TFM Daily Market Summary 10-18-21


U.S. beef cow slaughter is still running 10% higher than last year, and that could have longer-term effects in the cattle market.  With a little over a quarter left in the year, beef cow slaughter has been on analysts radar.  Current beef cow slaughter pace shows no signs of slowing, and heifer slaughter is running 55 higher than last year as well, which could put a pinch on longer-term cattle numbers.  Producers have been moving cattle out of production due to the impacts of drought conditions hurting pasture quality, and impacts of higher overall feed costs.  With the strong slaughter pace, analyst are predicting over a 2% decline in cow numbers for the semi-annual Cattle Inventory report to be released in January.  The tighter overall cattle supplies will have ripple effects through the industry, and cattle numbers in general should stay tight and declining into 2022.



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CORN HIGHLIGHTS: Corn futures firmed today, finishing near the high of the day, gaining 7 cents in December to close at 5.32-3/4 and 4-3/4 cents in Dec 2022 to end the session at 5.27-3.4. Higher energy prices and stronger ethanol margins, as well as short covering helped to buoy prices today. Today’s trade activity was impressive considering expectations are for 55% of the crop to be harvest as of Sunday and a week of good harvest weather is expected.

Export inspections at 38.4 mb were termed neutral. As the gulf becomes more operational, we expect increased sales and inspections. Total sales are estimated at 2.5 bb. Inspections year-to-date are just over 160 mb, a pace that currently would not meet the USDA sales projection. It is early in the season and between the gulf slow-down and end users switching to a buy as needed practice we are not surprised to the slow start of the inspection year. Wheat prices edged higher and remain supportive as does the concern that new crop corn prices are not high enough to reflect fertilizer costs. Yet, the upside is likely limited as farmer selling will pickup if prices move much higher. Over head resistance is first at the 60-day moving average, 5.36, and then at 5.50 a level prices failed to breach in late September and early October. New crop will likely need to reach 5.50 in order to encourage enough panting for 2022.


SOYBEAN HIGHLIGHTS: Soybean futures edged higher today, closing firmer for the third consecutive session. November gained 3-3/4 to close at 12.21-1/2. Strong gains in soybean oil after palm oil made new contract highs and longer-term implications of growing demand from biodiesel prospects provided support, as did the idea farmers are quickly moving in the direction of finishing harvest. A strong weekly export inspections figure was also viewed as supportive, confirming loadings at the gulf are close to resuming full capacity.

Export inspections at 84.4 mb were well above weekly projections to meet the current USDA total sales expectations of 2.090 bb. The 10-day moving average acted as over-head resistance. 65% of the crop is expected to have been harvested as Sunday. A week of good harvest weather should have many finishing soybeans. The likeliest scenario we see developing is rangebound between 12.00 and 12.50 until more news gathered regarding China, South American weather, and export sales. For now, farmer selling is slow on price dips and end user buying is picking up. We are concerned that new crop (2022) could come under pressure on expectations of more acreage due to sky-rocketing fertilizer costs.


WHEAT HIGHLIGHTS: Wheat futures ended the session with modest gains, still riding the coattails of last week’s WASDE report. Dec Chicago wheat gained 2-1/4 cents, closing at 7.36-1/4 and July up 1-3/4 at 7.40. Dec KC wheat gained 5-1/4 cents, closing at 7.49 and July up 4-1/4 at 7.50.

This morning, most markets were down on news that China’s Q3 GDP data was lower than expected. This offered some weakness to global equity markets and likely rippled through to other markets. Wheat did manage to recover and though Chi and KC wheat did manage to close higher today, the gains were moderate. The recent star of the wheat complex, Minneapolis, did not perform as well today, with losses of a penny or two. That contract did manage to make nine year highs last week, and the approach towards the $10 mark should help support Chi and KC. Paris milling wheat futures also continue to make new highs, though the gains were not held into the close of trading. Rumors continue to circulate that last week China bought up to 10 cargoes of French wheat, with a smaller purchase of US SRW wheat to boot. In Russia, wheat export prices are higher for the 13th consecutive week. Currently the managed funds are net long Minneapolis and KC, but net short Chi wheat. The La Nina weather pattern is intensifying and will likely produce drier than normal weather conditions in 2022 across the US Southern Plains.


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John Heinberg

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