Market Watch with Austin Schroeder and Alan Brugler
February 14, 2020
We Go Home!
Growing up watching TV with my father, a movie that was a staple was one of John Wayne’s westerns Mclintock!. If anyone’s seen it, one of my favorite parts was when Running Buffalo would say “Whooa Maclin, good party, no whiskey, we go home!” If you paid attention to this week’s price action in the grains, specifically Friday, you’d notice that most traders seemed to take the day off. There is no trading on Monday, and who doesn’t like a 4-day weekend?! It seems traders had a good time this week, but eh, that party was missing something, so they went home. Cattle traders, however, were the life of the party on Friday, erasing most of the losses in live cattle and posting a nice gain in feeders.
Corn futures slipped 1.5% or 5 ¾ cents this week. Tuesday’s WASDE report from WAOB showed the US ending stocks for 19/20 corn unch from January at 1.892 bbu. The did raise FSI use by 50 mbu, but cut exports by the same. On the world side, South American production was left unch at 101 MMT for Brazil and 50 MMT for Argentina. CONAB raised their projection for Brazil by 1.8 MMT to 100.5 MMT, with most of that coming from the second crop. As far as the WASDE world ending stocks projection, USDA trimmed it by 0.97 MMT to 296.84 MMT. Thursday’s Export Sales saw bookings go back below the 1 MMT mark, but not by much. A total of 968,815 MT of 19/20 corn was sold for the week or 2/6. Total commitments for corn are now 54% of the full year USDA forecast, while the normal pace is around 66% for this time of year. Ethanol production was back down 48,000 bdp while stocks rose 884,000 barrels. Managed money spec funds in corn futures and options added another 16,094 contracts to their bearish positions during the week ending February 11. They took that net short position to 72,084 contracts as of Tuesday.
Wheat futures followed corn, or maybe enticed it lower, with all three exchanges in the red on the week. The Chicago market led the complex, with losses of 2.86%, as Minneapolis was down a total of 1.96% and KC HRW losing 1.38%. February is not typically a market moving USDA report. However, they did reduce the US carryout number by 25 mbu on larger exports to 940 mbu. That would be 5-year low if realized. World wheat ending stocks were practically unch at 288.03 MMT. USDA showed another round of decent export sales on Thursday with 643,050 MT booked in the week ending 2/6. Export commitments of 2019/20 wheat are now 21% above last year and total 80% of the newly updated USDA export projections vs. the 88% average. Friday’s Commitment of Traders report from CFTC indicated spec traders trimmed 6,221 contracts from their net long position in Chicago wheat futures and options to 45,940 contracts on 2/11. They added another 2,218 contracts to their net long in KC wheat to take it to 10,479 contracts as of Tuesday. Specs added to 2,225 contracts their net short position in MPLS futures and options last week at 6,854 contracts.
Soybeans were one of the bright spots in the ags this week, with nearby March up 1.33 % this week, adding to the 9 ½ cent gain from last week. Soybean meal was also up 0.6%, 2-week move of a dime. Soy oil was back down 1.29%. USDA’s monthly update on Tuesday was a helpful hand to the US carryout, as exports were raised 50 mbu, cutting stocks by that amount to 425 mbu. To offset that on the world side, Brazilian production was raised 2 to 125 MMT, which helped world carryout to move 2.19 higher at 98.86 MMT. Export Sales data indicated old crop soybean bookings were less than enthusiastic at 644,848 MT during the week of 2/6. Export commitments for that 19/20 crop (through Fed 6) are 9% above last year, and 66% of the fresh USDA forecast, vs, the 82% average. CFTC data from the Commitment of Traders report showed managed money adding another 9,814 contracts to their net short position in soybean futures and options by 2/11. That net short position stood at -92,172 contracts as of Tuesday. In soybean meal, they took their net short to a record 68,159 contracts.
Cotton futures slipped 0.43% on the week, a 2-week net move of just -4 points. Tuesday’s Cotton Ginnings report showed that 18.934 million RB were ginned as of Feb 1, which was 14% more than last year. USDA left their 19/20 balance sheet unch in Tuesday’s WASDE, with the average farm price trimmed by a penny to 62 cents/lb. Thursday’s Export Sales report tallied upland cotton sales during the week of 2/6 at 350,865 running bales. That was a new marketing year high, and the largest weekly sales total since May. Shipments in that week were 400,463 RB. Cotton export commitments have reached 86% of the full year WASDE estimate, running ahead of the 81% average pace. The weekly Commitment of Traders report showed the large spec managed money funds adding 445 futures and options contracts to their net long in the week ending February 11. That took them to a net long position of 33,880 contracts by Tuesday.
Live cattle futures sold off the first part of the week but saw a rebound on Thursday and Friday to show Feb down 0.41% on the week. March feeders found some buying late in the week, with a Friday to Friday move of $3.325 (2.46%). The CME feeder cattle index was down just $0.02 from last week to $140.61. Wholesale beef prices were lower again this week. Choice boxes were down $2.03/cwt (-1%) for the week, with Select product slipping $1.82/cwt or 0.9%. The Chc/Sel spread ended the week at $2.38, down $3.85 from previous week. Weekly beef production was down 1.7% from last week but up 3.9% from the same week in 2019. Through the end of this Saturday, weekly estimated slaughter is down 0.3%, but 0.7% higher in terms of beef production. The weekly Export Sales report indicated lower wk/wk sales at 17,492 MT, which was still 16.49% above last year. Cash cattle trade mostly found a home around $118-119 across the country, with dressed sales of $190 in the north. CFTC’s Commitment of Traders report showed specs in live cattle futures and options liquidating the net long position by another 18,297 contracts in the week ending Feb 11. That left them net long 36,962 contracts on Tuesday.
April lean hog futures couldn’t recover from early week losses, as the contract was down 2.94% on the week. The CME Lean Hog index was down $3.74 on the week @ $56.70 (as of 2/12) but still had a premium basis to Feb futures (expired at $55.90). The pork carcass cutout value was down another 3.2% for the week ($2.06), with the belly primal dropping 15.4%. Weekly hog slaughter was up 4.0% from the same week in 2019, but 3.5% from last week at 2.596 million head. It looks like the seasonal decline has begun. Through 2/16, estimated pork production is up 3.7% YTD on 3.1% more slaughter. Thursday’s Export Sales report from USDA showed pork bookings at 28,585 MT, with 3,715 T to China. Shipments in the week ending February 6 were still strong at 42,883 MT. Exports to China slipped some, with 13,033 MT reported. Friday’s Commitment of Traders report showed spec funds net long of 9,308 contracts of futures and options in hogs on Tuesday. That was down 1,811 contracts from the previous week.
Next week starts off with both the government and markets closed on Monday in observance of Presidents Day. That will push back the USDA reports for the week, with the Export Inspections report being released on Tuesday morning. NOPA will release their monthly crush report of its members that afternoon. The weekly EIA ethanol report will be out on Thursday morning. March options will expire on Friday. Export Sales data will be published on Friday morning due to the holiday. NASS will issue the monthly Cattle on Feed report Friday afternoon to round out the week.
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