Tag Archives: Mike Zuzolo

Summary

The first full week of August has brought highs and lows across the entire market complex. Unfortunately the lows came in the agriculture commodity sector and the highs in equities and precious metals. The macro market picture is still heavily invested in the hope for a Corona Virus vaccine and fiscal stimulus from the federal government. Both has glimpses of hope this week, but neither came to fruition.

Economic data has been mixed to positive this week. Monday started the week of strong with PMI (purchasing managers index) data from Europe and China came out strong and above analyst expectations. The data continues to support economic expansion amid the pandemic. Thursday the initial jobless claims came in well under expectations at 1.19 million. 1.40 million was expected and last week 1.44 million. Friday the unemployment data for July showed a slight decrease from June at 10.2% unemployment. The US economy added 1.76 million jobs in July. Many of those jobs coming back in leisure industries.

The US Dollar continues to push lower as traders are no longer seeing it as a safe haven asset. Several fund managers have recently commented in financial publications that they have lost faith in the Federal Reserve to control inflation. With that confidence starting to dwindle traders are putting more money back in the long time safe haven of gold and silver. Gold is now well above $2,000 and seeming to gain momentum. Friday on the open there is some value buying in the dollar, but it will quickly come up against technical resistance given it’s recent sell off.

As the US Dollar continues it’s decline that is helping strengthen the Chinese Yuan. For the last 8+ months the Yuan has been holding near an all time low against the US Dollar of 7 yuan to 1 US dollar. It has now moved to 6.95 yuan to 1 US Dollar. Some analyst are targeting the Yuan to move to at least 6.85 yuan to 1 US Dollar. This would weaken the buying power of the US Dollar, but it would weaken the Chinese economy where they have used a continually devaluing Yuan to gain leverage in the global export market.

A lower US Dollar is still attracting foreign grain buyers. USDA announced a flash sale on Monday of 260,000 MT of soybeans to unknown destinations . After the selloff on Tuesday China went bargain shopping on Wednesday. USDA announced a flash sale of 192,000 MT. China was back in the market on Thursday buying 126,000 MT of soybeans for the 20/21 marketing year. Then China made a fourth buy on Friday morning of 456,000 MT of soybeans for the 20/21 marketing year.

Grain bulls were unimpressed with the latest crop condition ratings. Soybeans improved across the country to 73% good to excellent. Corn remained unchanged week to week at 72% good to excellent. XStone also released their findings from their most recent yield survey. Arlan Suderman of XStone says, “The customer survey pegged this year’s corn crop at 182.4 bushels per acre, while putting the soybean crop at 54.2 bushels per acre. Both would be records if verified. It should be mentioned that last year’s August survey perfectly predicted USDA’s final corn yield, although we recognize that August weather will continue to impact yield expectations, and we look forward to surveying our customers again September 1 to see how perceptions may be changing.”  These two pieces of fundamental data in the trade sidelined all bulls and brought the bears out in full force. September corn fell through all levels of nearby support and may try a run at $3. Soybeans also looking be sinking back towards spring lows or even worse. Seasonally August is usually a tough month for grains, but 2020 is not being gentle.

For the week ending July 31 according to EIA data US ethanol production dropped by 2.8%, or roughly 27,000 barrels per day (b/d), to 931,000 b/d.
US Ethanol stocks increased 0.4% to 20.3 million barrels. Looking at 2019 data that would be 12.0% lower. Inventories of ethanol increased in the East Coast (PADD 1) and Midwest (PADD 2) but declined across the other regions.
The volume of gasoline supplied to the U.S. market, a measure of implied demand, scaled back by 2.2% to 8.62 million b/d. Gasoline demand remained 10.7% lower than a year ago.

Livestock opened mixed on Friday. Lean hogs found the buyers, but live and feeder cattle found the sellers. As Jerry Stowell mentioned in his morning commentary August livestock options are expiring today and this may create added selling if traders were heavy in put options.

