Tag Archives: markets

Summary

Market Recap 7-14

Equities were able to overcome their concerns from California’s move to put Covid-19 restrictions back in place and moved higher on Tuesday. Earnings week kicked off fairly strong for companies on Wall Street. PepsiCo was a prime example of positive 2nd quarter financials. Snack revenue was able to pick up the slack caused by slumping soda sales. Big banks are also reporting strong 2nd quarter earnings, but they also show that they are keeping billions in reserve for possible loan defaults later on in 2020.

Economic data out on Tuesday showed that the US saw slight inflation in June with the Consumer Price Index coming in at +0.6%. That was just above analyst estimates and well above May’s -0.1%. Inflation is still a long ways from the FED’s target of 2%. Traders prime concern is still how much economic damage will be done if states start to follow California and start to lock down the economy. If other states start to follow California this could quickly swing the markets lower.

The US dollar and precious metals shed some long positions on Tuesday with some of the money flow headed back to the Euro.

Energies were able to take slight advantage of a lower dollar, but are still range bound at $39-$40/barrel on WTI crude. Traders will continue closely watching energy stocks and consumption to see how the rising covid-19 cases are impacting energy demand. OPEC is also warning they will ease production restrictions and increase output by nearly 2 million barrels per day. Helping the energy sector is the US Dollar which is down about 0.25% at the time of this writing.

US China tensions are heating up on Monday. China lashed back at the US with sanctions against several GOP lawmakers who are hawkish on China. This was in response to the US placing sanctions against several key Chinese government officials for human rights violations. Overnight China also retailiated and placed sanctions on Lockheed Martin. Tensions didn’t bother Chinese importers Tuesday mornign. USDA announced the 4th largest flash sale of corn, 1,762,000 MT, to China. This was the largest purchase of corn in a single day since the 1990s according to USDA. The record is still held by the USSR at 3.72 MMT January 9, 1991.  China also purchased 129,000 MT of soybeans. All for delivery in the 2020/2021 marketing year. This has some analysts concerned how China will leverage the large stockpile of grain it has committed to buy from the US for the 20/21 marketing year. Mike Zuzolo, Global Commodity Analytics addressed this in his midday commentary.

Grains closed  mixed on Tuesday. Corn and KC wheat were lower. Soybeans and Chicago Wheat were higher.  Looking at seasonal patterns corn and soybeans tend to bottom in July. Wheat is typically a month ahead of that, but for 2020 it looks like the harvest low may have came in early July. The big thing to keep in mind even if things do stabilize the market is likely to trade sideways with limited upside potential. Rain continues to be widespread across the Midwest. Part of the precipitation is coming with a high price of destructive wind and hail. It likely isn’t affecting a big enough area though to make a big impact on the overall crop. The latest crop progress report shows a slight decrease in corn and soybean ratings week to week, but they are still well ahead of year ago condition levels. That will continue to keep those strong trend line yields in place and likely make for a large US fall crop.

For a little good news StoneX Chief Economist Arlan Suderman reports that US export shipments of corn are now running 6 million bushels ahead of pace to hit USDA’s goal. That is up from 3 million bushels last week. The US Dollar will now have to cooperate to keep that pace though as South American corn is starting to hit the market.

Livestock closed mostly lower on Tuesday. With states like California rolling back their reopening plans and closing dining rooms how much food service demand will again be lost. So far carcass cutouts have yet to fall hard and load count is still very active. This could change quickly though, especially if more states start to follow suit. Cash and a strong close in the equities on Tuesday could give cattle a boost on Wednesday.

There was a light trade develop in Kansas and Texas on Tuesday at $95-$96.50. Most of that trade was $95. That is fully steady with last week’s weighted average in the South. There was no trade reported in the North. Asking prices are still around $100 plus in the South, and $162 plus in the North.

