Friday comes to a close with the outside markets finally showing a little bit of life, but the ag markets end mixed to lower. Overall it’s been a week of selling and lower prices. The selling hit right at the start on Monday, putting the market into an old fashioned risk off atmosphere. Tuesday tried to mount a comeback, but there has been plenty of selling since. Weighing heavy on the macro or broad market picture all week, is the possibility of another round of US stimulus being on hold as the death of a Supreme Court Justice has the Congress and President’s full attention. The financial sector has also been thrown into turmoil this week with reports of fraud and money laundering stinging some of the worlds largest banks including HSBC, Barclays and Deutsche .
Enough of the doom and gloom there has been some positive economic data on the week. Starting on Tuesday the weekly Redbook showed year on year retail sales up 1.5% for last week. That was better than the previous week’s -1.2%. It was also the first positive retail sales growth since late July/early August. One week doesn’t mean a lot in the big picture, but it could be a start to some retail resurgence.
Wednesday saw more positive housing data with MBA Mortgage applications rising 6.8% on the week ending September 18, after falling 2.5% on the week prior; new home purchases rose 3.4% after falling 0.5% in the previous week, while refinancing’s increased by a sharp 8.8% on the week to last Friday, after declining by 3.7% in the week prior. These were strong numbers despite a rebound in the average 30-year mortgage rate to the highest level since mid-August (though that’s still only 3.10%); mortgage applications are up 25% year-over-year despite rising prices, with some economists pointing to a massive overall pandemic shift to the “home office” going forward – U.S. workers are investing more in their homes with the new norm.
Existing home sales rose to an annualized rate of 6.000 million in August, up 2.4% from the 5.860 million unit pace in July and slightly above analyst expectations of 5.965 million. The August increase follows a robust 24.7% increase in July as people rushed to take advantage of record low mortgage rates. The pace of August existing home sales was up 10.5% year-on-year, up from an 8.7% year-on-year pace in July. The housing market continues to be one of the hottest sectors of the economy, due to those low interest rates.
Energy production data on Wednesday showed US crude oil stocks down 1.6 million barrels. Which was better than what many expected. Unfortunately US gasoline and other distillates actually increased. As a result energy futures were mixed.
For the week ending September 18 US ethanol production decreased 2.2%, or 21,000 barrels per day (b/d), to 906,000 b/d. US ethanol stocks in the same time frame increased 1.0%, 20,000 barrels to 20.0 million barrels, which was 11.1% below year-ago volumes. Inventories increased across all regions except the Midwest (PADD 2) and Rocky Mountains (PADD 4). The volume of gasoline supplied to the U.S. market, a measure of implied demand, ticked up 0.4% to 8.52 million b/d (130.53 bg annualized). Gasoline demand remained 8.9% lower than a year ago.
Grain bulls are lost steam from last week’s strong gains and almost gave fully into the bears. Thursday’s trade did see a little resilience in the wheat markets with Chicago settling in the green. Though that was lost on Friday. The green did end the week with corn and soybeans. Wheat over the week was helped with dry conditions in the US hard red winter wheat belt. Along with developing La Nina conditions in the pacific. Argentina also saw a late frost on their wheat crop this week. Although damage is not suspected to be huge. As for corn a rising dollar is putting the breaks on energy futures. That is hurting ethanol margins and in turn corn demand. The latest crop progress report also shows harvest is starting around the country for most row crops and outside of Iowa most yields aren’t horrible. Soybeans had an impressive run to the upside the last couple of weeks. That has come to an end this week with most of the contracts now back below $10. Going into the week the funds were heavy in the soybeans with open interest rising to 974,373 contracts, which was just below the record open interest posted in early 2017. However with the heavy selling this week that open interest has quickly retracted. That could have helped create momentum for the computer traders to push the market lower.
