Dec corn down 1 ¾ at $3.8625
Nov beans up 2 at $9.08
The DOW is up
USD is stronger
Crude oil up $.55 at $54.62
Corn bulls were excited to see the lower than expected USDA Quarterly Stocks estimate. Several sources inside the trade suspect the USDA made the surprise adjustment lower because they had either overestimated last year’s production, underestimated feed and residual demand, or perhaps some combination of the two. However you want to slice it, September 1 corn stocks were -331 million bushels below the USDA’s August forecast. The USDA is currently forecasting a 168.2 bushel per acre average yield. Bears will argue that overall demand still remains a major headwind as both U.S. exports and corn used for ethanol are highly debatable. The USDA also reported that corn stored “on-farm” was up +22%, while “off-farm” stocks are down -10% from a year ago. The trend for December corn is positive. Stable trade above 376.75 is likely to pressure the fund short and prompt a rally to near 400. Closing under 366 signals renewed weakness.
Soybean bulls are happy to see a wet U.S. forecast, cooler temps, and a tighter U.S. balance sheet. In case you missed the headline, the USDA lowered last years production estimate by trimming harvested acres and lowering the average yield by -1.0 bushel per acre to a 50.6 bushel average. In turn, this probably drops the new-crop ending stocks estimate into the sub-550 million bushe range and makes the balance sheet much more interesting. The trend for November beans is positive. The market is poised to test 912 perhaps 920. Stable action over 912 is bullish. Closing under 891 alerts for a setback.
Fed steer and heifer trade was again firmer last week. The south traded a range of 103.00-106.00/CWT and the north traded mostly 104.00-107.00/CWT and mostly 165.00/CWT on a dressed basis. National volumes of cattle traded was essentially unchanged with something north of 90,000 head trading. Market ready numbers consolidated over the last three weeks either as a function of lower cash prices or a result of placement patterns. Either way this may have been enough to tighten cash markets to the point where higher money was required. However, show list numbers bounced this week and may once again put pressure on flat price cash markets as well as basis. Spot beef markets lost ground last week and is at surface level beginning to dig into packing margins a bit. The spread between Choice and Select beef remains historically wide for this time of year. Futures markets set up quite well for a rally in recent weeks with charts and momentum both fueling the upside. At this point we have a cattle complex that is becoming a bit overbought and a sharply higher corn market adding risk to feeder cattle. It is very hard to tease much out of the CFTC COT data at this time, but we can see that for the first time in 4 weeks the non-commercial short did not grow and actually shrunk by almost 2000 cars. On a related note, the non-commercial long is relatively small but did see some liquidation in last weeks data. Point is, a non-commercial liquidation would likely be biased towards a short covering rally. I would surmise that bulls are touting stronger fundamentals and a nicely trending chart while bears are spooked of overcooked markets and looking for some back and fill action. Trey Warnock – Amarillo Brokerage
Too many hens laying too many eggs are pushing down prices for the consumer staple, hurting sales at producers such as Cal-Maine Foods Inc. and adding more stress to the U.S. farm economy. Jackson, Miss.-based Cal-Maine, the nation’s top egg producer, said Monday that prices for its eggs fell 30% to about 92 cents a dozen in its quarter that ended Aug. 31. The result cut Cal-Maine’s sales by 29%, year over year. Chickens in the U.S. produced more than 65 billion table eggs through August this year, up 3% from that period last year. The egg glut is adding to pressure on a U.S. agricultural economy in turmoil. The trade war has sapped demand for soybeans and other crops from China, a top customer, after years of high production. That has led to a bounty of stockpiled grain that is contributing to the expansion of U.S. livestock herds and flocks. Retailers have been quick to pass the drop in egg prices on to customers, advertised for sale in some parts of the country for as little as 48 cents a dozen, the USDA said. Analysts expect producers will have to cut back production in part by sending birds to slaughter to bolster prices. Cal-Maine said it had 36.5 million laying hens in August, according to security filings, down from 36.8 million a year earlier.