The bulls finally made an appearance in most markets midday. Equities were able to climb higher as stimulus is back in the air. US inflation also seems to be coming back with the latest data out Wednesday morning showing consumer price index moving from 0.4% in June to 0.6% in July.
Precious metals hit a wall and saw sharp profit taking start Tuesday. Wednesday gold and silver were trying to recover some of those losses. The drop in metals seems to be tied to a rise in treasury yields. On Monday the 10 year Treasury note held a premium of just 0.5%, but by Wednesday morning that had rallied to nearly 0.7%. Treasury notes hold more value to safety seeking investors where they are guaranteed a small return on their money.
The WASDE report held mixed reviews, but corn and soybean futures were able to rise after the report. Trend line yields did as they were expected and came in at record levels. Corns trend line yield was 181.8 bushels per acre. That is a decent jump from the July reports 180.5 bushels per acres. Soybean Trend line yield came in at 53.3 bushels per acre, well above pre-report estimates of 51.2 bushels per acres. Ending stocks were also closely watched, but for the 2020/21 corn ending stocks they came in lower than expected at 2.756 billion bushels. Pre-report estimates were 2.8 billion bushels and the July WASDE estimated 2.648 billion bushels.
Outside of the data midweek there is also a fundamental story trying to build in the grains after strong winds ripped across Eastern Nebraska, Iowa and Western Wisconsin on Monday. The strong winds called a derecho were as strong as an inland hurricane and left plenty of destruction in their path. Social media is filled with photos of destroyed grain bins, equipment shed and down row crops. The WASDE report listed that the data presented was compiled as of August 1st and would not reflect any weather or other impacts to the crop.
The Monday crop progress report showed a small decline in the national corn conditions, which is common this year. Soybeans improved another 1%, which could place more pressure on the market.
USDA has announced flash sales the first three days of the week. The first sale on Monday was 111,000 MT of soybeans sold to unknown destinations for the 20/21 marketing year. The second 324,000 MT of soybeans sold to China for the 20/21 marketing year. This helped to bolster soybean buyers throughout the day. Tuesday saw a lone sale of 132,000 MT of soybeans to China for the 20/21 marketing year. Wednesday saw two sales, 258,000 MT of soybeans sold to China, 120,000 MT of soybeans sold to unknown. Both sales were for the 20/21 marketing year.
Tuesday morning FOB soybean prices at the US Gulf were 68 cents cheaper than comparable prices in Brazil.
USDA export inspections for last week were also strong for corn (1.15 MMT) and soybeans (635,665 MT). Looking at year ago levels though both grains are well behind.
USDA on Monday also reported 264,000 MT of soybeans received for delivery to China for the 20/21 marketing year.
The latest ethanol data from the EIA Wednesday showed ethanol production dropping for the 2nd straight week, down 1.4%, or 13,000 barrels per day (b/d), to 918,000 b/d
US China tensions are still very hot and continuing to grow. China has placed sanctions on 11 U.S. citizens in a tick for tack response to U.S. sanctions on 11 Chinese officials in Hong Kong. China also arrested Hong Kong media mogul Jimmy Lai over the weekend under new security laws. This will likely invoke a response from the U.S. and may be part of the reason for the swiftness in Lai’s arrest.
The livestock sector ended mixed to mostly higher on Wednesday. Lean hogs caught another round of selling on the open, but were able to find support in the WASDE report. Pork production in the 3rd quarter is expected to be 7.17 billion pounds. That is down just slightly from the July WASDE report. Beef production is expected to increase slightly in the 3rd quarter to 7.06 billion pounds. Mike Zuzolo pointed out in his midday market commentary though that World Outlook and USDA expect the US to import more processing grade beef to try and meet rising demand for hamburger. The average fed steer price in the 3rd quarter is expected to be $108.16.
In the country a light trade was reported in parts of the South on Wednesday at mostly $104 (with a few up to $105), $4 higher than last week’s weighted averages. Asking prices remain firm around $106 plus in the South, and $168 to $170 plus in the North.
The Fed Cattle Exchange Auction today listed a total of 890 head in Kansas and Texas only, with 602 actually sold, 288 head listed as unsold, and 0 head listed as PO (Passed Offer). The state by state breakdown looks like this: KS 531 total head, of which 457 head sold at $104 to $104.50, that left 74 head unsold; TX 359 total head, of which 145 head sold at $104.50, that left 214 head unsold. The delivery date/weighted averages breakdown is as listed: 1-9 day delivery: 562 head total, of which 348 head sold, with a weighted average price of $104.50; 1-17 day delivery 328 head total, of which 254 head sold, with a weighted average price of $104.27.
For the week ending August 01, 2020, Imported Beef Passed for Entry in the U.S. totaled 43,077, 93.36% of the previous week and 104.88% of the 4-week average.
Expected Slaughter numbers Wednesday
117,000 hd today 119,000 hd wk ago 115,339 hd yr ago
474,000 hd today 475,000 hd wk ago 483,545 hd yr ago
Midday Carcass Value Wednesday
Choice up 0.56 208.64
Select up up 1.62 196.64
C/S Spread 12.00
Carcass up 0.49 70.88
Bellies dn 5.49 104.66
- Corn up 1 1/4 – 3 3/4
- Soybeans up 6 1/4 – 12 1/2
- Chicago Wht dn 2 3/4 -3 3/4
- Kansas City Wht dn 3/4 up 1
- Live Cattle dn 0.05 up 1.70
- Feeder Cattle up 0.17 – 1.47
- Lean Hogs dn 0.32 up 0.30
- Class III Milk dn 0.11 up 0.14
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. Strong winds ripped across Iowa on Monday. This could mute some of the data coming out this week.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Equities moving higher could help start cattle higher.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. The WASDE is out and Zuzolo believes it was ending stocks rather than yield forecasts that caught traders attention.
John Payne, Daniel’s Ag Marketing, takes a closer look at today’s grain close. Following the WASDE data Payne doesn’t see enough supply damage from the derecho to cause a rally in corn.
Jack Fenske, York Commodities, looks at the closing market numbers. Fenske is not expecting to see a friendly report on Wednesday.