On the live cattle front Tyson is reporting Monday that it is fully cooperating with the DOJ in their cattle price discrepancy investigation.  In a regulatory disclosure Tyson foods released information that they received a civil investigative demand from the DOJ antitrust division on May 22. It is believed all 4 of the major beef processors received the same notice.

There was just clean up trade on Friday at $163-$164 dressed and $100 live.  Southern live trade this week has been at mostly $99 to $100, while Northern dressed business has been at mostly $163.

The Fed Cattle Exchange Auction today listed a total of 1,474 head, with 1,400 actually sold, and 74 head listed as unsold. The state by state breakdown looks like this: KS 350 total head, with 276 head sold at $100.00, 74 head unsold; TX 788 total head, all of which sold at $99.75-$100.00; OK 336 total head, all of which sold at $100.00. The delivery date/weighted averages breakdown is as listed: 1-9 day delivery: 960 head total, all sold with a weighted average price of $99.95; 1-17 day delivery 514 head total, of which 440 head sold, with a weighted average price of $100.00;

Expected Slaughter numbers Friday

Cattle

118,000 hd today 117,000 hd wk ago 117,102 hd yr ago

Saturday

57,000 hd Sat. 61,000 hd wk ago 46,553 hd yr ago

 

Hogs

474,000 hd today 473,000  hd wk ago 448,535 hd yr ago

Saturday

225,000 hd Sat. 178,000 hd wk ago 52,304 hd yr ago

 

Midday Carcass Value Friday

Beef

Choice up 0.33 204.99

Select dn 0.78 192.79

C/S Spread 12.20

Loads 62

Pork

Carcass up 3.04 73.84

Bellies up 1.60 111.35

Loads 193

 

Grain Settlements

  • Corn dn 2 – 3 1/2
  • Soybeans dn 9 – 10 1/2
  • Chicago Wht dn 3 1/4 – 5 3/4
  • Kansas City Wht dn 3/4 – 1 3/4

Livestock Settlements

  • Live Cattle  dn 0.87 up 0.17
  • Feeder Cattle dn 0.75 up 0.22
  • Lean Hogs dn 0.40 up 1.77
  • Class III Milk dn 0.03 – 0.68

Pre-Opening Market Broker Commentary

Mark Gold, Top Third Ag Marketing, discusses overnight grains and what the trade may see today. China is back in the market for soybeans making 4 buys this week.


Jerry Stowell, Country Futures,  looks at what may impact the livestock futures today. August options expire on Friday. That could encourage buyers to end the week.


Mike Zuzolo, Global Commodity Analytics, takes a look at the midday trade. Supply is what the trade is focused on for Friday. The supply though is feeding the bear.


John Payne, Daniel’s Ag Marketing, takes a closer look at today’s grain close. Payne is keeping a close eye on gold and silver as it relates to the commodity markets.


Jack Fenske, York Commodities, looks at the closing market numbers. Fenske is happy to see lean hogs achieve some technical objectives.

  • Crop progress report
  • Yield information that wasn’t a big surprise to the trade
  • Collusion in grains?
  • China buying more grain as they ramp up hog production
  • Struggles in the cattle market

 

 

Mike Zuzolo, Global Commodity Analytics, joins the Fontanelle Final Bell after a mixed Tuesday trade. Grains all moved lower following the latest crop progress update from NASS. Zuzolo is still looking at dry conditions in Illinois, Iowa, Ohio and Michigan. So far rains have been beneficial and timely, but the latest forecast models show that dry conditions could continue to persist and the corn belt may miss it’s next timely rain.

Aside from the supply side of the equation there is still more demand to draw up. In the second segment of Final Bell Zuzolo reveals his latest data on China and the flooding they are experiencing. This actually translates into not only demand for grains, but protein as well. Zuzolo wraps up the market commentary with a look at the cattle market and what it means for the board to continue running premium to the futures.

Listen to the full episode here: