Welcome to a holiday shortened trading week. Markets will be open through their regular close on Wednesday. Then there will be no trade Thursday in observation of Thanksgiving. Then markets will resume on Friday, but closing early.
While most years the week of Thanksgiving can be a slow trading week 2020 looks to be more active. The Presidential election is still in the air as President Trump continues to fight election results at the state level. Meanwhile possible President Elect Biden is building his cabinet and looking to have policy ready to go should he be sworn into office in January. Covid-19 looks to disrupt travel and possible consumer money flow at a typically high time of the year.
Either way markets are trying to focus on the positive and move higher.
Economic data out early Monday shows economic activity continuing to expand in October. The Chicago Fed national activity index is a weighted average of 85 existing monthly indicators constructed to have an average value of zero when the economy is growing at a trend rate, with a standard deviation of one. The index rose to 0.83 for October, up from 0.32 in September and well-above analyst expectations of 0.10. In other words, the economy picked up positive momentum in October. It grew at a faster than trend rate
The grain market is starting off higher once again as the bulls continue to pull fuel from South American dryness. According to Stone X weekend rains in Brazil were limited to northeastern areas of its soybean belt, with 24% receiving more than 0.50” and 10% seeing more than 1.0”. Forecast rains continue to under-verify, with forecast models shifting drier over the weekend. A look back at the past 30 days finds that 74% of the belt received less than 75% of normal rainfall over the past month, while 44% saw less than 50% of normal rains. Typical rainfall amounts during this critical growing time are closer to 7 inches.
Funds are still long the grains and long in a big way. Last week’s CFTC data showed that the combined fund long position in corn, soybeans and wheat totaled 716,181 contracts. The largest long position held by funds since July 2013.
Livestock are starting the shortened holiday week with strong gains. This comes as the November cattle on feed report came in friendly with all cattle on feed for slaughter in the US only ticking up 1% year over year. Placements also trimmed sharply to just 89%.
Also helping the cattle and hogs are carcass cutouts that continued to gain momentum last week.
A higher grain market is drawing mixed opinions from analyst on its impact to the market. At first glance a higher grain market is bad for livestock as it increases it’s major input component. However looking a little deeper a higher grain market means trimming rations and possibly marketing lighter livestock to slaughter. That then helps clean up the oversupply issue we have seen with heavier carcasses. The week of 11/20 cattle dressed weights averaged 842 lbs, 11lbs higher than the previous year. Hog dressed weights were 215lbs right with last year’s carcass weights. If higher feed costs help trim 10-15 lbs of beef carcass and 5-7 lbs of pork carcass protein supplies could quickly tighten and result in higher prices. In the short term though higher grain prices look to have the most impact on feeder cattle futures.
A light trade started up in Kansas and Texas on Tuesday, the rest of feeder country jumped in on Wednesday and Thursday, with a little cleanup on Friday. Southern live deals ranged from $108 to $111, mostly $110, about steady with the prior week’s weighted averages. Northern dressed business ranged from $166 to $172, mostly $172, generally steady with the previous week’s weighted average basis Nebraska.
For the week ending November 14, 2020, Imported Beef Passed for Entry in the U.S. totaled 39,950, 101.08% of the previous week and 93.00% of the 4-week average.
Expected Slaughter numbers Monday
120,000 hd today 119,000 hd wk ago 119,736 hd yr ago
492,000 hd today 493,000 hd wk ago 493,487 hd yr ago
Midday Carcass Value Monday
Choice up 4.09 242.44
Select dn 0.45 214.53
C/S Spread 27.91
Carcass up 0.78 78.95
Bellies up 6.32 99.67
- Corn up 3 1/4 – 5 3/4
- Soybeans up 10 1/2 – 12 1/2
- Chicago Wht up 3 1/2 – 5 1/2
- Kansas City Wht up 1 – 1 1/2
- Livestock Settlements
- Live Cattle up 1.90 – 2.35
- Feeder Cattle up 2.27 – 2.90
- Lean Hogs up 0.82 – 1.97
- Class III Milk dn 0.23 – 0.30
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. Soybeans hit $12 overnight, but rain in Argentina could pull the bulls back.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Cattle are looking for a firmer open after a friendly cattle on feed report.
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. South American weather, cattle on feed report and trader mindset are all having an impact on the Monday midday trade.
John Payne, Daniel’s Ag Marketing, takes a closer look at today’s grain close. Until South America can prove it has a crop or not the bulls will likely stay in control of the grain market.
Jack Fenske, York Commodities, looks at the closing market numbers. Fenske is still bullish grains, but given the record run up he is pushing to secure as much profit as possible in the event of a turnaround.