Weekly Market Update With Lilja, Progressive Ag
A friend of mine recently took a couple market ready cattle to the butcher last week. The butcher told him to put the larger bull in the front of the trailer as its just easier to shoot him in there and then haul him out. They ended up shooting them both in the trailer after the butcher saw the attitude of the “small one”. I should have taken my friends story as prophetic relating to the February 9th monthly report. Everyone was “bulled up” going into the report and USDA attempted to shoot the bull market before it got out of the trailer. It appeared the bull was mortally wounded with 80 cent losses in soybeans and 45 cent losses in corn in the 36 hour stretch after the report but then the bull got up and started kicking again. It kicked higher in February
11th trade but then faded as the two bulls did. So the big question is, did USDA kill the bull?
Overall, the report numbers were viewed as neutral for soybeans, negative for corn and friendly for wheat. Brazil and Argentina soybean production was left unchanged from the January report at 133 MMT and 48 MMT. World ending stocks were estimated at 83.36 MMT and US carryout was lowered to 120 million bushels both very close to trade estimates. Brazil and Argentina corn production was left unchanged at 109 MMT and 47.5 MMT. This was a day after the US Ag Attache with boots on the ground estimated Brazil corn production closer to 105 MMT due to lower yields with second crop corn plantings later than normal. The US carryout number was bearish at 1.502 billion bushels vs. expectations of 1.390 billion bushels. US carryout of wheat was left unchanged from the January report, but there was a 9 MMT cut in world ending stocks. Chinese wheat demand was increased 5 MMT and feed usage increased 5.4 MMT. USDA built in an assumption that feed wheat will be substituted for corn at these higher prices to give the stocks number a cushion. This is actually a very logical assumption. But at the end of the day, they left Russian exports unchanged even though a coming export tax will be limiting their exports. Even a friendly wheat stocks number was shot down by an unfriendly Russian number and wheat retreated with the row crop complex.
South American weather is mixed with Brazil forecasting above normal precipitation and below normal temperatures for the next two weeks. The same timeframe has Argentina with above normal temps and below normal precip. With more soybean production in Brazil, the forecast is net negative for soybeans. The recent frigid US cold snap showed initial concern to the wheat complex on winterkill ideas in both the southern plains and soft red belt. The cold snap has also led cattle futures to new contract highs on concerns of weight limit gains, lower carcass weights and slowing transportation. Hogs have also climbed higher during the cold snap with additional concerns over new reported cases of African Swine Fever effecting the Chinese herd. For now, the cattle bulls have not been shot, but the grain bulls have.
Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing’s Research Department.