Trade War Heats Up Meat Prices Fizzle
Jun 01, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for June 1, 2018.
Grain markets are consolidating as we move into the first trading day of the month. Chart watchers are looking at support levels to hold to maintain the strong uptrend going into the weekend. Of course, trade negotiations will take spotlight for headline traders. Weather forecast will be another major influence on the other side of the weekend.
Weekly export sales report will be released today at 7:30 am CT. The delay was due to the holiday this past Monday. Trade estimates are: Wheat, old crop (100,000) to 100,000 mt., new crop 150,000 to 450,000 mt. Corn old crop 700,000 to 1,000,000 mt., new crop 150,000 to 350,000 mt. Soybeans 300,000 to 600,000 mt., new crop 350,000 to 750,000 mt. Soymeal old crop 100,000 to 400,000 mt. and soyoil 8,000 to 30,000 mt.
USDA will release the May soybean crush data at 2:00 pm CT today. Trade average estimate is 171.7 million bushels.
Funds were estimated net buyers of 1,000 corn and 3,000 wheat contracts on Thursday. They were net sellers of 4,500 soybeans, 2,000 soymeal and 4,000 soyoil.
Argentine soybean yields dropped to 2.23 tonnes per hectare as harvesting moves into areas hardest hit by, says the Buenos Aires Grains Exchange in their weekly crop report. They project 89.3 percent of this year's crop harvested and will keep their 2017/18 soybean crop at 36 million tonnes.
Weekly ethanol production report was neutral/slightly disappointing. Production did rise from 1.028 million barrels per day to now 1.041 for the week ended May 25 however that was 2.1% over last year when USDA is projecting corn for ethanol at 2.6% over last year.
The U.S. Environmental Protection Agency has awarded tens of millions of dollars’ worth of biofuel blending credits for this year to refiners HollyFrontier and Sinclair Oil after they argued the agency had wrongly denied them waivers from the country's biofuels law as far back as 2014, according to two sources and public filings. (Reuters)
Ukraine's state weather forecasting department projects their 2018 winter wheat harvest could fall to 24 million tonnes from 25.4 million tonnes in 2017 due to extremely dry weather this spring.
Cattle packers are finishing a short production week which has supported beef values however one could expect production over 650,000 head next week. The increase in beef supplies should have an impact on cutout values as we go forward. Trade is expecting an increase in market ready cattle at a time when beef demand slows into summer.
End of month position evening and spreaders dominated the trade on Thursday. Will we see short covering in the CME livestock complex as we start a new month, today?
Option expiration for June live cattle option is today. Trade will be watching the weekly export sales report for beef and pork which will be released at 7:30 am CT.
June live cattle futures remains at a discount to cash values which limit the amount of delivery notices. First notice day is Monday June 4th.
Cash hog numbers are tightening and weights are coming down which is a normal seasonal event.
Lean hog futures traders are concerned about trade war retaliation. Mexico has said it will put a tariff on pork legs, apples, grapes and cheeses as well as steel as a response to US tariff on aluminum and steel. Spreaders have been large players as they bear spread.
July lean hog contract slid to test the 20-day and 50-day moving averages on Thursday. The July contract is in a range between 75.00 and 80.00.
Dressed beef values were mixed with choice down .48 and select up .09. The CME Feeder Index is 134.82. Pork cutout value is up 2.17.