Market Recap Thursday 7-2
Commodity markets close early on Thursday. No trade on Friday.
We are now on the down hill slide of 2020. The good news it is starting with an petite for risk. After one of the worst quarters equities rallied through the 2nd quarter for one of their best performances since Black Monday in 1987. Economic reports continue to show the US economy reopening strong. The labor market is coming around with the latest non farm payroll data grew by 4.8 million. Beating analyst estimates of 3.7 million. That dropped unemployment to 11.1%. That is a drop from 13.3% in May. The US trade deficit also grew to $54.6 billion. Up from May’s $49.8 billion. The pending home sales index 44.3% beat May’s -21.8%. Consumer sentiment is up to 90.8 vs. last months 86.6. The case schiller home index ticked up 0.1% to 4.7%.
The US Dollar index finally broke through nearby support levels on Wednesday. The latest production numbers showed that product demand is returning in the US. That seemed to shift investors from wanting to hold the dollar as a safe haven to selling it and re-investing in production assets. Just ahead of the long weekend emerging currencies like the Russian Ruble and Brazilian Real are moving higher against the US Dollar.
Grains found a small rally Tuesday after the stocks and acreage report. USDA dropped corn acreage from nearly 97 million acres to 92.006 million acres. Soybean acres according to USDA are 10% higher than 2019 at 83.825 million acres. Mike Zuzolo, Global Commodity Analytics, pointed out in his midday commentary that USDA left 12 million soybean acres un-planted. Corn stocks were up almost 1% from 2019 to 5.22 billion bushels. Soybeans stocks were 22% lower than 2019 at 1.39 billion bushels. Old crop wheat stocks were 1.04 billion bushels down 3%. Weather will likely now move back to center stage. Forecasts look to be hot and dry to start July.
The support from the acreage report appears to have slowed by Thursday. Grains closed lower across the board. Partially in a profit taking move ahead of the extended holiday weekend. A looming WASDE report next week is also keeping some longs from entering the market. The main concern that the world outlook board will keep the US corn carryout for the next marketing year near 3 billion bushels.
Thursday’s export data was mixed for all grains. China was a less notable buyer, but was still the top destination for sorghum. Corn exports were also a marketing year high at 1,439,900 MT. Mexico and South Korea were the top destinations. Egypt was the top destination for US soybeans taking in over 146,000 MT. Net sales of soybeans were at a marketing year low at 241,000.
Wednesday’s ethanol production data was also a bullish factor for corn. EIA data showed for the week ending June 26, ethanol production increased 0.8%, or about 7,000 barrels per day (b/d), to 900,000 b/d. That is nearly 70% higher than it was 9 weeks ago, but is still 16.6% behind a year ago. Ethanol stocks continue to shrink for the tenth consecutive week. Ethanol stocks were down 4.1% to 20.2 million barrels and 11.7% below year-ago volumes. Inventories tightened across all regions and are at their lowest level since the first week of 2017.
The first of July is also the starting day for the new USMCA trade agreement. This could help boost North American demand for ag commodities. There are still a few tensions between the three trade partners like Mexican labor standards or Canadian protection of dairy.
USDA announced to flash sales on Thursday. For the 20/21 marketing year China bought 202,000 MT of corn and 126,000 MT of soybeans.
Weather is also still a lurking bull market maker. With most of the fall crops getting planted earlier than usual this year, a hot and dry July would not be good. Analyst believe though the crop is still looking fairly strong as farmer buying to cover forward contracts doesn’t seem to be happening yet. If the crop starts to burn up and farmers believe they can’t fulfill forward contracts that could bring farmer buying. Overall that scenario would create major momentum to the upside.
On Monday the weekly export inspections report from USDA showed corn, wheat and sorghum all making the needed number to meet USDA export expectations.
Livestock were broadly moving higher until the stocks and acreage report. That is when corn cattle spreads starting unwinding. Wednesday the selling hit cattle again, but midday profit started being taken and that helped cattle close in the green. Cattle found follow through on Thursday and actually reversed the positive basis to the cash. This could cause there to be weakness in the complex going into next week. Lean hogs on the July contract continue to trade under the $45 mark. This could set up bear spreading against the August contract as July goes off the board. There is also continued news reports from China that another virus may be emerging that impacts the hog herd. This comes as African Swine Fever is still active in China and impacting hog numbers. Lean hogs saw limited buying throughout the day. Grilling looks to be a go for many this Independence day. Going into next week though carcass prices could weaken as demand typically drops slightly after the fourth of July.
A light scattered trade was reported in a couple of areas on Thursday. Prices were generally steady with the bulk of deals earlier. Southern live business this week has had a full range of $91 to $96, mostly $94 to $95, while Northern dressed deals have had a full range of $148 to $155, mostly $153 to $155. For the cattle left on show lists Thursday afternoon asking prices were around $96 plus in the South, and $158 in the North.
The Fed Cattle Exchange Auction today listed a total of 1,814 head, with 144 actually sold, 1,352 head listed as unsold, and 318 head listed as PO (Passed Offer). The state by state breakdown looks like this: KS 1,155 total head, with 144 head sold at $95.00, 693 head unsold, 318 head listed as PO ($93.00); NE 194 total head, with no cattle sold; TX 465 total head, with no cattle sold. The delivery date/weighted averages breakdown is as listed: 1-9 day delivery: 768 head total, 144 head sold, with a weighted average price of $95.00; 1-17 day delivery 1,046 head total, with no sales.
Expected Slaughter numbers Thursday
121,000 hd today 120,000 hd wk ago 2,000 hd yr ago
461,000 hd today 472,000 hd wk ago 23,000 hd yr ago
Midday Carcass Value Thursday
Choice up 0.16 205.54
Select dn 0.13 198.30
C/S Spread 7.24
Carcass up 3.86 67.48
Bellies up 2.95 92.42
- Corn dn 3 1/2 – 7
- Soybeans dn 1/4 -2 1/4
- Chicago Wht dn 4 1/2 – 8 3/4
- Kansas City Wht dn 7 1/2 – 15 1/4
- Live Cattle up 0.32 – 2.10
- Feeder Cattle up 1.47 – 2.55
- Lean Hogs dn 0.07 up 0.82
- Class III Milk up 0.12 – 0.54
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. There could be profit taking ahead of the long weekend.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Grain selling ahead of the long weekend is somewhat expected.
John Payne, Daniels Ag Marketing, looks at the grain settlements. Weather is still being watched closely Grains found follow through support to start the new month. It may be time to consider sales.
Jack Fenske, York Commodities, looks at the closing market numbers.