The end of the week comes with a lot of data on the table. Inflation is being confirmed at the main street level in the US. As for the ag commodities grains are being largely driven by the weather market, but they also have some new data to trade.
In the equity market the CPI or consumer price index on Thursday showed a 0.6% month-on-month increase in May, beating analyst estimates of 0.4%, but down from 0.8% gains in April. That pushed the CPI up 5.0% year-on-year in May, beating analyst estimates of 4.6% and up from 4.2% the previous month. The core CPI that excludes the more volatile food and energy sectors rose 0.7% month-on-month in May, beating analyst estimates of 0.4%, but down from 0.9% the previous month. The Core CPI was up 3.8% year-on-year, beating analyst estimates of 3.4% and up from 3.0% in April. All eyes are now on next week’s Fed meeting to see how it responds.
In the grain complex WASDE data is out of the way for June and weather seems to be the apex that the complex hinges upon. The American GFS model continues to show some chances for moisture, but the European model continues to be hot and dry through July. The best way to understand the differences in the forecast models and why regardless the summer is likely to be hot and dry is to check out the Fontanelle Final Bell from Wednesday with Arlan Suderman.
Back to the WASDE report. There were no hug surprises, but corn and wheat ending stocks did drop from May. Wheat dropped 4 million bushels to 770 million bushels. Corn ending stocks dropped 15 million bushels to 1.357 billion bushels. Then soybean ending stocks increased 15 million bushels on lower crush numbers to 155 million bushels.
As for production numbers USDA left corn and soybeans alone. Winter wheat production was increased slightly. Most analysts believe USDA wants to wait until July to touch any of the row crop production numbers. That fits as USDA will release their latest acreage and quarterly stocks number on June 30.
Monday’s crop progress report shows that the spring wheat crop is struggling at 38% good to excellent nationwide. North Dakota spring wheat is rated 32% good to excellent. South Dakota spring wheat is rated 16% good to excellent. Meanwhile the hard red winter wheat crop did see a slight improvement in condition week to week at 50% good to excellent. Kansas winter wheat appreciated 4% to 65% good to excellent. Nebraska winter what appreciated 3% to 56% good to excellent. Oregon may have the poorest winter wheat crop in the country though at only 9% good to excellent.
South America continues to be dry and analysts are continuing to mark down the Safrinah corn crop. Stone X is now below 90 MMT. The USDA in May was at 100 MMT. This Thursday the June WASDE report will drop giving a look at USDA’s latest thoughts on South American production. USDA on WASDE also pulled back on South American corn production dropping the estimate on Brazilian corn to 98.5 MMT. That is still fairly high compared to other analyst estimates.
In the livestock complex feeder cattle have been battling the corn bulls this week. However the market may have finally been pushed far enough down that technical signals are helping to bring the market back on Thursday despite the higher corn market. The cash trade for feeders this week seems to be steady. As for live cattle they seem to be stuck in a sideways choppy market with the June contract in delivery. This time around though there have been no deliveries against the contract with the cash market staying premium to the board. Live cattle on the front months though continue to trade discount to the lean hog complex. This is fairly new territory for this spread and it seems that hogs want to stay premium to the cattle until possibly the June contract is expired.
Lean hogs continue to be supported by a strong cash market an carcass cutout. Exports were a little disappointing on Thursday morning. Cattle experienced a marketing week high in export shipments, but pork hit a marketing year low.
The WASDE report reflected that it expects both beef and pork exports to increase through the year and into next year as Asian demand continues to increase.
In the country the fed cattle trade started on Tuesday once again and the price action was steady with the previous eight weeks. So far this week Southern live deals have had a range of $118 to $120, mostly $119 to $120. Northern dressed business has had a range of $189 to $196, mostly $190 to $191.
The Fed Cattle Exchange auction on Wednesday had over 10,000 head listed. Southern Texas was able to move just over 1,000 head. Most of them traded $119-$120. However there was also a few lots that traded $116.
For the week ending May 29, 2021, Imported Beef Passed for Entry in the U.S. totaled 37,991, 94.99% of the previous week and 92.73% of the 4-week average.
Daily Slaughter Estimates Thursday
120,000 hd today 119,000 hd wk ago 115,610 hd yr ago
484,000 hd today 472,000 hd wk ago 455,075 hd yr ago
Thursday midday carcass cutout
Choice dn 0.47 338.18
Select up 4.27 312.14
C/S Spread 26.04
Carcass up 0.19 134.57
Bellies up 7.01 208.15
Daily broker commentary:
Pre-opening grains with Mark Gold of Top Third Ag Marketing
Pre-opening livestock with Jerry Stowell of Country Futures
Midday market commentary with Mike Zuzolo of Global Commodity Analytics
Closing grain commentary with John Payne Daniels Ag Marketing
Closing market commentary with Jack Fenske with York Commodities