USDA announced sales up to Thursday when for the first time since September 2nd there were no sales to announce. Sales resumed again on Friday with unknown destinations purchasing 100,000 MT of soybean meal. On Monday the USDA announced sales of 171,000 MT of soybeans to unknown destinations, 132,000 MT of soybeans to China and 132,000 MT of soybeans to Pakistan. Tuesday USDA announced 4 flash sales. Two to China; 266,000 MT of soybeans and 140,000 MT of corn. Two to unknown destinations; 264,000 MT of soybeans and 320,000 MT of corn. Wednesday China purchased 132,000 MT of soybeans. Unknown destinations purchased 126,000 MT of soybeans.
Livestock ended mixed on Friday, but with a reversal of Thursday’s action. Lean hogs ignored the higher market ready supply proposed by USDA. Rather traders followed the strong cash market suggesting the actual market hog supply is tighter than expected. Friday also brought the latest cattle on feed report. Placements took out the highest of analyst estimates at 109% of the previous year. This will likely induce more selling in the feeder cattle futures on Monday. On Thursday cattle were supported with increase export sales from USDA. Last week beef net export sales increased 26%. Beef exports increased 24%. Pork net export sales on the other hand dropped 25% from last week’s huge sale. China and Mexico were still the top buyers though. Pork exports were up 25% though with China taking delivery of nearly 11,000 MT. As for the quarterly hogs and pigs report the data was neutral to slightly bearish showing a slight increase in market ready hogs from the June report. Analysts are debating the data though suggesting that a larger market hog supply would not be justifying the current strong cash market.
Tuesday the cold storage report showed a monthly build in frozen red meat, but still well below year ago levels. Total red meat supplies in freezers were up 3% from the previous month but down 13% from last year. Total pounds of beef in freezers were up 5% from the previous month but down 2% from last year. Frozen pork supplies were up 2% from the previous month but down 23% from last year. Stocks of pork bellies were down 28% from last month and down 33% from last year.
In the country on on Friday there were scattered bids, but it appeared that the majority of business had concluded for the week. Cash developed different this week than what it has over the past couple of months. Feeders held until Thursday when cash finally developed at $105 live $165 dressed. Both $2 higher than last week’s weighted averages.
The Fed Cattle Exchange Auction today listed a total of 683 head (two lots each in Kansas and Texas), of which 219 actually sold, 195 head were listed as unsold, and 269 head were listed as PO (Passed Offer). The state by state breakdown looks like this: TX 417 total head, with 148 head sold at $104.25, 0 head unsold, 269 head listed as PO ($104.25); KS 266 total head, with 71 head sold at $104.00, 195 head unsold, and 0 head listed as PO. The delivery date/price range breakdown is as listed: 1-9 day delivery: 464 head total, of which none sold; 1-17 day delivery 219 head total, all sold, with a price range of $104.00 to $104.25.
For the week ending September 12, 2020, Imported Beef Passed for Entry in the U.S. totaled 36,388, 84.37% of the previous week and 81.60% of the 4-week average.
Expected Slaughter numbers Friday
120,000 hd today 117,000 hd wk ago 114,122 hd yr ago
49,000 hd Sat. 53,000 hd wk ago 66,598 hd yr ago
483,000 hd today 482,000 hd wk ago 481,661 hd yr ago
225,000 hd Sat. 187,000 hd wk ago 284,954 hd yr ago
Midday Carcass Value Friday
Choice up 1.74 219.22
Select dn 0.37 207.37
C/S Spread 11.85
Carcass up 0.91 92.94
Bellies up 0.67 152.78
- Corn up 1/4 – 1 3/4
- Soybeans dn 2 1/4 up 5
- Chicago Wht dn 4 1/4 – 5 3/4
- Kansas City Wht dn 6 3/4 – 8 1/4
- Live Cattle dn 0.07 – 1.05
- Feeder Cattle dn 0.97 – 2.20
- Lean Hogs up 0.62 -2.27
- Class III Milk up 0.02 – 0.70
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. Unknown destinations were back in the market for soybean meal.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Quarterly hogs and pigs report may prove bearish for the lean hog market .
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Grains are split and computer traders could be adding momentum.
John Payne, Daniel’s Ag Marketing, takes a closer look at today’s grain close. Grains could be range bound until the stocks report next week.
Jack Fenske, York Commodities, looks at the closing market numbers. Grains could have put highs in, but Fenske says seasonally grains put highs in next week.