As the week comes to a close the equities are moving higher with hopes back on the horizon of another round of stimulus. Grains continue to trade with wide daily ranges as the February WASDE draws closer. Livestock have been on both sides of unchanged, but look to put gains on for the week as a whole.
In the outside markets the US dollar index has made a turn around on the week. This comes as the dollar is more favored over the Euro with Europe facing recession challenges. The Eurozone sounded the recession alarm early on in the week as they released their 4th quarter GDP estimates -0.7%. That showed an annual decline of 5.1% . That was less than expected. Unfortunately, economists are calling for steeper losses for the first quarter of this year due to strict lockdowns and restrictions designed to slow the spread of Covid-19. Furthermore, German retail sales fell 9.6% in December, which was much worse than the 2.6% decline expected by analysts. The data sent the euro sharply lower on global currency markets, as it suggests that Europe will have a greater struggle to rebuild its economy. With the Euro lower the US dollar index started to climb higher and moving back into multi month highs.
In the grain complex it’s been a week of back and forth. While contracts often end near where they open there have been several sessions of 20 plus cent trading ranges in corn, soybeans and wheat. This comes as prices continue to test near record highs and continue to attract inflationary bias. Early estimates are coming out for the February WASDE report and US carryout stocks are expected to continue tightening. The average estimate for US carryout stocks on soybeans is 119 million bushels, corn 1.363 billion bushels, and 834 million bushels of wheat.
Speaking of wheat it has caught the brunt of most of the selling this week. The pressure came from Russia continuing to sell wheat despite increasing pressure to curb exports. Egypt’s GASC tendered several cargoes of wheat on Tuesday morning. The average cost was much higher than recent tenders. Egypt purchased French, Romanian, Ukrainian and Russian wheat. The prices ranged from $293/MT to over $300/MT. Russia continues to promote that it will put a 50 euro per MT tax on wheat exports as long as prices stay below $300/MT, but it will go to 70 euros/MT if the price rises above $300/MT. With current price levels several analyst believe that US and Canadian wheat are close to being price competitive in the global market.
Corn continues to see the benefits of the large sales last week from China. However China has been quiet this week with no flash sales going to China as of Thursday. According to USDA export sales released Thursday showed US net sales of 7,436,500 MT or 292 million bushels for 2020/2021. That is a marketing year high and nearly doubled the one week sales record set in December 1994. Sales were primarily to China (5,860,400 MT, including decreases of 100 MT), the second top purchaser was Japan at 502,900 MT. While the sales of corn look great on paper delivery of the corn is going to be more important. To date actual shipments still trail the pace to hit USDA’s export goal by 64 million. While export sales top USDA’s goal by 578 million bushels.
Soybeans continue to play on the fact that the US has extremely tight supplies and South America continues to battle issues on all levels of production and marketing.
South America continues to experience weather troubles. Brazil’s area’s with soybeans ready to harvest are continue to receive rain. Agrural estimates as of January 28th only 1.9% of Brazil soybeans have bee harvested. That is 7% behind where it was a year ago and the slowest start to the soybean harvest in the last ten years. Delays in soybean harvest may also delay the safrinha corn crop. Which is typically planted in February. Argentina has part of the their corn already planted, but it the crop is facing headwinds as it nears critical stages of reproduction. The long range forecasts are again turning dry for Argentina.
The livestock sector has been steadily rising towards the end of the week. Exports on Thursday helped both beef and pork. Beef net sales were at 29,800 MT; South Korea was the largeset purchaser at 10,000 MT, China made a record purchase of US beef at 7,000 MT. As for pork export net sales were 46,300 MT. China was the top purchaser of US pork at 17,900 MT followed quickly by Mexico at 10,300 MT,
The carcass cutouts continue to be strong, but after several weeks of steady increases the choice and select cutout have started to move lower. The pork carcass and pork bellies continue to steadily add gains.
Cash cattle finally started to devlop on Thursday. Nebraska sold 2,500 head at $178-$180 dressed. A regional packer bought 500 head in Iowa at $114 live. That would be steady to $1 higher than the previous week. Friday will likely see the majority of the trade for the week.
The Texas Cash Pool sold 688 head at $113.22, with the other bids coming in at $112.65, $112.51, and $113.05. Last week’s winning bid was $112.55, making this week’s sale $0.67 stronger.
The Fed Cattle Exchange Auction today listed a total of 1,362 head, of which 699 actually sold, 663 head went unsold, as they did not meet the reserve prices, that ranged from $113.50 to $115. Opening prices ranged from $111 to $112.50, high bids ranged from $113.25 to $113.75. The state by state breakdown looks like this: TX 1,186 total head, with 604 head sold at $113.75, 582 head were not sold; OK 95 total head, with all 95 head sold at $113.50; KS 81 total head, all of which went unsold.
The Special Fed Cattle Exchange Auction relisted unsold lots from Wednesday on Thursday. The special auction listed a total of 663 head, of which only 175 head actually sold, 488 head were listed as unsold, as they did not meet the reserve prices, that ranged from $114 to $115. Opening prices ranged from $111 to $112.50, high bids ranged from $111 to $113.75. The state by state breakdown looks like this: TX 582 total head, with 175 head sold at $113.75, 407 head went unsold; KS 81 total head, all went unsold.
For the week ending January 23, 2021, Imported Beef Passed for Entry in the U.S. totaled 35,985, 95.06% of the previous week and 107.64% of the 4-week average.
Expected Slaughter numbers Thursday
113,000 hd today 119,000 hd wk ago 121,847 hd yr ago
493,000 hd today 496,000 hd wk ago 491,830 hd yr ago
Midday Carcass Value Thursday
Choice dn 0.28 235.00
Select dn 2.13 221.36
C/S Spread 13.74
Carcass up 6.07 86.30
Bellies up 15.91 139.48
- Corn dn 2 up 3/4
- Soybeans up 1/4 – 4
- Chicago dn 4 1/2 – 10 3/4
- Kansas City dn 4 1/4 – 6 3/4
- Livestock Settlements
- Live Cattle up 0.12 -1.30
- Feeder Cattle up 0.32 -0.97
- Lean Hogs dn 1.35 up 0.10
- Class III Milk dn 0.03 up 0.09
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, shares that the net export sales of corn last week was a record.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Cash cattle has yet to develop. The Fed Cattle Exchange will try to sell the unsold cattle from Wednesday on Thursday.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Grains are mixed at midday with wheat the leader to the downside.
John Payne, Daniel’s Ag Marketing, takes a closer look at today’s grain close. Grains have another day of wide trading ranges.
Jack Fenske, York Commodities, looks at the closing market numbers. Fenske is closely watching the wheat market at critical levels of support.