A risk off day in grain and cattle futures with selling on news of a case of Highly Pathogenic Avian Influenza detected in a human associated with an infected Texas dairy herd.
Dave Chatterton, Strategic Farm Marketing, says the uncertainty caused panic selling. The funds liquidated some of their long position in the cattle markets and some contracts touched limit down due to this black swan event. “Beyond that I’d be a little cautious trying to chase rallies in the cattle market this time of year and with slaughter figures and pick-up in weights.”
He says at least the perception of lost feed demand due tied to HPAI may have also weighed on the grain complex.
Grain markets also sold off on USDA report hangover with fear of an increase in principal acres moving into USDA’s June Acreage Report. Chatterton says traders are still scratching their heads about the loss of 6.4 million principal acres “That was a move the trade was not expecting. Typically, a move that large is a weather issue. It’s a drought, it’s a flood or it’s a big prevent plant year. None of those are the case at this moment,” he says.
Chatterton says historically there is a strong tendency for acreage to move up between the March report and the June report. Plus, the accuracy is in question. “USDA indicated that the response rate to the March report was less than 45%. I think that creates some ambiguity about how that June number will come out.” he says.
He says last year corn acres also went up by 2 million acres between the reports and favorable planting weather may swing some acres back to corn according to Chatterton. “I think you’ve got what the trade views as a favorable forecast for the Midwest for next couple of weeks.”
Chatterton adds that the supply situation looks ample for all the crops in the U.S. without a weather problem and with big crops out of the Southern Hemisphere and slow Chinese demand.
Wheat was also weighed on by chances for precip in the extended forecast and ideas of improved winter wheat conditions in the first USDA Crop Progress Report.
The higher dollar was also a risk off factor.
Hogs saw a bounce on the long side of spreads being unwound with cattle and despite a bearish Hogs and Pigs Report from USDA.
