The market is feeling a little bit of correction to kick the week off. May is always a tough month for US row crops as planting typically makes big gains and the first data for the new production is released from USDA.
In the outside equities Wall Street is smelling more stimulus in the air after last week’s disappointing jobs number. Unemployment reached 6.1% after the economy only created 266,000 jobs instead of the predicted 1 million jobs. This has Federal Reserve Presidents already commenting on Monday that the US economy still has pandemic hurdles to overcome and stimulus is still needed. This week will help determine if there is inflation in the economy and where that inflation is working.
In the grain complex traders are squaring up positions ahead of Wednesday’s WASDE report. That means taking profit and excess long contracts out of the market. Grains hit 8 year highs last week and likely have nearby technical support if the momentum would want to switch directions. The May WASDE report is usually one where acres don’t change and production for the current growing season is revealed. However with the strong price action since the planting intentions report a few months ago the possibility for big surprises is increasing with this report. Also to put a little more perspective on how much things can change in a year. In 2020 planting was off to a great start and it looked like the growing season would be perfect. USDA in the May report showed a 3 billion bushel corn carryout. In reality that number will likely print closer to 1.3-1.5 billion bushels on Wednesday.
No matter how much speculation come in these early USDA reports it will still be the data the market has and will trade accordingly. Given the already large price swings, expansion of funds and larger daily trading limits the stage seems set for big volatility this week.
Other important grain points come in the veggie oil market. Malaysian palm oil stocks are said to be at 5 month highs. Which put pressure back on the soybean oil market.
On Monday AgRural lowered its Brazil corn production estimate to 95.5 MMT today. For reference USDA’s April estimate was 109 MMT and the last week’s Stone X producer survey pegged Brazilian corn production at 100.25 MMT.
In the livestock trade a softer grain complex is giving back to the feeder cattle futures. Live cattle are also joining the ascension higher. With a boost in futures cash may also be able to pick up this week as basis to the board is typically wider this time of year. There continues to be support for the beef market as Tyson reported in it’s quarterly earnings call that beef is it’s most profitable sector. That isn’t sitting well with cattle producers who are not seeing an appreciation in their cattle prices while inputs and refined product are moving higher. Economists point to an abundance of ready cattle and limited chain space as part of the reason packers are not aggressively chasing the market higher.
In the lean hog complex correction seems to be occurring with lower prices on Monday. From a technical perspective the market was starting to become overdone on the charts. Fundamentally though the carcass cutout and cash price remain very strong and could attract more buyers to the complex if the dip continues.
Meanwhile in China ASF continues to ravage herd and forces producers to sell market ready hogs early. That is causing a flood of hogs to the market and severely depressing prices. In the long run though this is likely to help US pork export prospects and continue to a strong pork market in the US.
In the country the fed cattle cash trade saw light movement in the North at $191 on Tuesday. That is generally $2 higher than last week’s weighted average basis Nebraska. Wednesday’s FED cattle exchange is likely to kick off more trade across the country.
For the week ending May 01, 2021, Imported Beef Passed for Entry in the U.S. totaled 41,595, 100.78% of the previous week and 106.44% of the 4-week average.
Daily Slaughter Estimates Tuesday
121,000 hd today 119,000 hd wk ago 94,331 hd yr ago
484,000 hd today 484,000 hd wk ago 370,565 hd yr ago
Tuesday midday carcass cutout
Choice up 2.84 311.95
Select up 2.59 296.35
C/S Spread 15.60
Carcass up 0.55 113.71
Bellies dn 2.00 162.01
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