make a slight turnaround on Thursday. Overall though one day and one week do not establish a new trade direction. The long term trend still looks friendly with strong to steady demand in the world. Along with supplies that continue to look tight or at least inaccessible at the current time.
The livestock market has steadily moved higher all week. Feeder cattle continue to unwind spreads against the grain. The cash feeder cattle market continues to see large volume this week, but mixed prices. Kyle Bumsted touched on these points in his Thursday appearance on the Fontanelle Final Bell. He expects volume to decrease over the next couple weeks as pens are filled and no one is ready for grass cattle yet.
Technically speaking the April live cattle contract may have finally had a break through being able to top $120 on Thursday and settling at $119.95. However if follow through support doesn’t develop on Friday $120 could continue to be a point of resistance. The intermonth spreads are also low for this time of year. Most calendar spreads stands just around $5 and is usually closer to $10 this time of year.
Lean hogs were soft and followers of the soybean market early on, but were able to establish their momentum by Thursday. A higher cash index and stronger carcass cutout helped to turn the market. Most notably was a sharp increase in picnic, ham and belly prices.
Reuters reported Thursday night that China is now seeing new strains of the African Swine Fever virus that may be coming from illicit vaccines. According to Reuters the new strain isn’t as deadly, but can still substantially impact production with low performing litters and fewer live births.
Cash cattle started to trade in Kansas and Texas Wednesday after the Fed cattle exchange with live cattle trading at $110. Dressed trade followed suite in the North on Thursday ranging $169-$173. Both live and dressed prices continue to be about steady with last week.
The Fed Cattle Exchange Auction today listed a total of 1,547 head, of which 567 actually sold, 980 head were listed as unsold, as they did not meet the reserve prices, that ranged from $110 to $112. Opening prices ranged from $108 to $109, high bids ranged from $110.50 to $111. The state by state breakdown looks like this: KS 299 total head, all 299 head sold at $110.75(grid based); TX 1,248 total head, with 268 head sold at $110.50-$111.00(live), 980 head went unsold.
For the week ending January 09, 2021, Imported Beef Passed for Entry in the U.S. totaled 34,280, 133.91% of the previous week and 109.63% of the 4-week average.
Expected Slaughter numbers Friday
117,000 hd today 116,000 hd wk ago 121,042 hd yr ago
69,000 hd Sat 61,000 hd wk ago 33,009 hd yr ago
496,000 hd today 495,000 hd wk ago 489,549 hd yr ago
322,000 hd Sat 257,000 hd wk ago 328,536 hd yr ago
Midday Carcass Value Friday
Choice up 1.85 223.05
Select up 3.24 213.52
C/S Spread 9.53
Carcass up 3.64 83.90
Bellies up 7.48 133.92
- Corn dn 18 1/2 – 23 3/4
- Soybeans dn 56 1/2 – 58 1/2
- Chicago dn 23 1/4 – 26 1/4
- Kansas City dn 21 1/2 – 22 1/2
- Livestock Settlements
- Live Cattle up 0.75 – 2.62
- Feeder Cattle up 1.37 – 5.00
- Lean Hogs up 1.52 – 2.25
- Class III Milk dn 0.01 up 0.27
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, comments that grains sold off in the overnight trade, but came off their lows following the export sales report.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Livestock may see selling pressure given the risk off sentiment in the equities.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. The grain complex moved into full risk off territory at the midday.
John Payne, Daniel’s Ag Marketing, takes a closer look at today’s grain close. Grains sell off sharply, but Payne see’s opportunity ahead.
Jack Fenske, York Commodities, looks at the closing market numbers. The Friday selling was more intense then Fenske expected and he is ready to sell rallies.
- Input cost worries?
- Tough day in the grains with lower prices
- Huge news week in the U.S. & globally
- With all this outside influence how is that effecting our markets
- What goes up has to come down once & awhile
- Mixed livestock cattle trade
- Lower hogs
- Crop report
- Trying to find levels to ration
- South American weather
- Harvest progress in South America
- Russia trying to slow down quotas
- Livestock structure is changing due to high prices grain
- Contract highs on the livestock
- Markets are closed Monday…but the rest of the world is trading
- How did today’s trade surprise?
