Mid week and the markets are still shaky for the bulls. Still weighing heavy on the macro or broad market picture is the possibility of another round of US stimulus may be on hold as the death of a Supreme Court Justice and their potential replacement weighs heavy on Congress and the President. Across the pond reports of fraud and money laundering are still stinging some of the worlds largest banks including HSBC, Barclays and Deutsche .
Tuesday though was met with some positive economic data. Before the opening bell the weekly Redbook showed year on year retail sales up 1.5% for last week. That was better than the previous week’s -1.2%. It was also the first positive retail sales growth since late July/early August. One week doesn’t mean a lot in the big picture, but it could be a start to some retail resurgence.
Wednesday saw more positive housing data with MBA Mortgage applications rising 6.8% on the week ending September 18, after falling 2.5% on the week prior; new home purchases rose 3.4% after falling 0.5% in the previous week, while refinancing’s increased by a sharp 8.8% on the week to last Friday, after declining by 3.7% in the week prior. These were strong numbers despite a rebound in the average 30-year mortgage rate to the highest level since mid-August (though that’s still only 3.10%); mortgage applications are up 25% year-over-year despite rising prices, with some economists pointing to a massive overall pandemic shift to the “home office” going forward – U.S. workers are investing more in their homes with the new norm.
Existing home sales rose to an annualized rate of 6.000 million in August, up 2.4% from the 5.860 million unit pace in July and slightly above analyst expectations of 5.965 million. The August increase follows a robust 24.7% increase in July as people rushed to take advantage of record low mortgage rates. The pace of August existing home sales was up 10.5% year-on-year, up from an 8.7% year-on-year pace in July. The housing market continues to be one of the hottest sectors of the economy, due to those low interest rates.
Energy production data on Wednesday showed US crude oil stocks down 1.6 million barrels. Which was better than what many expected. Unfortunately US gasoline and other distillates actually increased. As a result energy futures were mixed.
For the week ending September 18 US ethanol production decreased 2.2%, or 21,000 barrels per day (b/d), to 906,000 b/d. US ethanol stocks in the same time frame increased 1.0%, 20,000 barrels to 20.0 million barrels, which was 11.1% below year-ago volumes. Inventories increased across all regions except the Midwest (PADD 2) and Rocky Mountains (PADD 4). The volume of gasoline supplied to the U.S. market, a measure of implied demand, ticked up 0.4% to 8.52 million b/d (130.53 bg annualized). Gasoline demand remained 8.9% lower than a year ago.
Grain bulls are losing steam and some analyst are starting to suspect nearby highs have been established. Wheat broke to the technical down side on Wednesday. Closing below several key area’s of support. The positive news is Egypt’s latest tender shows them buying higher priced Russian wheat and that could mean business will eventually move back to the US. Wheat bulls are also closely watching a weather story develop in the Southern Pacific. Ocean temperatures are suggesting that late 2020 could be in a La Nina weather pattern. That means cold dry conditions for much of the US southern plains and poor conditions for hard red winter wheat. As for corn a rising dollar is putting the breaks on energy futures. That is hurting ethanol margins and in turn corn demand. The latest crop progress report also shows harvest is starting around the country for most row crops and outside of Iowa most yields aren’t horrible. Soybeans have had an impressive run to the upside. The move appears to have attracted quite a bit of fund money as well. Monday’s soybean open interest surged to 974,373 contracts, which was just below the record open interest posted in early 2017. However record open interest and managed money sitting in a long position is a recipe for fund liquidation at some point and it appears that bulls are running out of steam. The morning announcements of sales to China are not catching the attention they use to. There is also the concern of what happens when USDA doesn’t announce a sale to China.
