It’s been one year since crude oil traded in the negative and it’s a cold start to the day. Lexington Nebraska dropped below 20 degrees F on Tuesday morning meanwhile it dropped to nearly 25 degrees F in Dodge City Kansas. That has wheat traders feeling bullish and a general boost the commodity complex.
In the outside equities the discussion continues between main street, wall street and Washington D.C., on inflation and it’s impact the commodities. The Federal Reserve has made no switch to their plan of leaving rates flat for the next 2 years and pushing for 2+% inflation in the US economy. That lines up well and seems to be standing in solidarity with Secretary of the Treasury Yellen’s “Spend Big” plan. On main street though inflation already appears to be rising and analyst firm Stone X believes main street could see 3% inflation in 2021. Which would mean there is a disconnect between the Fed and main street on what is actually happening. This has Wall Street on edge and concerned that an out of touch Fed could be the final straw that brings this extremely strong equity market lower.
The grain complex continued higher on Monday. May corn flirted with $6 once again, but was unable to actually top the $6 mark. USDA export inspections were mixed to mostly lower week to week. USDA inspected 1.5 MMT of corn vs. 1.2 MMT of corn, 183,000 MT vs. 337,000 MT of soybeans, and 613,000 MT vs. 461,000 MT of wheat. Analysts in their daily commentary available below went back and forth on what actual signs we need to see before the market recognizes demand rationing due to price.
The main driver for the grain complex continues to be a dry South American Safrina corn crop. Again the 20% drop in yields is being discussed for Brazil, but there is still a lot of growing time to go before harvest. John Payne in his afternoon commentary made mention though that domestic grain prices in Brazil are reaching all time record highs showing that they are short grain in their own country. That means the global stockpiles are tight and any production concern is likely to continue feeding this strong bull market.
US wheat may have also gotten a boost over the weekend with tensions between the Ukraine and Russia rising once again. The US and NATO are backing Ukraine and the US navy has dispatched an aircraft carrier fleet to keep an eye on things. This is likely to make importers a little shy to continue sourcing Russian wheat if there are concerns the ships will never make their port.
In the livestock complex Monday brought higher prices on the hogs and lower prices on the cattle. Lean hogs seem to have once again hitched their wagon to the soybean complex. Mike Zuzolo, Global Commodity Analytics, highlighted that this likely means funds are starting to buy both contracts again. You can hear more of his comments below. As for the feeder cattle they continue to be the short side of spreads and are scratching for a point of support to try and come back. The weakness in the feeder cattle have taken their toll on the live cattle contracts, but they seem to have a little more support and have not sold off to the extent of the feeders.
Last week cattle carcass weights remained at 830 pounds. That is 14 pounds heavier than a year ago. Hog carcass weights remained at 217 pounds last week. That was 1 pound heavier than the previous year. Cattle and hog slaughter rates continue at a brisk pace, but behind year ago levels.
In the country Monday was quiet as show lists were established.
For the week ending April 10, 2021, Imported Beef Passed for Entry in the U.S. totaled 37,557, 96.69% of the previous week and 95.19% of the 4-week average.
Daily Slaughter Estimates Tuesday
119,000 hd today 119,000 hd wk ago 84,595 hd yr ago
491,000 hd today 477,000 hd wk ago 359,773 hd yr ago
Midday Carcass Value Tuesday
Choice up 1.38 277.55
Select up 1.30 270.43
C/S Spread 7.12
Carcass dn 0.25 113.83
Bellies dn 5.17 194.20
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