Grains are sideways to slightly lower going into the Friday trade. It’s been one week since the US and China signed the Phase One Trade Deal and there have been no purchases of commodities from China since the signing. This has the market in slow erosion, but traders are hesitant to build up short positions as the market could quickly come back on news of Chinese purchases.
Thursday saw 3 different sales of corn. USDA reported sales of a 114,000 tons of corn to unknown, 29,724 tons to Guatemala, and 114,224 tons to Guatemala. Many traders hope that the unknown destination was China though some believe it could be South Korea.
South American weather is dry and helping soybean harvest. Agroconsult reported earlier in the week that farmers in Mato Grosso are positively surprised with soybean yields this harvest. Dry conditions though are not helping the corn in Argentina. The Euro model is showing above average dryness for the next 2 weeks in South America.
In the broader commodity trade crude oil at the end of the week is near it’s 8 week lows below $56/bbl on the WTI. Two camps as to why oil is dropping are starting to form. Goldman Sachs released that they were studying the impacts of the SARS outbreak in 2002 and it’s possible similarities to the Corna Virus outbreak now. In 2003 air travel and jet fuel consumption dropped dramatically. The other camp is pointing to the International Energy report that shows a million barrel per day surplus in global supplies through the first half of the year.
The outbreak of the corona virus in China and now a confirmed case in the US has the outside and currency markets spooked. China is trying to stop the spread of the virus by outlawing the selling of live poultry in key provinces. The Chinese government is also canceling public events like the Chinese New Year Temple fairs. This could dampen some of it’s overall Lunar New Year Pork demand.
On Thursday the weekly ethanol production and stocks were released. Ethanol production fell 4.2% or about 46,000 barrels per day to 1.049 mln b/d. That is a nine week low in US ethanol production. The four week average of ethanol production is 1.068 mln b/d.
Ethanol stocks jumped 4.5% to their highest levels since July 2019 at 24 mln barrels.
Live cattle and feeder cattle prices slowly eroded through midweek, but then saw a sell off start on Thursday with near limit lower losses in live cattle futures. Lean hog futures seemed to catch the buying end of the live cattle spread and steadily moved higher throughout the week. Both the beef cutout and pork cutout strengthened throughout the week. The choice select spread finally opened to more than two dollars. Bellies seem to be the strongest part of the pork cutout nearing $120.
In the country feeders set the asking prices early in the week at $127 live and $202 dressed. Packer inquiry kicked off Wednesday afternoon with 3,000 head trading in Kansas at $124 live. Thursday then saw another 1,500 head trade in Nebraska at a $124. Bids were pretty sparce on Thursday with only a few dressed bids in Nebraska at a $199.
Analysts point to packers buying on Wednesday as a possible signal that they are short bought and are needing cattle. That could mean another week of steady prices. However packer margin has eroded and this could cause packers to not run plants at full capacity.
Hog prices in China are up over 450% compared to US hog prices. The Corna Virus is causing major cities in China to go on lock down and cancel many public events.
Cattle on Feed Report will be released Friday afternoon. Pre-report estimates show large placements, but are somewhat offset with equally large marketings. Packers have continued a light Saturday kill over the last several weeks in an effort to jump the beef cutout and it appears to be working. With that though they have pushed plants to capacity throughout the week.
Pre Report Estimates
Estimate Range of Estimate
On Feed Jan 1 102.2 101.6-102.5
Placed in December 103.2 100.5-105.3
Marketed in Dec 105.2 103.9-105.8
Beef Cutout at Midday Thursday
Choice up 0.48 215.44
Select dn 0.96 211.06
C/S Spread 4.38
Carcass up 0.72 79.46
Bellies up 4.71 116.99
123,00 hd today 122,000 hd wk ago 117,076 hd yr ago
498,000 hd today 497,000 hd wk ago 437,307 hd yr ago
- Corn up 1 1/2 – 5
- Soybeans dn 1/2 – 4 1/4
- Chicago Wheat up 3/4 – 2 3/4
- Kansas City Wheat dn 1/4 – 1/2
- Live Cattle dn 1.47 – 2.60
- Feeder Cattle dn 1.15 – 2.77
- Lean Hogs dn 0.65 up 0.95
- Class III Milk dn 0.03 up 0.25
Pre-opening Market Broker Commentary
Dan Smith, Top Third Ag Marketing, discusses overnight grains and what the trade may see today.
Darrel Holaday, Country Futures, discusses factors influencing the livestock trade today.
Mike Zuzolo, Global Commodity Analytics, shares his thoughts on the midday trade factors.
Closing Market Broker Commentary
Closing commentary with John Payne, Daniels Ag Marketing, and Jack Fenske, York Commodities.