Corn closed the week 2 ¾ cents lower. Private exporters announced sale of 143,948 metric tons (mts) of corn to Guatemala and 283,428 mts of corn to unknown destinations.
In the weekly export inspections report, U.S. corn exports were a dismal 13.6 million bushels (mb), the third-lowest of the first 20 weeks of the 2019/20 marketing year. With cumulative exports now at just 371 mb, down 54% from last year's 812 million, corn exports will need to average nearly 40 mb per week through the end of August in order to reach the USDA's 1.775 billion bushel (bb) export projection.
In the weekly Energy Information Administration report, ethanol production declined sharply from the previous week's historically high level and still met the average "needed" outright pace and year-over-year increase pace needed to reach the USDA's 2019/20 corn for ethanol usage estimate. Ethanol stocks rose sharply again, moving above year ago stocks for the first time in 18 weeks following the surge seen in recent weeks. Ethanol production was 1,049 barrles per day (bpd) versus 1,095 bpd last week.
Demand is improving for corn and should continue to improve into the end of February until South American supplies become available. Increased number of animals on feed should improve feed demand this quarter.
Strategy and outlook: The bullish weekly reversal should limit the fund and speculative selling interest. The sluggish fundamentals will limit the upside potential and producers should sell inventory on rallies.
Soybeans closed the week 27 cents lower. Private exporters did not announce any export sales.
In the weekly export inspections report, U.S. soybean export inspections were solid again at 44.1 mb and were a five-week high. Cumulative exports of 888 mb are up 24% from last year's 718 million, requiring exports through the end of August needing to average roughly 25.6 mb per week in order to reach the USDA's 1.775 bb export projection.
Normally, February looks to see slower U.S. export sales as early planted beans in Northern Brazil begin to come to harvest and hit the world market at a price lower than any U.S. posted price. Because Brazil can only store up to 25% of their harvest, they are forced to forward sell approximately 75% of their early harvested soybeans. It is the period between mid-February and May that South America over takes the U.S. as the primary port of origin for beans. This will leave weather on late maturing crops as the sole bullish factor for soybean values.
February in Brazil and Argentina is like August here as it’s a key yield-developing month for three quarters of the crop.
Strategy and outlook: Futures are anticipating that South America will produce a record soybean crop this will surely cut into US exports and limit the upside potential for soybean values. Futures look to probe key support in February unless South American weather turns adverse.
For the week, Chicago wheat closed ¾ of a cent higher, Kansas City wheat closed 9 ½ cents lower and Minneapolis wheat 12 ½ cents lower. Private exporters did not announce any export sales.
In the weekly export inspections report, U.S. wheat exports of 16.0 mb were the third of the last four weeks in which shipments fell below the roughly 18.3 mb per week average needed to reach the USDA's 975 mb export projection. The USDA's export target certainly still appears on track to be reached, as weekly shipments can run roughly 12% below last year's pace through the end of May. Cumulative exports of 585 mb are still up nearly 14% from last year's 515 mb with 19 weeks remaining in the 2019/20 marketing year.
Near term demand for U.S. SRW has lifted the Chicago front month futures. This has spilled over to other months and the hard wheat contracts as well. February is the last month before the winter wheat crop breaks dormancy, and grows into the June harvest. Thus with winter wheat still in the dormant stage, price direction will come from demand. Demand trends have been consistent but unimpressive due to the large supplies of wheat worldwide.
Strategy and outlook: The fundamentals do not suggest current price levels will be sustained. Prices have moved higher amid large speculative buying.
Last week, live cattle closed $2.90 lower while feeder cattle closed $5.42 lower.
Cash trade occurred in the North at mostly $124 live and $199, steady when compared to last week, while trade in the South was primarily at $124 - even with a week ago.
This week, in the Fed Cattle Exchange online auction, there were 561 head listed for sale from four lots. Only 112 head sold from a lot in Kansas at $124. 253 head were offered from Nebraska and 196 head were offered from Texas and went unsold.
The latest USDA steer carcass weights were down 8 pounds compared to the prior week at 904, making them 21 pounds above last year.
Last week's net beef sales were 27,800 metric tons (MT) for 2020.
The monthly Cattle on Feed report is considered neutral compared to pre-report trade estimates, however it does highlight a growing number of animals on feed. The on feed numbers were 102.3%, right in line with estimates at 102.2%, placements were also in line with estimates at 103.5% and marketings were 105.3%.
It appears more cattle are being fed in Kansas, Colorado and Texas and less in Nebraska.
Strategy and outlook: The strong cash markets and export sales will be bullish for the market. Cash could weaken quickly if packers decide to cut back on weekly kills to reclaim lost margins.
Lean hogs closed the week 22 cents higher. Weekly hog weights for Iowa-Southern Minnesota were down to 286.6 pounds versus 288.3 pounds last week and 285.9 pounds last year. Net pork sales of 30,300 mts were announced for 2020.
In the monthly Cold Storage report, total red meat supplies in freezers were up 1% from the previous month and up 5% from last year. Total pounds of beef in freezers were up 1% from the previous month but down 3% from last year. Frozen pork supplies were up 1% from the previous month and up 15% from last year. Stocks of pork bellies were up 25% from last month and up 61% from last year.
Strategy and outlook: Futures should rally off weekly technical support and expectations of large Chinese purchases of US pork products now that Phase 1 of the new trade agreement will become effective next month.
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. The home office is in Springfield, Mo., with branch offices in Thief River Falls, Minn.; Verona, N.D.; Yankton, S.D.; Storm Lake, Iowa; and Springfield, Neb.