A new week has optimism and bullish equities with another Covid vaccine entering availability to the general public. As for ag commodities they are caught in-between weather in South America and shrinking Chinese demand.
In the outside equities Johnson and Johnson’s Covid vaccine FDA approval gives the world another viable vaccine option. The new vaccine is also the first single dose vaccine that is available. Wall Street continues to push that herd immunity is just around the corner and with a fully opened economy with cheap interest they sky is the limit.
Treasuery interest rates though continue to be attractive to domestic and international investors. Much of Europe and Japan continue to have 0% or negative interest rate on government debt. That makes the US’s 1+% look very attractive. Arlan Suderman with Stone X also brings up the strong point that the Baby Boomer generation that is quickly approaching retirement will continue to seek safe havens for the majority of their portfolios. That leaves some concern for the equity bulls, but as the Boomer money leaves stocks that may invite money currently in highly volatile assets like crypto currency into equities.
In the grains an overnight move higher soured soon after the open. South America continues to have split weather with Argentina expected to remain dry through March 10. Temps will stay near 90 through much of that time and increase the chance for a flash drought. Further to the North Brazil will continue to see rain that is delaying soybean harvest and second season corn planting. Stone X released their results from their latest producer survey. The rain hasn’t dampened the soybean outlook increasing month to month to 133.48 MMT. The rain though has pushed Brazil out of the ideal planting time for the second corn crop and decreased it’s yield potential from 110 to 108.5 MMT.
South American weather is feeding the supply bull, but the demand bull is being starved by China who continues to stay out of the market following the Lunar New Year. Mid morning on Monday the latest USDA export inspections may shed light on China at least taking delivery of what they already have purchased on the books.
The wheat trade received the latest look at conditions from NASS on Monday. Kansas winter wheat dropped 3% to 37% good to excellent. Oklahoma winter wheat was rated 46% good to excellent. Texas winter wheat was rated 33% good to excellent.
In the livestock trade cattle are starting the week lower. This comes off of a strong weekly kill of 666,000 head last week. If packers can continue weekly kills like this that will keep cattle current. Which is slowly backing the carcass weights down. Last week the average beef carcass was 844 pounds down from 846 pound the previous week. Total cattle slaughter on the year is down 4.2% from the previous year, but total beef production is only down 2%. It’s that continued presence of plenty of beef in the supply chain that cool bullish momentum.
As for lean hogs Asian demand is expected to continue remaining strong. Malaysia just found the first cases of African Swine Fever in wild pigs. They plan to cull at least 3,000 animals. It’s still murky just where China’s hog herd stands following more concerns that ASF and PEV’d continue to be active.
The Texas Cash Pool was able to sell 775 head Tuesday morning at $113.11, which is $0.94 less than last week’s Cash Pool price. Other packers offered bids of $112.01. Otherwise the countryside is still quiet Tuesday afternoon with little interest having developed yet. Bids are still nonexistent throughout the countryside and it’s unlikely any worthy interest will develop until after the Fed Cattle Exchange. Asking prices in the South are $116 and the North has yet to share their asking prices.
For the week ending February 20, 2021, Imported Beef Passed for Entry in the U.S. totaled 31,398, 91.07% of the previous week and 86.88% of the 4-week average.
Expected Slaughter numbers Tuesday
121,000 hd today 118,000 hd wk ago 124,374 hd yr ago
497,000 hd today 495,000 hd wk ago 496,517 hd yr ago
Midday Carcass Value Tuesday
Choice dn 2.07 236.96
Select dn 1.10 226.54
C/S Spread 10.42
Carcass up 7.08 99.45
Bellies up 23.04 180.26
Daily broker commentary:
Pre-opening grains with Ed Dugan 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