As the week comes to an end the bulls are still in the driver seat across much of the market complex.
Equities has moved higher through out the week. Inflation and taxation concerns though are nearby in Wall Street traders minds.
The Bank of England joined Canada this week in announcing it would slowly start tapering it’s economic stimulus to the UK economy. The tapering is going to be very subtle at first, but the central bank feels the economy is recovering enough to start rolling back some of the support.
This is in stark contrast to what the US’s Federal Reserve has said in recent statements and press conferences. Albeit this week there may have been the early signs the US treasury is slowly coming around to the idea of tapering. Janet Yellen made subtle comments near mid week that possibly inflation was starting to occur and that stimulus efforst would eventually have to be rolled back. This comes after Warren Buffet noted at his Berkshire shareholders meeting that the US economy is showing recovery and inflation is a real concern. The Oracle of Omaha isn’t the only company executive sounding the inflation alarm.
Economic data this week has been very positive. Thursday showed non-farm productivity rising by an annualized rate of 5.4% in the first quarter. That topped analyst estimates of 3.7% and is much better than the -3.8% in the fourth quarter of last year when Covid numbers were soaring.
The grain complex continues to benefit from the influx of cheap money in the global system. Grains have the story with continued drought conditions in Brazil. Stone X has recently released their latest producer production survey from Brazil. Stone X increased their soybean production estimate to 135.73 million metric tons, up from 134.03 mmt last month. Then they lowered their total corn production estimate to 100.25 mmt, down from 105.06 mmt last month. USDA is currently at 109 mmt of corn.
The possibility of soy based bio fuels seems to also be a popular point in the market at the moment. Soybean oil and edible oils in general have benefitted greatly from this demand. Also global demand for edible oils is still strong. All of this adds together to continue putting momentum under the soybean complex.
The US crop isn’t experiencing too much concern at the moment. The northern plains are still in extreme drought, but they are still fringe acres. The US has planted 46% of the corn crop and 24% of the soybean crop.
After nearly 7 weeks of continuing decreases in US ethanol stocks last week saw a slight increase. According to EIA data US ethanol stocks increased 70,000 barrels or 3.6% to 20.4 million barrels. While the slight increase has some analysts pointing towards an early indication the summer driving season could be less than expected it is still 20.2% below a year-ago and 9.0% below this time in 2019. Inventories did built across all regions.
Also according to EIA data US ethanol production increased for the week ending April 30, by 0.7%, or 7,000 barrels per day (b/d), to 952,000 b/d. US ethanol production is still 59.2% above the same week last year when the effects of the pandemic were reflected but was 8.1% below the same week in 2019.
USDA export inspections were mixed on Monday with the USDA inspecting 2.139 MMT of corn, 235,496 MT of sorghum, 143,418 MT of soybeans and 509,932 MT of wheat. Wheat and soybeans were the only two grains to come in lower week to week. China took delivery of 6,072 MT / 223,109 bu of soybeans, 770,794 MT / 30,344,618 bu of corn, and 182,289 MT / 6,698,027 bu of wheat.
Export sales out on Thursday continue to show the current high prices are curbing demand. Wheat actually saw a net sales reductions of 96,500 MT due to unknown destinations canceling 131,500 MT. This also made for a marketing year low so far in wheat export sales. Corn net export sales were 137,400 MT for 2020/2021 were down 74% from the previous week. Japan was the top customer at 206,800 MT. Unknown destinations cancelled 559,100 MT. Soybean net export sales were 165,300 MT for 2020/2021 were down 44% from the previous week. Unknown destinations were the top purchaser at 135,500 MT.
In the livestock complex cattle finally got a little reprieve on Wednesday and fought to maintain gains on Thursday. The June live cattle and lean hog contract continue going back and forth. On Wednesday they end at the same price. This is causing some concern, but hogs are being driven by a every higher cash and carcass price. Thursday the June live cattle contract was able to put about $1 of space between it and the June lean hog contract.
Feeder cattle sadly continue to be the funds choice of a short contract against the corn long contract. This has slowly spilled over to the cash feeder cattle market as well. Sales have noted that fleshier cattle suitable for finishing have performed poorer in the ring. Meanwhile grass type cattle are still seeing a fairly active market.
All the while beef prices are in record territory for this time of year, but cash is not moving higher. Packers are not chasing the market and seem to be content bringing in fewer cattle. This is causing plenty of conversation and heart ache in the cow calf and feeder communities. There are some analysts starting to report that feeders will be closing pens out and not refilling them in the near future. This only stands to put more pressure on cash feeder cattle. On the other end of the spectrum that margin for packers on the pork side are getting tighter and they may slow chain speeds to slow down hog procurement. None of this though is set and stone and is coming from analyst conversation.
In the country cash trade kicked off on Tuesday. Then trickled in on Wednesday and Thursday. There could be another round of trade on Friday given the lighter volume so far this week. Southern live trades have ranged from $117.50 to $119, mostly $118 to $119, about steady to $1 higher than last week’s weighted averages. Northern dressed deals ranged from $187 to $192, mostly $190, fully steady with last week’s weighted average basis Nebraska. Asking prices for cattle still on the show lists is $120 live and $192 dressed.
The Fed Cattle Exchange Auction today listed a total of 2,153 head, of which 1,091 actually sold, 202 head were scratched from the auction, and 860 head were listed as unsold, as they did not meet the reserve prices, that ranged from $118 to $120. Opening prices ranged from $117 to $117.50, high bids ranged from $117.50 to $119. The state by state breakdown looks like this: TX 1,967 total head, with 1,038 head sold at $118.50-$119.00, 727 head unsold, and 202 head were scratched; NE 118 total head, with 53 head sold at $117.75, 65 head went unsold; KS 68 total head, all of which went unsold.
For the week ending April 24, 2021, Imported Beef Passed for Entry in the U.S. totaled 41,633, 105.00% of the previous week and 106.70% of the 4-week average.
Daily Slaughter Estimates Thursday
120,000 hd today 120,000 hd wk ago 90,413 hd yr ago
486,000 hd today 486,000 hd wk ago 333,673 hd yr ago
Thursday midday carcass cutout
Choice up 2.48 307.26
Select up 3.95 290.13
C/S Spread 17.13
Carcass up 2.72 114.63
Bellies up 7.60 171.63
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 No Commentary 4-26
Closing grain commentary with John Payne Daniels Ag Marketing
Closing market commentary with Jack Fenske with York Commodities