The market has more of risk on tone to it on Tuesday. The US dollar index has broken lower falling through support at 94. It is now near a 3 week low. That has given rise to crude oil with WTI crude over $83/barrel. Grains are mixed with some old spreads possibly becoming reprised. Livestock are slow and sluggish.
In the outside equity market housing starts fell to an annualized rate of 1.555 million units in September. That was well below analyst expectations of 1.621 million. While one month does not define a trend the August numbers were revised to 1.580 million, down from the 1.615 million originally reported. The data is starting to point towards consumers not wanting to build new homes due to cost, labor and supply shortages.
Wall Street though doesn’t seem to phased by the housing data with financial reports still showing US companies are doing well. The huge spending bill the Biden Administration would like to push through continues to be in a stalemate and a bureaucratic locked up government is a favored government by Wall Street as little legislation can impact traders for the moment.
In the grain complex export inspections on Monday showed the US is finally rid of the slow downs caused by Hurricane Ida weeks ago. Corn inspected for export totaled 972,000 MT and soybeans inspected for export totaled nearly 2.3 MMT. Both were well above the previous week. Year to date though is a different story with corn nearly 1.5 MMT behind year ago levels and soybeans over 6 MMT behind the previous year. Some analysts are pointing to last year being an exceptional year for grain exports as China was being forced to come close to Phase 1 expectations. That doesn’t seem to be here in 2021. Overall shipments are still strong and near pace for USDA estimates, but not encouraging bulls to run the market sharply higher.
Meanwhile in South America Brazil soybean planting is progressing with Mato Grosso 45% complete compared to 8% last year, which means that Brazilian exports will be available 30-45 days earlier than last season. The big question from South America and eventually into the US is how farmers handle sharply higher fertilizer costs. China is trying to reduce exports and is a major player in global fertilizer production. Josh Linville fertilizer risk management specialist highlights that China accounts for approximately 39% of the global phosphate operating capacity and approximately 32% of world exports (equates to around 4.6MMT). China also accounts for approximately 1/3rd of the global urea market (180 – 200MMT). Higher input costs could curb demand and cause farmers to utilize less which in turn curbs yields and could help keep stocks of available grain under pressure. However we can’t put the cart ahead of the horse. At this point there is no indication that the higher prices have caused dramatically lower usage of fertilizer inputs.
According to EIA data for the week ending October 15, US ethanol production increased 64,000 barrels per day (b/d) to 1.096 million b/d. This is the third-highest volume on record and just 12,000 b/d below the all-time record. US ethanol production was 20.0% above the same week last year, which was affected by the pandemic, and 10.0% above the same week in 2019.
US ethanol stocks increased 1.2% to 20.1 million barrels. Stocks were 1.8% above the year-ago level but 6.0% below the same week in 2019. Inventories increased across all regions except the West Coast (PADD 5).
In the livestock trade cattle are back and forth this week with little direction or momentum. Fund money is likely sidelined until Friday when the latest cattle on feed number are released.
Meanwhile lean hogs are trying to decide what to think with China released 3rd quarter pork production data showing a 43% increase year over year. Likely indicating that Chinese hog herd is back to 90% of pre African swine fever levels. Mike Zuzolo with Global Commodity Analytics highlighted in his midday market commentary that China also didn’t liquidate their market herd as hard as they have in the past and that helped to show they can still increase production if demand warrants.
In the country a light trade is getting going on Wednesday despite the fact that the Fed Cattle Exchange did not sell any cattle. Texas and Kansas are selling cattle at $124 live and Nebraska has sold cattle at $124 live $196 dressed. At these prices this is essentially fully steady with last week. This is not the direction many thought the cash market would go this week with high volume trade last week.
The Fed Cattle Exchange Auction today listed a total of 2,757 head, of which none actually sold, 362 were scratched from the auction and 2,395 head were listed as unsold, as they did not meet the reserve prices, that ranged from $121 to $126. Opening prices ranged from $120 to $122, high bids ranged from $123 to $124. The state-by-state breakdown looks like this: TX 1,137 total head, all of which went unsold; KS 1,299 total head, with none sold, 937 head went unsold and 362 were scratched from the auction; SD 252 total head, all of which went unsold; NE 69 total head, all of which went unsold.
For the week ending October 09, 2021, Imported Beef Passed for Entry in the U.S. totaled 46,223, 97.72% of the previous week and 104.97% of the 4-week average.
Daily Slaughter Estimates Wednesday
121,000 hd today 120,000 hd wk ago 119,164 hd yr ago
478,000 hd today 477,000 hd wk ago 492,755 hd yr ago
Wednesday midday carcass cutout
Choice dn 0.37 280.51
Select up 1.47 263.00
C/S Spread 17.51
Carcass up 1.74 101.01
Bellies dn 0.40 189.17
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