Howdy market watchers. First of all, we would like to thank all the men and women who have served our great country ahead of tomorrow’s Veterans Day.
On the market front, it was report week with USDA’s monthly WASDE and Crop Production reports for November released on Friday at 11 a.m. Interestingly, it was not until about 11:15 a.m. that we actually received all the data as the USDA website where the data is released was reported as “under maintenance.” Makes one wonder if anyone did have access to the data on time before the rest of the market. All in all, the report lacked the bullish tilt many had expected, read hoped for, to recoup losses since USDA’s surprising August report increased corn and bean yields and acres to a degree that many analyst and traders still do not believe reasonable. In short, USDA’s estimates were slightly bullish for corn and wheat and bearish for soybeans.
As soon as the market finally received the numbers, corn and wheat futures staged a short-lived rally before settling back near the day’s open. December corn settled up just over a penny above $3.77 from a high near $3.84, while December KC wheat closed lower on the day at $4.21½ after briefly trading up to a high of $4.30. The push in corn stemmed from a reduction in estimated corn yield to 167.0 bpa versus last month’s 168.4 bpa and average estimates of 167.2 bpa. Harvested acres were kept unchanged at 81.8 million acres versus average estimates of 81.3 million acres. This took total production to 13.661 billion bushels above average trade guesses of 13.604 billion bushels. The 118 million bushel decrease in production from last month was supportive, but offset by the 50 million bushel decline in exports, 25 million bushel decline in ethanol use and a 25 million bushel reduction in forecast feed use.
World ending stocks declined by 6.7 million tons from reductions in global production and increase in global consumption that lent some support. The USDA reported Monday that 52% of the U.S. corn harvest was complete versus 54% expected and the average of 75%. Late planting, wet weather and humidity have slowed harvest and made it extremely difficult to dry down corn. We heard this week that some elevators were shutting down early as they could not handle any more wet corn until drying caught up. We also heard of premiums being offered for corn with moisture less than 19%. On top of that, there are reports of propane shortages given the volume needed to dry 25% and 35% corn. While farmers are rushing to get the corn out of the field, these issues and moisture discounts could see harvest slowing rather than accelerating. Bottomline is that there likely are to be quality issues with this crop that we will be dealing with over the next marketing year, especially in meeting export demands.
For soybeans, this week’s USDA report pegged yields at 46.9 bpa unchanged from last month and slightly above average expectations at 46.6 bpa. Harvested acres were also unchanged at 75.6 million acres, just 100,000 acres above the average trade guess. Total U.S. production came in at 3.550 billion bushels versus average estimates of 3.513 million bushels and unchanged from last month’s figures. From USDA’s numbers, the October snowstorm did not have much of an impact on either soybean or corn yields though time will tell as harvest progresses. Monday’s harvest progress reported U.S. soybeans were 75% cut out versus an 87% average.
Perhaps the bigger news for soybeans this week came from continued Chinese purchases, as well as reports from China that tariffs were looking to be rolled back on both sides as a condition of the Phase 1 deal that was nearing signing. However, as China’s announcement began to get picked up by U.S. media, President Donald Trump on Friday made sure it was clear that he did not agree to reduce or remove tariffs on China. Furthermore, Trump authorized the second MFP2 installment, which is expected to be paid later in November or early December. This is, of course, a message to China that the U.S. and this administration are prepared to hold out until our conditions are met.
The wheat market was supported by corn’s move, as well as reductions in U.S. ending stocks and adjustments in Australia and Argentine wheat crops. World ending stocks came in at a record high given upward adjustments to Russian production and exports. While the higher global ending stocks pressured markets, we expect further reductions to come for these Southern Hemisphere countries to be supportive over the coming months.
The cattle market continues to remain firm with most feeder contracts this week trading back to last Friday’s highs and several above that level. Live cattle contracts also held this week making highs not seen since late April. The December live contract peaked on Monday trading to a high at $120.325. While the path of least resistance in the cattle market remains up and this week’s morning pullbacks met with higher closes, be cautious to get complacent if risk management of your physical cattle is the main objective. Holiday demand has kicked in and supported the market as packer margins remain near record levels incentivizing kills and keeping our feedlot numbers current.
Dr. Peel wrote in a Drover’s article that “boxed beef prices increased about ten percent over the month of October into early November.” This compares to the normal seasonal bump of less than 2% during this same period. “Choice boxed beef cutouts are currently up nearly seven percent” compared to last year. These same increases have been seen across other cuts as well with large retailers actively promoting beef as wage rate growth amidst a tight labor market boost consumer spending. For producers, we advise calculating your breakevens, discussing with your banker and making an educated decision on your risk management strategy for home raised and stocker cattle.
We are here to help design strategies that fit the needs of your operation as well as those of your bank. Give me a call (580) 232-2772 or stop by our office to get your account set up and discuss strategies to protect your exposure to these markets. It is never too late to start and there is no operation too small to get a risk management and marketing plan in place.
And finally, be sure to tune in to KGWA AM960 every Friday morning from 6:30-7 a.m. to catch our Weekly CommodityBuzz on the airwaves with Alan Clepper where we discuss latest trends influencing our industry, marketing strategy ideas and commentary. Wishing everyone a successful trading week ahead.
Sidwell is a Series 3 licensed commodity futures broker and principal of Sidwell Strategies. He can be reached at (580) 232-2272 or at email@example.com. Futures and options trading involves the risk of loss and may not be suitable for all investors. Review full disclaimer at http://www.sidwellstrategies.com/disclaimer.