Tuesday 5/26 market recap.
The trade seems to favor the re-opening story on Wednesday morning. Instead of the US China tension story. That really seems to be at the root of what markets rise and fall on here towards the end of May and first of June. Still there is rumors in the trade that President Trump is considering stiff sanctions against China due to their treatment of Hong Kong and prison camps. Wedneseday is a little light for economic data early, but the beige book will be out later this afternoon. The beige book is where each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. An overall summary of the twelve district reports is prepared by a designated Federal Reserve Bank on a rotating basis. This could highlight issues that the pandemic has caused to the US economy.
Traders were treated to a bullish surprise on housing data Tuesday. Analysts expected a sharp decline in new home sales to an annualized rate of 495,000 in April. Sales actually improved in April to an annualized rate of 623,000. Homes buyers seem to be taking full advantage of record low mortgage rates.
Investors are also thawing their money from the safe haven of the US Dollar on hopes that the US economy is over the hump of Covid-19 and ready to start moving higher. The dollar went down well past it’s 100 day moving average on Tuesday evening. Wednesday morning it is coming around and is back to it’s 100 day moving average. We will see if the day trade can bring in some pressure to drive it down again. Crude oil is not liking a rebounding dollar as it starts to slide. That has pressure on the entire energy complex.
Grains returned to the bulls in the overnight on Tuesday. With little data out this week traders are closely watching for weather issue’s to develop. Over the weekend much the corn belt was able to fill in much of it’s dry area’s. The winter wheat belt received some moisture, but Western Kansas missed out on much of the moisture. Still the latest crop progress report shows winter wheat improving in quality. Nationally the crop improved 2% to 54% good to excellent. Kansas remained unchanged at 40% good to excellent. Nebraska improved 3% to 70% good to excellent. Colorado wheat farmers are still struggling with a poor crop as only 32% of the winter wheat is considered good to excellent. Corn and soybean planting continue well ahead of their five year average. Nebraska and Iowa are both 97% complete for corn planting. As expected North Dakota and Pennsylvania are just at the half way point for corn planting. This may help curb some corn acres, but for the majority the US looks to have another large crop developing.
There were no flash sales from USDA last week, but Tuesday got rolling with two sales. The first 264,000 MT of soybeans sold to China; 66,000 MT for the 19/20 marketing year and 198,000 MT for the 20/21 marketing year. Then unknown destinations purchased 216,000 MT of soybean meal for the 19/20 marketing year. Wednesday morning USDA announced 138,000 MT of soybean meal in the unknown order were bought by the Philippines for the 19/20 marketing year.
Monday export inspections showed week to week reductions for all grains except wheat. Corn was still fairly solid at 1,091, 972 MT vs. 1,182,471 MT. Soybean export inspections were 333,127 MT vs. 356,078 MT. Wheat export inspections were 535,691 MT vs 506,323 MT. Sorghum exports were 140,458 MT vs. 285,813 MT. All grains inspected for export thus far in the 2019-2020 marketing year is just over 90 MMT. That is still about 7.8 MMT less than the previous marketing year. The largest spread between marketing years is corn which is about 8.2 MMT behind the previous marketing year. Soybeans and sorghum are both ahead of the previous marketing year. Wheat is almost steady with the previous marketing year.
Livestock started the week strongly higher. The August feeder cattle will see expanded trading limits on Wednesday as they closed the $4.50 limit higher. Feeder cattle strong Tuesday gains come on the heels of last Friday’s USDA cattle on feed report. The report showed the lowest placements going into feed yards since the report started in 1996.
As for fed cattle there were still 11.2 million on feed as of May 1 and it is lower year to year, but sheds some light on how backed up cattle are from the lack of slaughter capacity. Thankfully that is improving with last week crossing the 500,000 hd mark for the first time in weeks. As slaughter capacity increases carcass cutouts are starting to come down from their highs. Last week the choice cutout fell over $53 near the $400 mark. Tuesday showed more declines as the choice cutout drop below $400 for the first time in nearly a month. Load count continues to be strong for beef and pork. Showing that demand at the retail level continues to be steady. As restaurants are able to start opening dining rooms again food service demand is also starting to come back.
Cattle on feed report Friday.
|May Cattle on Feed||May 2020||% to 2019||Est.|
|On Feed||11.2 mln hd||95.00%||95.00%|
|Placed||1.43 mln hd||78.00%||77.10%|
|Marketed||1.46 mln hd||76.00%||74.70%|
The fed cattle cash trade started early this week with a light trade being reported in Nebraska at $190. The source reports it was around 250 head. That would be fully steady with last week’s upper trade. Asking prices are around $120 plus in the South and $195 in the North. A few bids have been noted in Iowa at $190.
Friday slaughter was 102,000 head, 11,000 more than last week, but 18,000 smaller than a year ago. Saturday’s kill is estimated at 56,000 head, bringing the weekly total to 555,000 head, 56,000 above the prior week, but 92,000 less than 2019. Packing plant managers have said they may only be able to get plants to 80-85% capacity given the social distancing guidelines. That may help get cattle slaughter over the 100,000 head mark, but not much further.
For the week ending May 16, 2020, Imported Beef Passed for Entry in the U.S. totaled 41,699, 111.33% of the previous week and 107.88% of the 4-week average.
Expected Slaughter numbers Wednesday
106,000 hd today 99,000 hd wk ago 121,536 hd yr ago
410,000 hd today 400,000 hd wk ago 461,030 hd yr ago
Midday Carcass Value Tuesday
Choice dn 10.73 386.01
Select dn 9.62 364.56
C/S Spread 21.45
Carcass up 10.06 106.81
Bellies up 56.62 128.43
- Corn up 1- 1 1/4
- Soybeans up 7 – 13 3/4
- Chicago Wht dn 1/2 – 2 1/4
- Kansas City Wht up 1 3/4 – 2 3/4
- Live Cattle up 1.70 – 2.37
- Feeder Cattle up 3.40 -3.50
- Lean Hogs up 0.57 – 3.67
- Class III Milk up 0.23 – 0.50
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. Crop progress held few surprises. The dollar is coming up slightly.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Packers started cash cattle early on Tuesday.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade.
John Payne, Daniels Ag Marketing, looks at the grain settlements.
Jack Fenske, York Commodities, looks at the closing market numbers. Fenske believes we could see the slow grain trade persist for the next couple of weeks.