On Nov. 19, the USDA updated its Cattle on Feed report showing that cattle and calves on feed for slaughter market in the U.S. for feedlots with capacity of 1,000 or more head totaled 11.5 million head on Nov. 1. The inventory was 3 percent above Nov. 1, 2009.
Placements in feedlots during October totaled 2.50 million, 1 percent above 2009. Net placements were 2.44 million head. During October, placements of cattle and calves weighing less than 600 pounds were 725,000, 600-699 pounds were 640,000, 700-799 pounds were 514,000, and 800 pounds and greater were 625,000.
Marketing of fed cattle during October totaled 1.73 million, 1 percent below 2009. This is the second lowest fed cattle marketing for the month of October since the series began in 1996.
Other disappearance totaled 62,000 during October, 5 percent above 2009.
Hoops’ analysis: I would view this month’s cattle on feed as bearish based on the large number of heavy weight placements.
The August through October placement of 800-pound and heavier cattle is record large. When these are combined with the relatively heavy 700- 799-pound placements this summer, projected marketings increase significantly.
With the Thanksgiving and Christmas holidays approaching, the packers are likely to use the reduced slaughter days as a way to leverage the cash market lower and feedlots may fall into the trap of not aggressively marketing their production, at a time when carcass weights are already seven pounds above the five-year average. This could be bearish for prices into the end of the year unless a winter storm hits the Midwest.
A bullish marketing psychology exists despite the slow marketing figure and the increased carcass weights.
Corn closed the week $.13 1/4 lower. Last week, private exporters reported sales of 281,000 metric tons of corn to South Korea and 120,000 mts of corn to Egypt.
Basis levels should now improve as farmers will be tight fisted with their remaining inventory until after the January crop report.
The weekly export sales report showed net sales of 533,700 metric tons were down 7 percent from the previous week, but up 20 percent from the prior four-week average. Increases were reported for South Korea (506,500 MT, including 281,000 MT switched from unknown destinations), Japan (113,100 MT, including 70,300 MT switched from unknown destinations and decreases of 10,400 MT), Syria (102,300 MT, including 57,800 MT switched from Egypt and 44,300 MT switched from unknown destinations) and Taiwan (42,400 MT). This year’s export profile is now at 838.2 million bushels versus the USDA forecast of 1.950 billion bushels.
The 50 percent retracement on the weekly continuation charts occurs at $5.26, a likely destination for December corn. Corn has hit my projected target. Now would be a good time to re-own cash sales for a winter rally.
Strategy and outlook: Producers have sold/hedged a portion of the 2010 crop and re-owned cash sales with call options. Don’t become too aggressive marketing the 2011 crop until more is known about the 2011 marketing year.
Soybeans closed the week $.67 1/2 lower from last week. Last week, private exporters reported sales of 105,000 MT and 119,000 MT to an unknown destination and 20,000 MT bean oil to China.
The NOPA October crush was sharply higher than September and was solidly better than expected. Soybean oil stocks remain excessive at record levels. NOPA October soybean crush was reported at 151.9 million bushels, solidly above expectations of 148.3 million, and up sharply from September crush of 124.9 million. However, October crush was down slightly from last year’s 155.3 million and was the 2nd lowest of the last five years for the month of October.
The weekly export sales report showed net sales of 1,007,500 MT were up 25 percent from the previous week, but down 37 percent from the prior four-week average. The primary destinations were China (829,800 MT, including 225,000 MT switched from unknown destinations and decreases of 17,800 MT), Mexico (135,400 MT), the Netherlands (77,100 MT, including 70,000 MT switched from unknown destinations), Taiwan (61,600 MT), Spain (60,000 MT, switched from France), and Japan (50,300 MT, including 36,000 MT switched from unknown destinations and decreased of 4,400 MT).
This year’s export pace stands at 1.130 billion bushels versus the USDA forecast of 1.570 bb.
Strategy and outlook: Producers have sold/hedged a portion of the 2010 crop and re-owned cash sales with call options. Don’t become too aggressive with marketing the 2011 crop until more is known about the 2011 marketing year.
Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.
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