MARKET SUMMARY 08-27-2021
U.S. beef packer margins are pushing to all-time highs, but the cash cattle market has stayed relatively quiet. Going into the Labor Day holiday, beef demand has been aggressive and strong. Choice carcasses recently challenged the $350 level, putting in a new high for the year. Packer margins in turn have skyrocketed, now challenging nearly $1000/head levels. This has not translated into a strong cash market in relation to the price of boxed beef. To be fair, the cash market has been steadily climbing, with the 5-state average at $127, up a few dollars from a few weeks ago. The packers still have the leverage in the cash market due to tight slaughter capacity. Typical slaughter has been near 120,000 head/day, which has allowed packers to be patient and spread the number of available cattle out over time. This has kept product supplies low, in a window of high demand, affecting retail prices. This may stay a trend in the near term as long as the labor and logistic issues continue to impact the movement of cattle to the plants.
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CORN HIGHLIGHTS: Corn futures traded both sides of steady finishing the day higher. Sep closed at 5.58, up 5-1/4 and Dec added 3 cents finished the session at 5.53-3/4. Sep grain options expired on Friday, and that may have added some of the volatility in the trade on Friday. It was another interesting week for the corn market where prices moved but didn’t go anywhere fast. Despite overall quiet trade, Dec futures gained 16-3/4 cents on the week and gravitated back to the 5.50 price level. Bullish traders will argue this is a victory as harvest approaches. It is reflective of a fast dry down to the corn crop and that rain for many was too little too late. Ultimately this could mean yield somewhere close to 174 to 176 bushels. Very straight is where I go, it’s just a matter of time before prices succumb to further downward pressure as harvest picks up its pace in mid to late September. Historically, the bears probably have a better argument. It does appear most end users have adopted a just-in-time inventory approach which suggests there are no large commercial purchases or exports driving prices higher. Demand will still be a key in the weeks ahead, and the corn market did find some buyers this week on the export front. Colombia has picked up U.S. corn the past two days, adding a sale of 150,000 mt, reported this morning. Yet, tight supplies in the U.S. in higher wheat prices due to tightening world grain supplies will suggest that corn prices, while they may be choppy, could also remain mostly rangebound.
SOYBEAN HIGHLIGHTS: Soybean futures finished the day softer, but did fight off sessions lows. Sep gained 8-1/4 cents to 13.59-1/4, while the most active Nov contract gained 3 cents to 13.23-1/4. For the week, Nov soybeans finished 32-1/2 cents higher as prices moved back into the center of the most recent range. Soybean futures saw some selling pressure as weather is still an influence in the soybean market. For the Corn Belt, recent rains and forecasted rains may be a help to some areas and complete the soybean crop for the fall. The market will be keeping a close eye on the Gulf over the weekend, as Hurricane Ida is bearing down on that region and could bring damage to maturing crops. With supplies as tight as they are, any loss of production nationally will likely impact prices. Secondly, concerns regarding the Gulf movement may come into play as the marketing closes out next week. On the export front, the USDA announced a flash sale of 129,000 mt of soybeans to China, as they have stayed active in the soybean market recently. They are not big sales, but the total is still building. In the product market, a strong crude oil market helped support soybean oil, but soybean meal stays as the sell against the oil demand. Getting some consistency in price for soybean meal would go a long way in helping support the soybean market.
WHEAT HIGHLIGHTS: Sep Chi wheat lost 6-3/4 cents closing at 7.18-1/2 and Dec lost 6-3/4 cents closing at 7.32-1/2. Sep KC wheat lost 3-1/4 cents closing at 7.12-1/4 and Dec lost 4-1/4 cents closing at 7.24. Sep Minneapolis wheat gained 7-3/4 cents closing at 9.36-1/4 and Dec gained 6-1/4 cents closing at 9.17-3/4. Tropical Storm Ida is expected to make landfall on the Gulf Coast as a hurricane this weekend. As the rains push into the Midwest, this could create some field delays but we don’t expect a significant impact on wheat. Overall in the wheat market, we are trading supply concerns. The non-U.S. wheat exporter stocks to usage ratios are record low and we expect in September the USDA to continue to drop the Russian crop. On Monday we will get a Stats Canada report, which is expected to show a lower all-wheat crop with an average estimate of 22.6mmt. In Argentina, dryness has impacted the wheat areas and the expanding La Nina pattern is causing more concern for that crop. Yesterday the International Grains Council lowered world wheat production by 6mmt – lowering the Russian, Canadian, and U.S. production numbers but raising Australian and Ukrainian production.
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Author
John Heinberg