 

Expected Slaughter numbers Tuesday

Cattle

120,000 hd today 121,000 hd wk ago 121,588 hd yr ago

Hogs

466,000 hd today 462,000  hd wk ago 473,311 hd yr ago

 

Midday Carcass Value Tuesday

Beef

Choice dn 2.47 200.79

Select  dn 0.10 191.78

C/S Spread 9.01

Loads 91

Pork

Carcass up 0.58 68.10

Bellies up 2.23 101.80

Loads 227

 

Grains Settlements

  • Corn dn 2-3
  • Soybeans up 1 1/4 – 4
  • Chicago Wht up 1 – 2
  • Kansas City Wht dn 6 – 6 3/4

Livestock Settlements

  • Live Cattle dn 0.32 – 1.22
  • Feeder Cattle dn 0.30 – 1.20
  • Lean Hogs dn 1.35 up 0.55
  • Class III Milk dn 0.61 up 0.01

Pre-Opening Market Broker Commentary

Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. China made a large purchase of corn and soybeans.


Jerry Stowell, Country Futures,  looks at what may impact the livestock futures today. Cattle are not offering a lot of direction ahead of the open.


Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Corn calendar spreads may give an idea of what the cash market is thinking. China is needing corn.


John Payne, Daniels Ag Marketing, looks at the grain settlements. Corn saw a large sale before the open, but large stockpiles kept corn from moving higher.


Jack Fenske, York Commodities, looks at the closing market numbers.

Kyle Bumsted, Allendale Inc, joins the Fontanelle Final Bell from a dirt road near Ericson Nebraska. The market discussion centers around livestock. Heat is not only taking it’s toll on the row crops, but it also impacting cattle. This could help to decrease carcass weights. Which have been on the rise since the pandemic caused a backlog of fed cattle. Heat also discourages grilling though. As Bumsted says in the program, “Not many people want to stand in 100+ degree weather and grill a steak.” That creates the question of, where will demand fall going through the rest of summer? Bumsted believes that there will be plenty of meat coming to the market and this may put pressure back on the futures.

Bumsted has also been closely watching spreads and seasonal trends in the livestock markets. His research shows that feeders have a tendency to trend higher though the end of July into August. This happens to parallel when many large video auctions are also occurring.

Grains are not left out of the conversation. In the second half of the Fontanelle Final Bell, Bumsted looks at the technical and weather pattern driving the grain trade.

You can catch the full episode uninterrupted here:

Commodity markets, including grains, fell in with the risk off sentiment that developed across the entire market complex Friday. Brain Splitt with Ag Marketing.Net weighed in on how rising cases of Covid-19 may impact more than the equity markets.

Energy markets are at risk as states like Texas pause their reopening. That translate to harm for corn demand. Splitt is quick to point out though that there is one demand factor that could be improving for corn and that is feed demand. As DDGS and other feed ration ingredients became more scarce corn filled in more gaps livestock feeders.

China is back in the market for US soybeans on Friday, but their total demand picture is still fuzzy. A weather story would definitely help bean bears, but time for the story to develop is starting to dwindle in Splitt’s opinion.

Listen to the full commentary here:

Markets on Tuesday started with a risk on sentiment. By the close even the outside equities had faded on that sentiment. Grains ended mixed with spread action setting up between corn and wheat. Wheat is being sold on decent crop conditions, but also seasonal harvest market pressure. Shawn Hackett, Hackett Financial Advisors, joined the Fontanelle Final Bell and discussed the seasonality of the current marketing trends in the grains. Hackett is eyeing the Minneapolis spring wheat market as the signal for a turn around in the market. “Spring wheat is growing right now and very susceptible to a weather issue.” According to Hackett. During the Fontanelle Final Bell Hackett also highlights recent research his team has done about global crop insects and pests that could impact the markets later this year.

The second half of the Fonatenelle Final Bell is dedicated to livestock. Hackett starts with Class III milk futures and highlights that the recent upswing may be over done at $20. Hackett also doesn’t believe the live cattle lean hog spread can continue much higher.

Hear the full program here: