The market coming back from Thanksgiving is mixed, but near record highs for the equities. Traders right now are trying to decide between the looming economic impact of lockdowns across the globe and hopes of a vaccine that could roll out in 2 weeks in the US.
Economic data on Wednesday was positive with the second reading of third quarter gross domestic product revealed that GDP grew at a robust 33.1% pace on an annualized basis, unchanged from the first reading last month and matching analyst expectations. Personal consumption expenditures grew at an annualized rate of 40.6%, down slightly from 40.7% initially reported and from analyst expectations of 40.8%. There is no question that we saw a robust recovery in the third quarter following this spring’s shutdown in the economy to slow the spread of coronavirus.
The grain complex comes into the end of the week in pullback mode with the bullish fundamentals still sitting strong. Most analyst are viewing the current selling as something that was coming sooner rather than later. The net long fund position going into this shortened trading week was the largest it had been since July 2013. With many traders and fund managers stepping away from the office for Thanksgiving protecting profit was a top priority. With the current dip this could give an opportunity for speculative funds to come back into the market once again.
Overall the main driver of the rally continues to be dry South American weather. Area’s in Southern Brazil have seen less than 50% of their typical rainfall to this point in the growing season. With most of the soybeans emerged and growing analysts liken the current time frame the 4th of July in the US. rain is needed sooner rather than later to help the crop really develop. Which could happen for Northern Brazil which is typically favored my more rains in a La Nina weather pattern. How much rain the North gets though could determine if the Northern production can help offset the losses in Southern production.
With the South American crop still being a big unknown the supply side of the market dominates the story the trade is looking at. However the demand side of the story is starting to dry up it appears. USDA has announced very few flash sales this week and it’s been several weeks since China was the headlining buyer. There is even rumor Wednesday that China has washed out or cancelled several option origin soybean contracts. The major thing to understand with this rumor is that it is likely small Chinese crushers that did not have hedges in to protect against this sharp run up in prices. Crusher margin in China is flat to near negative so small crushers may cancel imports to wait for more favorable prices possibly from South America in a few months.
As for corn it continues to play between corn and wheat, but finally got some positive news this week with a rally in energy prices. Crude oil ran up 4+% on Tuesday into Wednesday with WTI prices back near $45/barrel. With energy prices finally getting off the ground ethanol may finally have a chance in 2020. According to EIA data on Wednesday US ethanol production rose to an 8 month high of 990,000 barrels per day for the week ending November 20. That was still below the 1,059,000 barrels per day being produced last year at this time. US ethanol stocks also climbed 700,000 barrels to 20.9 million. Estimated corn used in ethanol production rose to 102 million bushels weekly. With 1.119 billion bushels consumed so far in 2020. That is 5.4% or 64 million bushels lower than last year.
- In the wheat trade Tuesday was a good day as buyers finally got the break in winter wheat condition ratings that they had been waiting for several weeks. The US winter wheat crop dropped 3% to 43% good to excellent. Then Wednesday rain looked more favorable in the Black Sea forecast and sellers returned to the market.
The livestock complex has broken away from the grains has made positive gains up to the trade on Friday. Live cattle have lead the way building off support from the recent cattle on feed report. The boxed beef cutout has also supported cattle bulls continuing to appreciate through Thanksgiving. Traders are curious to see where protein demand falls this year with Thanksgiving looking different for many families across the country. Smaller gatherings could indicate more willingness to purchase higher priced cuts of beef and pork. Instead of the traditional turkey.
Friday will also host the USDA export sales and shipments report. Beef exports were strong last week, but pork was starting to dwindle as China pushes the story of it’s hog herd rebuilding. There also hasn’t been any recent data to suggest that food inflation is still rampant in China so state held reserves maybe finally started to fill up.
It’s also key to note in the livestock that Arlan Suderman with Stone X pointed out in the Fontanelle Final Bell on Wednesday that Tianjin officials in China are blaming the source of its latest COVID-19 outbreak on pork products originating from the United States. This has not been confirmed by any of China’s major news outlets or publications, but could be the early signal that China looks to shift policy on US pork imports.
Cash trade in the country was slowly developing Wednesday afternoon with cattle in Eastern Nebraska trading at $111 live. There was also reported trade in Iowa at $110 live and $172 dressed. While not enough to establish a full market trend that would be steady to $1 higher if it continues. There were also bids of $111 live $172 dressed in Kansas, Texas and Western Nebraska. Feeders were passing on the offers though digging in for better cash on Friday with support from the futures trade.
For the week ending November 14, 2020, Imported Beef Passed for Entry in the U.S. totaled 39,950, 101.08% of the previous week and 93.00% of the 4-week average.
Expected Slaughter numbers Wednesday
121,000 hd today 121,000 hd wk ago 118,520 hd yr ago
495,000 hd today 493,000 hd wk ago 479,094 hd yr ago
Midday Carcass Value Wednesday
Choice up 0.62 244.92
Select up 1.40 221.11
C/S Spread 23.81
Carcass up 0.56 78.14
Bellies dn 0.20 93.25
- Corn dn 2 1/4 – 5 3/4
- Soybeans dn 7 1/4 – 8
- Chicago Wht dn 15 – 23
- Kansas City Wht dn 17 1/4 – 20 1/4
- Livestock Settlements
- Live Cattle up 0.20 – 0.45
- Feeder Cattle up 0.60 – 1.15
- Lean Hogs up 0.52 – 0.92
- Class III Milk dn 0.25 – 0.33
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. Soybeans hit $12 overnight, but rain in Argentina could pull the bulls back. No Mark Gold commentary 11/24-11/25 due to technical difficulties in recording.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Cattle are looking for a firmer open after a friendly cattle on feed report. No Jerry Stowell commentary 11/24-11/25 due to technical difficulties in recording.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Grains are moving lower, but livestock are trading higher on solid fundamentals.
John Payne, Daniel’s Ag Marketing, takes a closer look at today’s grain close. Payne see’s the selling as traders going into first notice day and wanting to square up positions. This could be a dip that encourages more commercials and funds into the market.
Jack Fenske, York Commodities, looks at the closing market numbers. Grains pull back with profit taking.