At the end of the week we have seen brand new highs in the equities, tests of nearly decade old highs in the grains and a break down in the livestock complex.
In the equities traders were not quite as bullish to start the week as they are ending the week. Monday brought traders back to the reality that the pandemic is not over as the FDA is paused the Johnson and Johnson vaccine for a 1 in a million blood clot issue that could be related to the shot. The concern to the market was short lived though as strong economic data started to be released the rest of the week.
The March consumer price index (CPI) released on Tuesday showed a gain of 0.6% month-on-month, up from 0.4% gains in February and beating analyst expectations of a 0.5% rise. The CPI rose 2.6% year-on-year in March, up from 1.7% in February and beating analyst expectations of 2.5%. Then on Thursday retail sales exploded as consumers spent their $1,400 stimulus check in March. Retail sales jumped 9.8% month-on-month in March, after falling 2.7% in February. Analysts had expected a 5.6% jump in sales. Sales minus vehicles and gas still jumped 8.2%, after falling 3.1% in February. Analysts had expected this category to rise by 4.4%.
Armed with this economic data traders bought the DOW Industrial Average into a new record high of 34,000. It opened past 34,200 on Friday morning.
In the grain complex the market floated higher and on Thursday May corn tested and beat $6 in the overnight trade. That took out the high set back in July 2013. With this type of market action and momentum soybeans and wheat joined in the move higher. The big driver behind the grain move has been dry North and South American weather. The Safrina corn crop in Brazil is approaching a critical growth points in early May. Unfortunately forecasters are calling for the dry season to start early and that has some analysts already sounding the alarm that heat stress could drop the second Brazilian corn crop yield 15%-20%. In North America the Northern plains are still extremely dry and while not as concerning as the Big I states it’s still likely to impact fringe acres of corn and soybeans. These acres are important in a time when grain stocks are extremely tight already.
However the high grain prices may have started to cause demand rationing with Thursday’s export sales report showing 4 marketing year low in sales. Wheat net export sales were a marketing year low and not sales at all, but rather the cancellation of 56,600 MT of sales. Corn net export sales were down 57% from the previous week. Soybean cake, meal and oil were all marketing year lows on net export sales. At this time though the poor export sales numbers seem to be having little impact on the market, but could if we continue to see the trend build over the next several weeks.
In the livestock complex Thursday was the straw that broke the camels back. Lean hogs sold off to limit losses. Meaning they have expanded limits on Friday. A poor export sales number started the selling, but funds that have been long the market since late 2020 were starting to look for a reason to exit the market and take their strong profits. Earlier in the week softness in the carcass cutout has started some light liquidation, but it went full liquidation on Thursday.
The selling was not isolated to the lean hog complex. With corn hitting new highs feeder cattle continue to be the short side of spreads. With selling in the hogs and feeders, live cattle didn’t stand much of a chance.
Last week cattle carcass weights dropped 1 pound again to 830 pounds. Slaughter continues above levels seen a year ago when plants were struggling with the pandemic.
In the country the fed cattle trade kicked off on Thursday after another standstill in the Fed Cattle Exchange. Kansas marked at mostly $121, $.50 higher, Texas trade was marked at mostly $120, about steady with last week’s weighted average. Dressed deals in the North were at mostly $196, roughly $1 higher than last week’s weighted average.
Both the Wednesday and Thursday Fed Cattle exchanges were unable to get cattle to trade. Wednesday saw Southern bids of $121-$122, but they were passed for asking prices of $123. Northern cattle were bid $126, but they were passed for asking prices of $128. Then on Thursday packers only bid on Southern cattle at $119.75-$120. Feeders again held their ground for $123. Northern feeders were still asking $128 and packers did not bid on the cattle.
For the week ending April 03, 2021, Imported Beef Passed for Entry in the U.S. totaled 38,841, 97.02% of the previous week and 98.93% of the 4-week average.
Daily Slaughter Estimates Friday
114,000 hd today 118,000 hd wk ago 85,810 hd yr ago
61,000 hd Sat. 69,000 hd wk ago 37,846 hd yr ago
480,000 hd today 491,000 hd wk ago 405,216 hd yr ago
86,000 hd Sat. 211,000 hd wk ago 216,634 hd yr ago
Midday Carcass Value Thursday
Choice dn 1.60 269.81
Select up 0.74 266.90
C/S Spread 2.91
Carcass up 5.36 115.46
Bellies up 10.68 197.63
Daily broker commentary:
Pre-opening grains with Mark Gold of Top Third Ag Marketing
Pre-opening livestock with Jerry Stowell of Country Futures
Midday market commentary with Mike Zuzolo of Global Commodity Analytics
Closing grain commentary with John Payne Daniels Ag Marketing
Closing market commentary with Jack Fenske with York Commodities