At the end end of the week markets are feeling risk adverse, but not completely risk off. For the equities and outside market the dim shimmer of stimulus hope continues to shine. Mid week there were strong rumors that the Treasury department and Democratic leaders in the house were close to a deal on another round of stimulus. President Trump has even came around to the idea of a big aid package, but the senate is still wanting to try and keep things tight for the balance sheet. Which they may not be wrong in thinking that way. Currently the US debt load sits around $27.1 trillion dollars. While the Federal Reserves balance sheet sits close to $7.2 trillion dollars. That leaves a big question up to the FED of if and when a stimulus package gets passed should it increase its bond buying program to create demand for the extra debt needed to fund any stimulus program created by Congress.
Back to the top of the summary again the market feels risk adverse, but not risk off. The VIX volatility index commonly called Wall Street’s fear factor has not breached 30 throughout the week. Safe haven assets have also had mixed performance, with the dollar lower and Gold almost unchanged. The yield on the 10 year treasury has also been rising to nearly 0.9%. This all shows that investors are looking for the right investment and are not comfortable taking large risks at the current time. That could be well founded given the highly debated election that is 2 weeks away.
In the grain complex end of the week may see the dam that has been holding back the bears finally give way. Thursday saw the wheat complex break down on poor export sales and moisture forecasted in several key wheat area’s of the world. While wheat was breaking soybeans overcame their technical resistance of $10.80 on the November contract. If more momentum enters the complex soybeans could look to test $11. The big IF here is will it needs wheat support to try and move higher from here. Mike Zuzolo, Global Commodity Analytics, takes this question on in his midday commentary on Thursday available at the bottom of the page. Meanwhile corn is content to continue chugging towards it’s target of $4.20 on the December contract. Corn export sales and shipments are Thursday were solid at nearly 2 MMT of sales and almost 1 MMT of physical exports. Interesting to note Japan was also the largest buyer last week of US corn.
Other important items occurring in the grain complex is the fact that harvest is rolling along at a brisk pace. On Monday the latest crop progress data showed that 60% of the US corn crop has been picked and 75% of the beans cut. The next two weeks will be critical to watch how far harvest can progress with cold and wet descending on the Northern plains and Eastern corn belt. In South America the wet season may finally be getting started. Soybean plantings are rolling right with the rains now 32% complete in Brazil. The thing to keep in mind with the delayed plantings in South America is that it will delay harvest and may keep US soybeans in the market for a few more weeks at the beginning of the year.
Other factors helping US grains at least is a friendly currency market. The US Dollar Index is testing recent lows this week. The Chinese Yuan and Russian Ruble have been able to experience a recent run up given the weakness in the dollar.
USDA’s export sale terminal fired up on Monday announcing two flash sales. The first 345,000 MT of corn sold to unknown and the second 123,000 MT of corn sold to Mexico. Tuesday unknown destinations purchased 132,000 MT of soybeans. Wednesday the flash sale terminal was silent. Thursday the USDA was busy again with flash sales of 152,404 MT of soybeans sold to Mexico, 132,000 MT of soybeans sold to unknown, and 130,000 MT of white wheat sold to South Korea. Friday unknown destinations purchased 100,000 MT of corn.
In the livestock complex down is the word, no matter the fundamentals it seems. Cattle started the selling early in the week. Then feeder cattle attempted to come back on Wednesday. Thursday sellers established themselves once again and moved the market lower. Export sales were solid for beef up 62% week to week. China also made it’s way to the 2nd biggest buyer of US beef at 3,700 MT. Pork net sales disappointed unchanged week to week, but down 35% on the 4 week average. China was also noticeably absent in the us pork export sales.
Demand for pork is still strong though with the noon carcass cutout on Thursday reporting $100+ carcass and nearly $200 bellies. Boxed beef on the other hand remains in an almost sideways pattern.
Friday the October cattle on feed report will drop. Ahead of the report few traders are showing much concern expecting the report to be neutral.
With cattle futures moving into risk off mode cattle feeders focused on basis started to move cattle early in the week. Monday saw light trade develop in the South at $106, $2 lower than the prior week’s weighted averages. A few scattered deals were reported in parts of the North at $165 to $166, $2.50 to $3.50 lower than last week’s weighted average basis Nebraska. Tuesday and Wednesday saw another round of trade develop at $106 live $163-$165 dressed. Thursday and Friday the country was quiet with no bids from packers. Business appeared to conclude ealry in the week.
The Fed Cattle Exchange Auction today listed a total of 1,096 head, of which 702 actually sold, 394 head were listed as unsold, and none were listed as PO (Passed Offer). The state by state breakdown looks like this: KS 184 total head (1 lot), with all 184 head sold at $106.50; NE 394 total head (2 lots), with none sold; TX 518 total head (3 lots), with all 518 head sold at $106.25 to $106.50. The delivery date/weighted averages breakdown is as listed: 1-9 day delivery: 558 head total, of which all sold, with a weighted average price of $106.50; 1-17 day delivery 538 head total, of which 144 head sold, with a weighted average price of $106.25.
For the week ending October 10, 2020, Imported Beef Passed for Entry in the U.S. totaled 37,136, 87.18% of the previous week and 90.73% of the 4-week average.
Expected Slaughter numbers Friday
116,000 hd today 118,000 hd wk ago 109,311 hd yr ago
51,000 hd Sat. 57,000 hd wk ago 58,992 hd yr ago
488,000 hd today 487,000 hd wk ago 479,720 hd yr ago
239,000 hd today 266,000 hd wk ago 252,614 hd yr ago
Midday Carcass Value Friday
Choice up 0.11 208.97
Select up 1.02 192.10
C/S Spread 16.87
Carcass dn 0.11 98.73
Bellies dn 10.98 163.36
- Corn dn 2 1/2 up 3
- Soybeans dn 1/4 up 10
- Chicago Wht up 4 3/4 – 10
- Kansas City Wht up 7 – 9 1/2
- Live Cattle dn 0.60 up 0.10
- Feeder Cattle dn 0.77 up 0.07
- Lean Hogs dn 0.32 up 0.82
- Class III Milk up 0.07 – 0.75
Pre-Opening Market Broker Commentary
Ed Dugan, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. Grains look to open higher with rumors that China is expanding import quotas.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Livestock could open either direction on Friday.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Wheat is the leader to the topside as Chicago wheat makes bullish technical moves.
John Payne, Daniel’s Ag Marketing, takes a closer look at today’s grain close. Payne is bullish grains as demand continues strong.
Jack Fenske, York Commodities, looks at the closing market numbers. Ag commodities may have established highs until 2021.