Morning Commentary

July corn up 1 ½ at $3.205

July beans up 4 at $8.51

The DOW is up

USD is weaker

Crude oil down $.82 at $33.53

Good morning,

Corn bulls are hoping to find improved demand and a few weather hiccups in the forecast ahead. The USDA reported another week of strong export inspections which should keep us on track to beat the current USDA estimate. Ethanol should probably see another uptick this week as the economy fires back up. The USDA showed U.S. corn planting 88% complete vs. 55% last year vs. 82% on average. Iowa was reported at 97% planted vs. 91% on average, with our crop rated 81% Good to Excellent.

Soybean bulls are happy to see China still in the market buying some U.S. supply and still no major political fallout between U.S. and Chinese leadership. Unfortunately, weekly export inspections still disappoint and most inside the trade suspect the USDA could be currently overestimating U.S. export demand by 50 to 75 million bushels. The USDA showed 65% of the U.S. soybean crop as planted vs. 55% on average. Iowa is 92% complete vs. 64% on average.

Cattle slaughter totals have rebounded back significantly from the lows from four weeks ago, as has beef production. The combined fed and non-fed slaughter as well as domestic beef production is very near a five-year average level for this time period. As we begin this Memorial Day week, slaughter pace is slower as a result of most packers allowing team members off for the holiday. However, today’s estimated totals are the largest one-day number in quite some time at 106,000 head. Year-to-date the non-fed kill pace remains dramatically behind last year, keeping in mind we pulled a tremendous amount of cattle forward and with fewer cattle on feed. Cash trade finished up last week in a range of 110-120.00/CWT live and 180-190.00/CWT on a dressed basis which is 3-4.00/CWT higher. Volumes traded in the negotiated cash as well as the negotiated grid were slightly smaller than last week but remain materially larger than other weeks in the recent past. All of this to say, the market is functioning. Kills are growing, negotiated volumes are growing, and prices are increasing for now. The basis is seasonally strong and many isolated operations are growing more current after aggressive marketings. Formula numbers are certainly building but do appear to be slowing the decreases in movements and should begin to see upticks in the coming weeks of those numbers moving more fluidly. To start this week, we have seen isolated sales of 110-119.00/CWT and 180-190.00/CWT. The beef was down yesterday with the comprehensive report printing a 394.70/CWT versus 421.80/CWT last week and 215.40/CWT last year. The general idea is that the beef has some additional downside near term but the continued demand from retailers and building restaurant sales should support the market broadly. In this setup, the beef is supported as are processing margins, thus we may continue to garner robust packer demand and generally supported fed cattle prices. As mentioned, the risk going forward is likely more basis oriented. Futures are looking better technically but lack the clarity and attraction of a building macro story to draw in large scale, non-commercial interest. Additionally, the current prices remain well below levels that commercial hedgers are interested. So for now, we watch…right, wrong, or indifferent. Trey Warnock – Amarillo Brokerage Company

USDA officials and federal prosecutors are probing the wide gap between what consumers pay for beef at the grocery store (the highest in decades) and the painfully low prices that livestock producers are paid for their cattle. According to meatpackers, beef prices are up during the pandemic because processing plants have scaled back operations as workers fall ill, meaning less meat is making its way to grocery store shelves. The reduced capacity also means less demand for live cattle, pushing livestock prices lower. But farmers and lawmakers think there’s more afoot than simple supply-and-demand shifts. One hundred years ago, the five largest meatpackers accounted for 82% of the beef market, before agreeing to antitrust measures. Today, four companies control about 85% of the market. “It’s evidence that something isn’t right in the industry,” said Sen. Chuck Grassley (R-Iowa). He’s one of 20 senators and nearly a dozen state attorneys general who have asked the Trump administration to take a closer look at the beef market. USDA has been investigating potential price-fixing since last August, and the Justice Department is now reviewing the so-called Big Four beef processors, according to a person with knowledge of the probe. A group of ranchers is also suing the four companies for allegedly colluding to depress cattle prices since 2015, a case that is pending in Minneapolis federal court. (Source:Politico)

The U.S. Food & Drug Administration released the findings of an investigation into three outbreaks of Escherichia coli O157:H7 (E.coli) illnesses in the fall of 2019 that were all tied to romaine lettuce and suggests that the proximity of cattle to produce fields may have been a contributing factor.  Some clusters (but not all) within each of these outbreaks were traced back to a common grower with multiple ranches/fields located in the Salinas, Cal., growing region. Together, the outbreaks made 188 people ill. In reaction to the findings, FDA is calling on growers of leafy greens to redouble their efforts and accelerate prevention and has provided mitigation strategies to do so.


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