Welcome to the Feds week of decisions that will have lasting impacts to the market and economy. With that being said there is plenty of concern in the market going through this week. That was very evident in the Sunday overnight trade through to the early day trade on Monday.
The Federal Open Market Committee (FOMC) consists of twelve members–the seven members of the Board of Governors of the Federal Reserve System. They will start their meeting discussing aspects of the economy, inflation, their multi trillion dollar balance sheet and of course interest rates and how much they may need to raise them in order to combat inflation. Going into Monday Fed Fund futures trading suggests that the market gives 80% odds that the Fed will raise its benchmark interest rate 75 basis points on Wednesday to 3.0%, with a similar hike likely in November.
The market is continuing to try and contend with what happens once the Fed successfully breaks inflation whether that be through a down turn in the labor market, or they finally get enough free flowing cash out of the market that it slows down. For commodities a riskier asset a drop in inflation likely means a drop in raw commodity demand. Thus a pullback in commodity prices as interest rates rise.
In the grain complex to start the week corn and soybeans end in the positive as the supply bulls try to stay one step ahead of the demand bears. Helping start the day was USDA’s announcement of 136,000 MT of new crop soybeans that were sold to China. The US is in it’s critical marketing time for soybeans as South America has largely marketed it’s previous crop. That leaves the US in a prime spot for availability. Not helping the export market though is the US dollar hitting a new 20 year high on Monday.
There was still more good news on the export front as USDA export inspections noted an increase week to week for corn and soybeans. Last week USDA inspected 549,354 MT of corn vs. 474,388 MT last week. The best news comes in the fact that the US has almost doubled it’s shipments of corn since last year at 1.15 MMT vs. 622K last year. For soybeans last week USDA inspected 518,743 MT, vs. 341,713 MT last week. Year to date the US has shipped 912,000 MT of soybeans vs 503,000 MT at the same time last year. So that is positive. However it’s still not enough to make corn or soybeans par with where they need to be to hit USDA estimates for exports on the year. According to Stone X the US is about 27 million bushels behind on corn shipments and 58 million bushels behind on soybean shipments to make USDA’s export estimates. Arlan Suderman does note the strong start to the marketing year though does give hope the US can close those gaps.
In the livestock side of the trade live cattle struggled throughout the session with a sub dollar trading range. That puts pressure on the market from a technical perspective. The cash market was slightly stronger last week as packers showed they were a little short bought. Hopefully feeders can keep the pressure on this week. That gives fundamental support to the market, but the October contract doesn’t go into delivery until 10/10. That leaves time for the market to move closer to cash.
For hogs there was disappointing news out of China. Chinese customs data released today showed August 2022 pork imports off -50% from the year ago month and -64% year-to-date.
In the country the cash market waited until Thursday to develop. That seemed to help put some pressure on the packers and move the needle positive for cattle feeders. Southern live deals marked at $140 to mostly $142, generally $1 higher than last week’s weighted averages. Northern dressed trade had a rather large range of $222 to $230, mostly $226 to $227, steady to $1 higher than last week’s weighted average basis Nebraska.
For the week ending September 10, 2022, Imported Beef Passed for Entry in the U.S. totaled 37,162, 82.98% of the previous week and 82.53% of the 4-week average.
Daily slaughter estimates Monday
127,000 hd today 125,000 hd wk ago 119,000 hd yr ago
484,000 hd today 475,000 hd wk ago 465,000 hd yr ago
Monday Midday Carcass Cutout
Choice up 1.10 253.50
Select dn 0.73 225.92
C/S Spread 27.58
Carcass up 1.79 108.18
Bellies up 23.54 163.51
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 market commentary with Donna Hughes of Daniels Ag Marketing
Closing market commentary with Jack Fenske with York Commodities