- Strong farmer selling…lines at the elevators
- How has the basis changed in the past couple of days?
- Could we continue to go up?
- South American weather
- Ethanol demand?
- Are the grain markets overbought?
- Cattle…where are things at & why not a better run?
Higher priced corn early in the week brought some emotion into the trade. Will we see cattle sell quicker? Demand for meat both in home & at restaurants has been good. This weeks Cattle Call looks at this and more with Brad Kooima.
- Return of the emotions of the markets yesterday
- Wheat still dealing with Russia
- Is there a big reversal in the weather pattern at the end of this month for South America?
- USDA numbers pretty close to StoneX numbers
- Sept 1 corn stalk numbers were adjusted as well this week
- Higher corn-how have cattle been reacting?
- WASDE Report
- How did the USDA get to those USDA numbers?
- What will the overnight & Wednesday trade be like?
- Corn/Bean/Wheat info
- How will livestock continue to react?
USDA today released its January Crop Production, World Agricultural Supply and Demand Estimates (WASDE), Quarterly Stocks and Winter Wheat Seedings reports.
WHEAT: The outlook for 2020/21 U.S. wheat this month is for stable supplies, higher domestic use, unchanged exports, and lower ending stocks. Feed and residual use is raised 25 million bushels to 125 million on lower-than-expected second-quarter stocks reported in today’s NASS Grain Stocks report. Seed use is up 1 million bushels to 63 million, reflecting 2020/21 wheat planted area released today in the NASS Winter Wheat and Canola Seedings report. Projected 2020/21 ending stocks are reduced 26 million bushels to 836 million, down 19 percent from last year. The season-average farm price is raised $0.15 per bushel to $4.85 based on NASS prices reported to date and expectations for futures and cash prices
for the remainder of the marketing year.
The 2020/21 global wheat outlook is for smaller supplies, increased consumption, higher exports, and reduced stocks. Supplies are lowered 1.6 million tons to 1,072.7 million on reduced production in China and Argentina more than offsetting an increase for Russia.
Corn sent to limit gains following USDA data drop Tuesday | Jeff Peterson – Heartland Farm Partners
China’s production is reduced 1.8 million tons to 134.3 million on the National Bureau of Statistics estimate. Russia’s production is raised 1.3 million tons to a new record of 85.3 million, based on estimates from Russia’s statistical agency Rosstat, surpassing the 2017/18 crop. Argentina’s production is reduced 0.5 million tons to 17.5 million on updated harvest results to date and this would be Argentina’s smallest crop in five years. World 2020/21 consumption is increased 1.8 million tons to 759.5 million, mostly on higher feed and residual use for China and the United States and greater food, seed, and industrial (FSI) use for Russia. Continued high domestic corn prices in China are expected to result in further wheat feed use as projected 2020/21 wheat feed consumption is raised 1.0 million tons to 25.0 million, up 32 percent from last year. Russia’s FSI consumption is raised 500,000 tons to 23.5 million with greater supplies.
COARSE GRAINS: This month’s 2020/21 U.S. corn outlook is for lower production, reduced corn used for ethanol, smaller feed and residual use and exports, and decreased ending stocks. Corn production is estimated at 14.182 billion bushels, down 324 million on a lower yield and slight reduction in harvested area.
Total corn use is down 250 million bushels to 14.575 billion. Exports are down 100 million bushels, reflecting sharply lower supplies and higher expected prices. Corn used for ethanol is lowered, based on data through November from the Grain Crushings and Co-Products Production report and weekly ethanol production during December as indicated by the Energy Information Administration. Feed and residual use is reduced 50 million bushels to 5.650 billion, based on indicated disappearance during the September-November quarter. With supply falling more than use, corn stocks are lowered 150 million bushels to 1.552 billion. The season-average corn price received by producers is raised to $4.20 per bushel.
Sorghum production is estimated 2 million bushels higher as increased harvested area more than offsets a reduction in yield. Food, seed, and industrial use is lowered 10 million bushels on lower sorghum used for ethanol. Exports are raised 15 million bushels reflecting larger exports to China.
