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Markets: Cattle futures free fall amidst global market crash

Markets: Cattle futures free fall amidst global market crash

  • Updated

CORN------

Corn closed the week 12 cents lower. Private exporters announced a sale of 123,000 metric tons (mts) of optional origin corn to South Korea. 

In the weekly export inspections report, U.S. corn exports were a marketing year high 35.9 million bushels (mb) and were above last year's same-week exports of 30 mb. Despite the relatively good appearance of corn exports last week, they were still below the roughly 39.6 mb per week we estimate shipments need to average through the end of August in order to reach the USDA's 1.725 billion bushel (bb) export projection. Cumulative exports are still down 47% from last year's 982 million, while the USDA is projecting a 16.5% decline in exports on the year. 

In the weekly Energy Information Administration report, U.S. ethanol production was slightly higher at 1.054 million barrels per day (310 million gallons per week) from 1.040 mbpd the week prior and was 2.5% above last year's same-week production of 1.028 mbpd. Over the last 12 weeks, U.S. ethanol production has run, on average 3.9% above year ago levels. U.S. ethanol stocks last week ticked lower to 1.038 billion gallons from 1.041 billion the week prior, but easily remain record-high on a same week basis and held onto the 2nd highest on record level in the pullback from last week. 

Strategy and outlook: The USDA outlook forum shed a bearish light on the corn market. The COT report shows commercials have a bullish position, however they may be premature. If weekly chart support can hold, this may facilitate a short covering rally. Any weather related rallies need to be sold as producers rid themselves of both old and new crop inventories.

 

SOYBEANS------

Soybeans closed the week 3 ¼ cents lower. Private exporters announced sales of 163,290 mts of soybeans to Mexico and 135,000 mts of meal to the Philippines. 

In the weekly export inspections report, U.S. soybean exports last week were a marketing year low 21.8 mb, down from the previous week's 36.9 mb and significantly below last year's same-week exports of 48.1 mb. For the second time in three weeks, soybean exports also fell below the roughly 25.6 mb per week we estimate is needed through the end of August in order to reach the USDA's 1.825 bb export projection. Cumulative exports of 1.061 bb are still up 15% from last year's 923 million, but falling fast as they were up more than 26% in early January. 

The USDA Ag Outlook Forum suggests new crop soybean stocks will be 320 mb versus new crop corn stocks at 2.638 bb. This suggests soybean will try to rally against corn to steal a few acres during the spring planting timeframe.

Strategy and outlook: A record South American soybean crop is hurting U.S. exports. Futures continue to test key downside support and may try and rally off of it, although the upside is limited until spring planting.

 

WHEAT-------

For the week, Chicago wheat closed 27 ½ cents lower, Kansas City wheat closed 20 ¼ cents lower and Minneapolis wheat 12 ¼ cents lower. Exporters did not announce any export sales. 

In the weekly export inspections report, U.S. wheat exports last week of 15.1 mb and were in the lower portion of market expectations. More importantly, each of the last nine weeks' exports have been below the current 21.2 mb per week average estimated that is needed in order to reach the USDA's 1 bb export projection. Wheat exports from this point forward last year averaged 21.7 mb per week. Cumulative exports of 667 mb are still up nearly 10% from last year's 607 million, but fading fast. 

The USDA is currently projecting 2019/20 U.S. wheat exports up 6.8% from last year. Kansas wheat crop is now rated 35% good or excellent versus 34% last month, Oklahoma jumped to 46% good or excellent versus 36% last month, Nebraska rose to 69% from 59% last month and Texas dropped to 31% from 35% previously. Texas planting is just underway.

Strategy and outlook: Weekly reversals have put an end to the speculative buying. Prices have turned lower as the fundamentals do not suggest current price levels will be sustained.

 

LIVE CATTLE-----

Live cattle closed $10.60 lower while feeder cattle closed $5.27 lower. Fed cattle trade in the North was mostly $115 live and $185 to $187 dressed, $3 to $5 lower than last week. Trade in the South occurred at $115, $5 softer. 

The Fed Cattle Exchange Auction reported a total of 755 head, of which 627 head sold. There was a total of five lots, one in Texas and four in Kansas. Only one lot in Kansas did not sell. All started with $115 asking prices and those that sold went for $115.25, most lots were set for 1-9 day delivery, and one lot in Kansas is set for 1-17 day delivery. 

The latest USDA steer carcass weights were up two pounds compared to the prior week at 905, making them 26 pounds above last year. Last week's net beef sales of 13,900 metric tons (MT) for 2020.

Strategy and outlook: Reaction to the coronavirus and fears of a slowing economy have sent cattle futures into a free fall. The cattle market is trading the stock market and the economy, ignoring other fundamental factors.

 

HOGS----

Lean hogs closed the week $5.27 lower. Iowa/Minnesota weekly hog weights saw weights at 285.6 pounds versus 285.3 pounds last week and 285.7 pounds last year.  Last week's net pork sales of 38,900 MT for 2020.

In the monthly cold storage report, total red meat supplies in freezers were up 5% from the previous month and up 3% from last year. Total pounds of beef in freezers were up 2% from the previous month but down 4% from last year. Frozen pork supplies were up 8% from the previous month and up 11% from last year. Stocks of pork bellies were up 6% from last month and up 32% from last year. The CME will increase the daily trading limits for futures to $3.75 from $3 starting April 13.

Strategy and outlook: Large supplies of hogs are keeping pressure against the cash markets and front-month futures. Hog weights are expected to rise into the spring.

 

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