Sellers were met with some resistance Midweek, but the Fed may have finally let the cat out of the bag and put pressure on the broader commodity complex.
In the outside equities the market seems to be showing it wants to throw a tantrum to the Federal Reserve on Wednesday afternoon. The Fed noted that it wants to start raising interest rate from 0% to 0.6% by the end of 2023. That is just a step ahead of where they were last month when interest rates would stay at 0.0% through 2023. Analysts are concerned this could be early signaling that the Fed will soon start tapering their stimulus to the economy. As Arlan Suderman has said several times, “Wall Street and the market like easy money and will get upset when it’s taken away.”
In return to the possibility of rising US interest rates the US dollar started quickly moving higher. This signals that foreign investors want to buy US debt as they are paying the best interest. Other countries in Europe and Japan still have negative interest rates. A higher dollar is not good for US commodities.
Other economic data out this week includes the Redbook retail sales number. The Redbook showed significant improvement over a year ago. The first two weeks of June show retail sales up 15.4% from the first two weeks of June last year. However the month of May saw lower retail sales than April and March. That wasn’t totally unexpected though where March and April had direct stimulus payments helping to prop them higher.
In the grain complex the selling was mixed on Wednesday. Which was a slight improvement over the broader complex selling Monday and Tuesday. Soybean oil was the biggest leader to the down side hitting limit lower by the settlement. This means the soybean complex will see expanded limits in all sectors on Thursday. On Tuesday the NOPA crush report US oil seed crushers utilized 163.5 million bushels of soybeans in May. That was up 3.2 million bushels from April. The number was a nice monthly growth, but missed analyst estimates. Some analysts see the miss though as a sign that the market literally doesn’t have the physical beans to feed crushers to continue meeting those high crush demand.
Pressure on the soybean oil market maybe coming from the Biden Administration starting to wobble on their commitment to biofuels. Earlier in the week the administration was facing pressure from labor unions and US Senators, including his home state of Delaware, to provide relief to US oil refiners from biofuel blending mandates.
Egypt received 16 bids in their latest wheat tender. However prices were still $250/MT or better and Egypt cancelled the tender without purchasing any wheat.
Internationally wheat is catching some pressure as SovEcon raised its forecast for Russia’s 2021 wheat by 1.5 MMT to 82.4 MMT. Monday afternoons crop progress report will bring the latest in US winter wheat harvest.
In the livestock complex cattle continue to catch a rocket higher, but may be starting to move into over bought territory. June live cattle have moved past $122 and helped moved the cash market higher. The feeder cattle have taken the live cattle’s cue and moved higher. Feeders were even able to beat corn bulls early Wednesday. Finally money flow and momentum has turned friendly to the cattle and let them move higher.
The lean hogs turn decidedly lower on Wednesday quickly moving limit lower. The price move came on the heels of Tuesday afternoons carcass cutout seeing a $48 drop in belly prices. The Wednesday midday cutout saw ribs return, but the dramatic and volatile drop was enough to concern traders. The rib cutout on the other hand seems to be invincible and continues higher. This could be supported by an aggressive barbeque season. However scorching temps right now in the Midwest may back that demand down. Cash hogs continue to be strong with cash over $0.90.
In the country a light trade is being reported Wednesday in parts of Nebraska, and Kansas at fully steady money with yesterday’s advance. Northern dressed deals were at $193 to $197, mostly $195 $4 higher than last week’s weighted average basis Nebraska (most set for delivery the week of June 28). Southern live trade was at $120 to $123, mostly $122, $2 higher than last week’s weighted averages. More trade is likely to take place throughout the week. Asking prices for cattle left on showlists are around $122 plus in the South, and $195 to $197 in the North.
The Fed Cattle Exchange Auction today listed a total of 6,049 head, of which 889 actually sold, 712 head were scratched from the auction, and 4,448 head were listed as unsold, as they did not meet the reserve prices, that ranged from $120 to $122.50. Opening prices ranged from $118 to $120, high bids ranged from $119.25 to $122.50. The state by state breakdown looks like this: TX 5,585 total head, with 793 head sold at $121 to $122.50, 678 head were scratched from the auction, and 4,114 head went unsold; KS 339 total head, with 27 head sold at $119.25, 34 head were scratched from the auction, and 27 head went unsold; OK 125 total head, with 61 head sold at $122, 64 head went unsold.
For the week ending June 05, 2021, Imported Beef Passed for Entry in the U.S. totaled 37,206, 97.93% of the previous week and 93.07% of the 4-week average.
Daily Slaughter Estimates Thursday
121,000 hd today 120,000 hd wk ago 118,718 hd yr ago
484,000 hd today 484,000 hd wk ago 464,644 hd yr ago
Friday midday carcass cutout
Choice dn 0.78 325.147
Select dn 1.59 285.65
C/S Spread 39.82
Carcass up 2.75 127.58
Bellies up 15.95 201.75
Daily broker commentary:
Pre-opening grains with Dan O’Bryan 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 No Audio 6-18
Closing market commentary with Jack Fenske with York Commodities