Global coarse grain production for 2020/21 is forecast down 9.3 million tons to 1,438.5 million. This month’s foreign coarse grain outlook is for lower production and consumption, and smaller ending stocks. Foreign corn production is reduced with declines for Argentina and Brazil more than offsetting increases for China and India. For Argentina, dryness during December reduces yield prospects for early-planted corn in key central growing areas. Brazil is lowered reflecting reduced yield expectations for first-crop corn in southern Brazil.
OILSEEDS: U.S. oilseed production for 2020/21 is estimated at 122.4 million tons, down 1.25 million from the previous report. Smaller soybean, peanut, and cottonseed crops are partly offset by an increase for canola and sunflower seed. Soybean production is estimated at 4.135 billion bushels, down 35 million led by reductions for Minnesota, Iowa, and Kansas. Harvested area is estimated at 82.3 million acres, up slightly from the previous report. Yield is estimated at 50.2 bushels per acre, down 0.5 bushels. With higher imports and slightly higher beginning stocks, soybean supplies are down 14 million bushels from last month.
The soybean crush forecast is raised 5 million bushels to 2.2 billion, reflecting improved prospects for soybean meal exports with a lower export forecast for Argentina. The soybean export forecast is raised 30 million to a record 2.23 billion bushels. With lower supplies and increased use, ending stocks are projected at 140 million bushels, down 35 million from the previous forecast.
Soybean and soybean product prices are forecast higher this month. The U.S. seasonal average soybean price for 2020/21 is projected at $11.15 per bushel, up 60 cents as cash prices in Central Illinois reach 6-year highs. The soybean meal price is projected at $390 per short ton, up 20 dollars. The soybean oil price is forecast at 38.5 cents per pound, up 2.5 cents.
Foreign 2020/21 oilseed production is relatively unchanged, with higher sunflower seed mostly offset by lower soybean, cottonseed, peanut, rapeseed, and palm kernel output. Sunflower seed production is increased 0.5 million tons to 13.5 million for Russia based on recent government estimates. Soybean production is lowered 2 million tons to 48 million for Argentina and 0.2 million to 2.2 million for Uruguay, reflecting dry weather conditions in December and early January. Mostly offsetting lower South American soybean production is a 2.1-million-ton increase to 19.6 million for China on recent government data. Global soybean stocks are lowered 1.3 million tons to 84.3 million, with lower stocks for Argentina and the United States that are partly offset by higher stocks for China.
LIVESTOCK, POULTRY, AND DAIRY: The 2020 total red meat and poultry production estimate is reduced from last month. The beef production estimate is reduced on lower cattle slaughter. The pork production estimate is reduced as the slower pace of slaughter in late 2020 more than offset heavier carcass weights. The broiler production estimate is reduced on recent hatchery and slaughter data, while the turkey production estimate is lowered or recent production data. The egg production estimate is unchanged.
For 2021, the total red meat and poultry production forecast is lowered from the previous month as lower expected beef, broiler, and turkey production more than offsets higher pork production. Lower expected placements in late 2020 will impact fed cattle supplies in mid2021. Cattle carcass weights are forecast lighter for 2021. USDA will release its semiannual Cattle report on January 29, providing estimates of heifers held for breeding and an insight into the number of feeder cattle available for placement during 2021.
The pork production forecast for 2021 is raised from the previous month as higher expected hog slaughter more than offsets lighter expected carcass weights. Broiler, turkey, and egg production forecasts are lowered for 2021 as higher feed costs are expected to slow production growth.
The beef import estimate for 2020 is reduced on recent trade data while the 2021 import forecast is reduced primarily due to lower expected imports from Australia. Beef exports for 2020 and 2021 are raised from last month. Pork exports for 2020 and 2021 are lowered from last month on weaker import demand from key trading partners. The 2020 broiler export estimate is raised on recent trade data, but no change is made to the 2021 export forecast.
Livestock and poultry price estimates for 2020 are adjusted to reflect December price data. For 2021, cattle prices are raised on a lower production forecast. The 2021 hog price forecast is raised, reflecting strong domestic demand. Broiler prices are raised as lower forecast production in the second half of the year is expected to support firmer prices.
Mike Zuzolo breaks the report down here: