Market Watch

Its an Ill Wind That Blows Nobody Any Good

Market Watch with Alan Brugler

April 19, 2019

Its an Ill Wind That Blows Nobody Any Good

You’ve likely heard the phrase from our title, an optimistic one that suggests somebody benefits (accidentally or otherwise) from negative events.  The line is credited to John Heywood back in 1546, but the idea has been in circulation a lot longer than that. Thunderstorms bring some folks needed rain, and other folks tornados. We have seen some ill winds in the commodity complex that appear to greatly benefit cattle and hog producers.  That is, assuming they avoided the bomb cyclones (definitely ill winds) and flooding in the Midwest! The ASF outbreak in China is likely going to result in massive meat imports by that country, draining stocks and boosting prices around the world. Shipping companies with refrigerated containers will also benefit immensely from the solution to that meat shortfall. Soybean producers globally have been getting the ill wind, because dead hogs don’t eat soybean meal and Chinese soybean imports are down. The good news is that meal consumption is likely going to be higher in the ROW (rest of the world) as livestock production ramps up to meet Chinese demand.  In the meantime, cattle and hog producers benefit from lower feed costs as corn, wheat, soybeans and canola all try to find a bottom.  Markets are mean reverting, eventually everyone gets a turn with the wind at their back!

Corn futures lost 0.7% this week. Export sales commitment are still problematic, almost 9% below year ago as of Thursday’s USDA report. YTD commitments are 76% of the full year WASDE estimate, lagging the 5 year average pace of 85% for this date.  Weekly sales from April 4-11 were stronger than the previous week at 947,600 MT for old crop and 18,400 MT for new crop. Planting progress is behind schedule, with 3% in the ground as of Sunday vs. the 5% average for that date. Traders will be more nervous if we’re still running behind schedule after May 15. On the industrial use side, ethanol stocks dropped to the lowest level since September.

Wheat futures were lower in all three markets this week. Chicago was down 4.4% as it shed a little of the premium on the W/KW spread. KC HRW gained on that spread but was still down 3.3%. Minneapolis spring wheat was down 1.5%. SRW crop condition ratings are still the worst in at least 18 years but did rise 3 points on the Brugler500 Index from the previous week. USDA confirmed that 6% of the winter wheat is now heading, a bit behind the 9% average pace. To the surprise of no one, spring wheat planting is only 2% done, well behind the 13% average for mid-April. Weekly US wheat export sales rose to 545,500 MT (old and new crop combined). US wheat export sales commitments are now 8% above year ago.  Commitments YTD still lag the pace to meet the reduced WASDE forecast. They were 97% of the total, vs. the average of 103% for this date. The marketing year ends May 31.

Soybean futures were down 1.6% for the week, giving back 14 ¾ and posting new lows for the move. Soybean meal was down $4.70 or 1.5%. Soy oil was down 0.5%. Full year soybean US export commitments are still 18% below last year, with sales of 382,100 MT reported on Thursday morning for the week ending April 11. Weekly sales for 2019/20 were only 21,100 MT.  Total soybean commitments are 87% of the full year WASDE forecast. They would typically have reached 95% by now.

	Commodity				Weekly	Weekly
Mon		04/05/19	04/12/19	04/12/19	Change	% Chg
May	Corn	$3.6250	$3.6100	$3.5850	($0.025)	-0.69%
May	CBOT Wheat	$4.6775	$4.6450	$4.4425	($0.203)	-4.36%
May	KCBT Wheat	$4.31	$4.34	$4.20	($0.143)	-3.28%
May	MGEX Wheat	$5.225	$5.313	$5.233	($0.080)	-1.51%
May	Soybeans	$8.99	$8.95	$8.81	($0.148)	-1.65%
May	Soy Meal	$308.00	$307.90	$303.20	($4.700)	-1.53%
May	Soybean Oil	$29.15	$28.95	$28.80	($0.150)	-0.52%
Apr	Live Cattle	$126.05	$126.55	$128.53	$1.975	1.56%
Apr	Feeder Cattle	$146.15	$145.43	$145.70	$0.275	0.19%
May	Lean Hogs	$91.00	$89.60	$90.20	$0.600	0.67%
May	Cotton	$78.25	$78.11	$77.31	($0.800)	-1.02%
May	Oats	$2.8750	$2.8725	$2.9200	$0.047	1.65%

Cotton futures were down 1% this week.   Cotton export sales slowed quite a bit in the week ending April 11. USDA confirmed upland sales of 217,600 running bales. That was down 25% from the previous week.  Another 20,600 RB were sold for 2019/20 delivery.  Pima bookings were 14,300 RB.  Cotton export commitments are 96% of the full year WASDE estimate, matching the 5 year average pace. Unshipped export sales are 15% smaller than last year at this time. Planting is running at the 5-year average pace, with 7% done as of last Sunday. Most of that is in Arizona and Texas.

Live cattle futures were up 1.6% this week. Cash cattle trade was up $2 or more, with trades at $126 in the south at midweek and $127-$128 reported on Thursday in the north. Feeder cattle futures were up 0.2% for the holiday shortened week. The CME feeder cattle index was $144.98 as of April 17, up $2.20 from the end of last week. Wholesale beef prices were mixed. Choice boxes were up 1.8% or $4.23 per cwt. From Thursday to Thursday.  Select 600-900# carcass values were down 49 cents or 0.2%. USDA weekly beef export sales rose from last week’s 11,800 MT to 28,800 MTs. South Korea and Japan were the lead buyers. The Cattle on Feed report showed larger March placements than expected at 104.8% of year ago. Marketings were on the light side at 96.6%, but the April 1 On Feed was 102.0% of year ago and the largest monthly count since December 2011. It is the largest April inventory since the big lot data series began in 1996.

Lean hog futures were up 0.7% in the front month May contract this week.  Several hog futures contracts posted new life of contract highs during the week. Weekly export sales totaled 40,300 MT. That’s a large number historically, but down 56% from the previous week. China was a buyer of 23,500 MT and shipped 4,500 MT of previous purchases. Don’t forget that less than 50% of US pork exports are typically picked up in the weekly Export Sales report. That report focuses on muscle cuts and not the processed or byproducts. The CME Lean Hog index was $80.24 on Thursday, up $0.88 from the previous week. The pork carcass cutout value rose $3.42 or 4.1% from Thursday to Thursday.

Market Watch

Cattle traders will begin the week reacting to the Cattle on Feed report, which was released after the end of the trading session on Thursday.  The market was closed on Friday for Good Friday and Easter. The USDA Export Inspections report is scheduled for Monday, along with the weekly Crop Progress report. The weekly EIA ethanol report will be out on Wednesday with USDA’s weekly Export Sales report on Thursday.  The monthly Cold Storage report is scheduled for Tuesday, with Stats Canada planting intentions due on Wednesday. That one will be closely watched for both wheat and canola plans.  Wednesday is also first notice day for May cotton deliveries.  Friday the 26^th will mark the expiration of May grain futures options. 

Visit our Brugler web site at http://www.bruglermarketing.com or call 402-289-2330 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

There is a risk of loss in futures and options trading. Similar risks exist for cash commodity producers. Past performance is not necessarily indicative of future results.  

 

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