However the question hasn’t been asked yet so an answer is unknown. So far this week China has been in the market everyday. On Monday the USDA announced sales of 171,000 MT of soybeans to unknown destinations, 132,000 MT of soybeans to China and 132,000 MT of soybeans to Pakistan. Tuesday USDA announced 4 flash sales. Two to China; 266,000 MT of soybeans and 140,000 MT of corn. Two to unknown destinations; 264,000 MT of soybeans and 320,000 MT of corn. Wednesday China purchased 132,000 MT of soybeans. Unknown destinations purchased 126,000 MT of soybeans.
Livestock end mixed again on Wednesday. Cattle were able to pull some of their losses from Tuesday back. While lean hogs gave back partial gains. Chris Swift with Swift Trading may have described the current livestock market the best and that is boring. Cattle seem somewhat range bound and marking time until the cattle on feed Friday. Lean hogs are waiting for export numbers and the quarterly hog numbers on Thursday. Cold storage seemed to have little impact on the market, but highlights that there is demand, but maybe not as much as some had anticipated.
Tuesday the cold storage report showed a monthly build in frozen red meat, but still well below year ago levels. Total red meat supplies in freezers were up 3% from the previous month but down 13% from last year. Total pounds of beef in freezers were up 5% from the previous month but down 2% from last year. Frozen pork supplies were up 2% from the previous month but down 23% from last year. Stocks of pork bellies were down 28% from last month and down 33% from last year.
Thursday traders will know more about the latest supply of hogs in the US with quarterly hogs and pigs report. Friday the cattle supply will be known with the latest cattle on feed report.
In the country Wednesday it was quiet as has been the rest of the week. There was rumor of $105 live in Western Nebraska, but that has not been confirmed. On Tuesday there was a light trade in the North with Iowa and Nebraska letting a few go at $164 dressed. Monday saw a light trade in Texas at $103 live. Either day hasn’t had enough trade to establish a full market trend. Asking prices appear to be $106 in the South and $167 in the North.
The Fed Cattle Exchange Auction today listed a total of 683 head (two lots each in Kansas and Texas), of which 219 actually sold, 195 head were listed as unsold, and 269 head were listed as PO (Passed Offer). The state by state breakdown looks like this: TX 417 total head, with 148 head sold at $104.25, 0 head unsold, 269 head listed as PO ($104.25); KS 266 total head, with 71 head sold at $104.00, 195 head unsold, and 0 head listed as PO. The delivery date/price range breakdown is as listed: 1-9 day delivery: 464 head total, of which none sold; 1-17 day delivery 219 head total, all sold, with a price range of $104.00 to $104.25.
For the week ending September 12, 2020, Imported Beef Passed for Entry in the U.S. totaled 36,388, 84.37% of the previous week and 81.60% of the 4-week average.
Expected Slaughter numbers Thursday
120,000 hd today 117,000 hd wk ago 118,382 hd yr ago
485,000 hd today 484,000 wk ago 484,697 hd yr ago
Midday Carcass Value Wednesday
Choice up 0.96 216.40
Select up 1.63 207.93
C/S Spread 8.47
Carcass up 2.09 90.75
Bellies up 4.03 154.34
- Corn dn 3/4 – 1 1/2
- Soybeans dn 1/2 – 5 3/4
- Chicago Wht dn 7 – 9
- Kansas City Wht dn 7 – 7 3/4
- Live Cattle up 0.10 – 1.02
- Feeder Cattle up 0.25 – 0.90
- Lean Hogs dn 0.22 up 1.17
- Class III Milk up 0.01 – 0.13
Pre-Opening Market Broker Commentary
Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. USDA did not announce a flash sale on Thursday morning.
Jerry Stowell, Country Futures, looks at what may impact the livestock futures today. Pork export sales were .
Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Wheat is seeing the strongest signs of a technical selloff.
John Payne, Daniel’s Ag Marketing, takes a closer look at today’s grain close. Grains are lower, but there are fundamentals that could help turn things around on Thursday.
Jack Fenske, York Commodities, looks at the closing market numbers. Soybeans appear to have put their nearby high in place.