The monthly cattle on feed report, released by the USDA on Aug. 23, was a bullish report for the cattle industry as the Aug. 1 cattle on feed supply was well below expectations and year-ago levels.
USDA reported cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 10 million head on Aug. 1.
The inventory was 6 percent below Aug. 1, 2012.
Placements were also sharply below expectations and year-ago levels. Placements in feedlots during July totaled 1.72 million, 10 percent below 2012.
Net placements were 1.66 million head. During July, placements of cattle and calves weighing less than 600 pounds were 390,000, 600-699 pounds were 275,000, 700-799 pounds were 455,000, and 800 pounds and greater were 602,000.
This tells us there are some cattle to work through over the next 30 to 60 days, but once these cattle are through the pipeline, smaller numbers of cattle should be bullish for the market.
Farmland values, which have risen rapidly in recent years, continued to see slight gains during the third quarter.
According to the Kansas City Federal Reserve Bank’s quarterly report, non-irrigated cropland values increased 18 percent from a year ago, while irrigated cropland values increased 25 percent.
What is notable in the report is an increasing number of bankers in the Kansas City Fed region who think farmland values have peaked. The majority are expecting to see slow declines of less than 10 percent over the next year.
Corn closed the week $.06 1/2 higher and posted a bullish weekly reversal.
Last week, private exporters did not report any private sales.
In the weekly export sales report, new crop corn sales were 34.8 million bushels. In the weekly crop progress report, corn conditions were 3 percent lower at 61 percent good to excellent.
Fifty-two percent of the crop is dented, behind the average of 65 percent, continuing to indicate the crop is late in maturity.
With the late maturity, the threat of an early frost would be a bullish catalyst to send prices soaring.
Corn has only had a minor, late-season rally despite soybeans rallying sharply. Clearly the market is comfortable with the projected supply of corn this season.
This rally is uncovering selling interest from producers who have not pre-sold very much of the crop this year and need to make some cash sales prior to harvest.
Strategy and outlook: Producers are 50 percent sold of the 2013/14 crop. Producers own December corn puts on 50 percent of 2013 production.
Sell 10 percent at $5.34 against July 2014. Sell 10 percent of 2014 production at $5.30 against December 2014.
Soybeans closed the week $.68 3/4 higher from last week. Last week, private exporters did not report any private sales.
In the weekly export sales report, new sales were 34.8 mb. This was a strong number, but disappointing considering the previous week’s private export sales.
The crop progress report showed soybean conditions were 2 percent lower at 62 percent good to excellent.
Seventy-two 72 of the crop is setting pods, behind the average of 81 percent.
The soybean crop is made during August and has received some timely rains early in the month to help pod fill, but a hot and dry end of August has sent prices soaring as more moisture is needed for the late-seeded crop to reach full yield potential.
Soybean values are near the summer highs with weekly resistance of $13.50 a major resistance point on the charts.
Interesting market setup with January beans commanding a 53 cent premium to July soybeans, giving producers no incentive to store soybeans this year.
Strategy and outlook: Producers are 40 percent sold of 2013/14. Sell 20 percent at $13.50 against the January contract.
Producers own November puts on 50 percent of 2013 production.
Sell 10 percent of 2014 production at $12.35 against November 2014.
This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solution’s Research Department. The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such.
Brian Hoops can be reached at (605) 660-1155.
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