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Tight beef supplies could be bullish for values
Market Forecaster

Tight beef supplies could be bullish for values

Angus Cow

Corn closed the week 3 cents lower. Private exporters announced sale of 165,000 metric tons to Mexico and 161,544 metric tons to an unknown destination.

In the weekly export inspections report, U.S. corn exports, for the week ending Oct. 4 were 29.4 million bushels and below last year’s same-week exports of 33.3 million. One month into the 2021-2022 marketing year, cumulative corn exports stood at just 116 million bushels, down 36% from last year’s 180 million.

Based on the U.S. Department of Agriculture’s 2.475 billion bushel export projection, corn export inspections will need to average roughly 48 million bushels per week over the remainder of 2021-2022 versus last year’s 51 million per week average from this point forward.

Brian Hoops

Brian Hoops

In the weekly crop progress report, conditions improved 1% to 60% good or excellent versus 59% expected, 59% last week and 61% last year. Corn harvested moved to 41% complete versus 42% expected, 29% last week and 31% average.

In the weekly Energy Information Administration report, ethanol production, for the week ending Oct. 1 rose to 978,000 barrels per day from 914,000 the week prior. That’s the highest production in eight weeks and a solid 6% above last year’s same-week production of 923,000 barrels. This was also the largest year-over-year gain in production in eight weeks.

Despite the strong increase in production last week, U.S. ethanol stocks declined to 837 million gallons from 849 million gallons the week prior, reflecting a decline in stocks to the lowest level in 18 weeks and leaving stocks only 11 million gallons above last year’s 826 million gallons at this time.

In the October supply and demand report, the USDA increased corn yield to 176.5 bushels per acre, above the average estimate of 176 bushels and 176.3 in September.

This would be the second highest yield on record, trailing only 2017 when yields were 176.6 bushels per acre.

Corn production was forecast at 15 billion bushels. Carryout now sits at 1.5 billion bushels versus 1.408 billion in September and 1.236 billion in October 2020. Total usage for 2021-2022 corn was reduced by 20 million bushels, although exports were actually increased by 25 million bushels.

World carryout came in larger than the average estimate of 298.76 million metric tons with the October update at 301.74 million, September was 297.63 and last year at 289.99 million.

Strategy and outlook: Commercials have been accumulating contracts of corn on weakness as values near weekly support. Surging wheat values will support corn.

SOYBEANS 

Soybeans closed the week $.24 lower. Private exporters announced sale of 462,000 metric tons to China and 1,052,750 metric tons to an unknown destination.

In the weekly export inspections report, exports last week were a marketing year high at 59.2 million bushels. However, last week’s exports were much smaller compared to last year’s 90.7 million bushels, leaving cumulative exports of 127 million bushels still down 64% from last year’s 341 million as of early October.

Based on the USDA’s 2.09 billion bushel export projection, export inspections will need to average roughly 40.7 million bushels per week the rest of the marketing year versus last year’s 38.5 million per week average from this point forward.

In the weekly crop progress and conditions report, soybean conditions improved to 59% good or excellent versus 58% expected, 58% last week and 63% last year. Soybean harvest pace moved to 49% complete versus 50% expected, 34% last week and 40% average.

In the October supply and demand report, USDA increased soybean yields to 51.5 bushels per acre from 50.6 bushels last month. This would be the second largest yield on record, only trailing 2016 when yield was 51.9 bushels. Production is forecast at a record large 4.448 billion bushels.

Ending stocks increased to 320 million bushels from 185 million last month. Crush was increased by 10 million bushels but exports held steady.

World carryout came in at 104.6 million metric tons, well above the September report of 98.89 million and the average estimate of 100.72 million and last year was 99.16. The USDA kept Brazil production steady at 144 million metric tons and they reduced Argentina by 1 million to 51.

Strategy and outlook: Commercials have been accumulating contracts of soybeans on weakness as values near weekly support. This buying will limit the downside risk for the soybean market as harvest progresses.

WHEAT

Chicago wheat closed a half cent higher. Kansas City wheat closed 8 cents higher and Minneapolis wheat 22.25 cents higher. Private exporters did not announce any sales.

In the weekly export inspections report, exports of 16 million bushels were down from the previous week’s 22.6 million and last year’s 18.9 million.

Wheat exports again met the roughly 14.6 million bushel per week average that is needed for 2021-2022 exports to reach the USDA’s 875 million bushel export projection. The number compares to last year’s 16.4 million per week average. Cumulative exports of 338 million bushels are down 12% from last year’s 384 million, which is exactly in line with USDA’s projection for a 12% decline in annual exports from last year.

In the weekly crop progress and conditions report, winter wheat seedings were 60% complete versus 61% expected, 47% last week and 60% average.

In the October supply and demand report, wheat carryout was lowered to 580 million bushels versus 615 last month and 845 in October 2020. World wheat carryout was also seen as supportive at 277.18 million metric tons versus an average estimate of 280.82 million and 283.22 million in September.

Strategy and outlook: Commercials have been buying as smaller world production and ending stocks figures are bullish for wheat values.

Producers are seeding winter wheat but the lack of moisture in the Plains could slow emergence of the crop.

LIVE CATTLE 

Live cattle closed 65 cents higher while feeder cattle closed 2 cents higher.

The monthly Cattle on Feed report will be released Friday, Oct. 22 at 2 p.m. Bloomberg’s survey of market analysts has on feed supplies at 99.7%, placements at 103.1% and marketings at 97.5%.

Moderate to active fed cattle trade occurred in the North this past week at mostly $124 live with a few up to $125, and mainly $196 dressed – steady to $2 higher compared to the prior week. Trade in the South was moderate to active at primarily $124 – steady or firm versus last week.

The Fed Cattle Exchange weekly auction had 3,350 head listed for sale and sold 2,069 head at $122.50 to $124.

The latest USDA steer carcass weights were up 2 pounds this week at 916 pounds, which is 8 pounds lower than a year ago, but the highest they’ve been since February.

Total U.S. meat exports rose in August, according to trade data recently released by USDA. Total meat exports were up 87.6 million pounds (6%) compared to a year ago and up 645 million pounds (5.4%) year-to-date. Beef exports were a large portion of this total amount, being up 20.8% or 39 million pounds.

Last week’s beef export sales saw a net sales of 15,700 metric tons reported for 2021 with shipments of 15,500 metric tons.

Strategy and outlook: Producers should have window or fence strategies to protect the downside but allow for upside potential as tight supplies in the fourth quarter and first quarter of 2022 should be bullish for values but the economy is struggling.

HOGS

Lean hogs closed the week $3.55 lower.

Iowa and southern Minnesota weekly hog weights for week ending Oct. 9 were 285.8 pounds versus 283.9 pounds last week and 284.3 pounds last year.

This past week’s net pork sales of 33,500 metric tons reported for 2021 with shipments of 29,700 metric tons.

Strategy and outlook: Hog futures have soared after a bullish hog and pig report, bouncing off weekly chart support as commercials have turned bullish.

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.

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