Closing Market Recap Monday 6-1
No holiday this Monday so the trade is back to a regular week. The best place to start with the current rhetoric trying to drive the market is to go back to late last week. Friday President Trump held a late afternoon press conference where he continued to scold China for their actions against Hong Kong. The US is now removing Hong Kong from it’s SAR (special administrative region) status and placing similar sanctions against China and Hong Kong. Following the press conference the market started to rebound as President Trump was key to leave out any mention of the Phase One trade deal. Late Sunday, early Monday China was sure to sound the horn of trade war again.
Bloomberg reported that China has ordered it’s state commodity buyers to halt all US buys. This includes cancellations of current US pork orders. Bloomberg Markets cited, “Cofco and Sinograin are China’s key importers of farm goods. They had been making pricing inquiries for 20 to 30 cargoes of U.S. soybeans on Friday but held off on going through with purchases after Trump indicated he would punish Chinese officials, one of the people said. Beijing is waiting to see what steps Trump takes before deciding its next move, one of the people said.”
Monday afternoon brought real confusion on this point though. Bloomberg made it sound pretty clear that Chinese state buyers were out. Then just ahead of the grain close Reuters relays that sources have indicated Chinese state buyers bought 3-5 cargoes of US soybeans from the Pacific North West for October-November delivery. Tuesday may help clear some of this confusion up with a flash sale report from USDA.
If China has in fact cut off it’s state buyers there is some sting to US farmers. In the big picture though it’s better to have this happen now then in the fall when harvest is going. China is usually a limited buyer of US commodities this time of year. South America is wrapping up their latest harvest and moving plenty of grain. Now you still have to consider that Covid-19 seems to just be hitting these countries. That could continue to disrupt their supply chains and leave China no where else to go. Which is what many analysts point to last week’s cause for the 10-12 cargoes of soybeans that China bought from South America. Trying to get ahead of the possible shutdowns.
As for China itself, the picture that their economy is rebounding and life is great after Covid-19 may be a little embellished. A prime example is employment. China urban employment survey showed just 6% unemployment in April. At the same time the US was showing 15%. However this report does not take into account the huge migrant labor force that returns to their home state in times of economic down turn. ANZ bank estimates total unemployment or underemployment in China at 16% for April.
Despite all the negative from China there is still plenty of positive news for the trade. Currencies seem to be cooperating for commodities rather than acting against them. The US Dollar index at the time of this writing is down 0.53% to the 97.82 level. That is well below all significant moving averages. The Canadian dollar is up 1.6%, the Russian Ruble is up 1.83% and the Brazilian Real is down 0.48%. Argentina is still walking thin ice starting to hit defaults on global debt.
Monday export inspection report from the USDA showed weekly increases for corn at 1,128,091 MT, soybeans 396,387 MT, wheat 499,353 MT. Sorghum was the weekly decrease at 125,119 MT. Looking at the year to year comparisons corn still lags almost 11 MMT vs. the previous year (28,484,807 MT vs. 39,327,338 MT). Sorghum see’s the largest year over year gains (3,317,783 MT vs. 7,413,253 MT).
There is also hot weather heading for the mid west. That is somewhat a double edge sword at the heat will help emergence and growth, but if it isn’t followed with moisture it could quickly turn to a dry issue. Soybean planting is expected to take quite the leap in this afternoon’s crop progress report at 82%-85% complete. The heat is also hitting winter wheat. This could spur the final stage of development, but it could also limit yield.
Over in livestock analysts expect a lower open as demand is limited in major US cities as people are concerned to leave home amid the riots. Back to China there is rumor in the trade that China is already terminating US pork shipments. This will be clarified later in the week with US export sales.
In the country feeders are expected to offer cattle at lower money to try and get them moved before the heat hits this week and next week.
Slaughter numbers continued to increase through last week, but seem to have started plateauing with possible max capacity being hit with social distancing policies in place.
The cash cattle trade came in a little bit each day last week, and it was another round of price ranges so large you could drive a truck through them (between $10 to $16). Nebraska’s dressed deals ranged from $178 to $190, while Iowa’s dressed range was $174 to $190. Kansas live prices ranged from $110 to $120, while Texas had a full range of $108 to $120. Where will weighted averages fall when summaries come out later this morning? Well, that is anybody’s guess at this point. According to the Friday afternoon Mandatory reports weekly trade volumes were as follows: KS 21,911; NE 39,978; TX 6,432; IA 28,197; CO not available due to confidentiality.
For the week ending May 23, 2020, Imported Beef Passed for Entry in the U.S. totaled 40,697, 97.60% of the previous week and 105.90% of the 4-week average.
Expected Slaughter numbers Monday
111,000 hd today Holiday hd wk ago 121,892 hd yr ago
424,000 hd today Holiday hd wk ago 465,121,892 hd yr ago
Midday Carcass Value Monday
Choice dn 13.03 350.31
Select dn 10.40 329.67
C/S Spread 20.64
Carcass dn 4.87 83.33
Bellies up 9.80 95.23
- Corn dn 2 1/2 – 3 1/4
- Soybeans dn 1/4 up 1 1/2
- Chicago Wht dn 3/4 – 5 1/2
- Kansas City Wht dn 5 1/4 – 8
- Live Cattle dn 1.42 up 1.45
- Feeder Cattle up 0.77 – 2.27
- Lean Hogs dn 1.42 – 2.25
- Class III Milk dn 0.16 up 0.41
Pre-Opening Market Broker Commentary
Ed Dugan, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. Macro market impacts to China firing back at the US have things pointing to a negative open.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Cattle are being offered at lower cash to try and move them before the heat.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Zuzolo has heard private Chinese firms are pricing soybeans in the Gulf.
John Payne, Daniels Ag Marketing, looks at the grain settlements.
Jack Fenske, York Commodities, looks at the closing market numbers. cycle.