Concerns about debt default, and the Fed continuing to raise interest rates set the feel for the macro market environment this week. Meanwhile a continuing shift in weather patterns in the US, corn harvest starting in Brazil and demand still up in the air, keep bears and bulls active in the ag commodity complex.
For the outside equities traders are confident that legislatures will come to some sort of agreement in the 11th hour and avoid US debt default. However some analysts are pointing to potential pain that could be felt if the agreement isn’t met soon. Even if the US doesn’t default a near default could cause a drop in the US credit rating and in turn raise interest rate on US debt obligations. The Fed will also release their FOMC meeting minutes at 2 PM Eastern Wednesday. That will highlight exactly how the Fed was feeling in their last meeting where they agreed to raise interest rates 0.25%. With recent comments from Fed officials that were viewed as hawkish Fed Fund Rates are giving 30% odds that the Fed will raise interest rates at their next meeting.
Crude oil prices are on the rise as the Saudi Energy Minister warned speculators/short sellers there may be further OPEC output cuts. The next OPEC meeting is June 4th. On the bio fuel side, US ethanol production for the week ending May 19th dropped 0.4% to 983,000 b/d. US ethanol production was down 3.1% from last year and 1.4% higher than the 5 year average. US ethanol stocks dropped 5.0% to a 27-week low of 22.0 million barrels. Stocks were 7.0% less than a year ago yet 0.4% above the five-year average. Inventories thinned across all regions except the Rocky Mountains (PADD 4).
In the grain complex rains continue to be predicted for drought stricken area’s in Southwest Nebraska through Western Kansas. While it’s great to see the moisture in those hard hit area’s it appears that there may be some dryness setting up further to the East. There is a high pressure system sitting over the great lakes, acting like a force field to keep crops dry east of the Missouri River. That could dry down parts of the corn belt.
On the demand side of the trade China is trying to be more self sufficient and has moved a large portion of their wheat crop over into livestock feeding. Chinese data showed April soybean imports from Brazil were off -16% compared to April 2022. For the year, bean imports from Brazil are -28%, shipped in Jan-April. Chinese imports of US beans were up +11% in April and are ahead in Jan-April.
In the livestock trade cash trade in the country helped pick up cattle futures on Wednesday. Meanwhile hog futures continue to struggle in a consolidated and negative trade channel.
In the country Wednesday saw the cash market kick off. Southern live deals were mostly $171, steady in Kansas and $1 higher in Texas. Nebraska dressed deals are marked at mostly $285 to $286. Some asking prices remain firm at $174 live in the South, and $287 dressed in the North.
Daily slaughter estimates Wednesday
Cattle
126,000 hd today 126,000 hd wk ago 124,000 hd yr ago
Hogs
472,000 hd today 466,000 hd wk ago 473,000 hd yr ago
Wednesday Midday Carcass Cutout
Beef
Choice dn 1.37 299.37
Select up 2.10 283.38
C/S Spread 15.99
Loads 81
Pork
Carcass dn 2.25 81.25
Bellies dn 11.81 71.48
Loads 201
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 John Payne of Hedge Point Global Markets No Audio 5-24
