Pork production continues to be high, but a strong export market is helping prices remain steady. A recent analysis for the Livestock Marketing Information Center indicates pork production for the second quarter increased by 3 percent from a year ago. Lower carcass weights have also helped ease the load on consumers. “Importantly, that increase in production did not need to be consumed in the U.S. marketplace because exports were robust,” the report says. “In fact, calculated per capita disappearance in the second quarter was below 2016’s by nearly 1 percent.” Market hog prices moved upward over the past two months, with prices moving above year-ago levels in June. This marked the first time the market had seen a year-over-year increase since late March. The most recent USDA Hogs and Pigs report did not include many revisions, solidifying the expectation that production would continue to be more robust than a year ago. Production is expected to be up 1 to 4 percent in 2018.
Corn closed the week $.14 3/4 lower. Last week, private exporters did not report any private sales. Weekly export sales of corn showed a total of 17.3 mb (440,700 mt) with 6.3 mb (161,000 mt) for the 2016-2017 marketing year. This was above the 3.9 mb (100,100 mt) needed this week to be on pace with USDA’s July demand projection of 2.225 bb. In the weekly crop conditions report, NASS reported U.S. corn crop conditions at 65 percent good/excellent versus 67 percent expected (66-68 percent range of ideas), 68 percent last week and 76 percent last year , a 3 percent decline. Iowa is rated 77 percent good/excellent; Illinois is 63 percent with Minnesota 80 percent and Nebraska 68 percent good/excellent. The July supply/demand report was expected to show a reduction in the corn yield with average trade estimates pegging this crop year’s corn yield near 169 bu/acre. However, the USDA did not change their yield estimate, leaving the corn crop yield at 170.7 bu/acre. 2017 estimates for corn production came in at 14255 bb, up from 14,065 bb in June, reflecting the changes made to planted and harvested area in the last quarterly grain stocks report.
U.S. corn ending stocks for 2016/17 were increased by 75 million bushels to 2,370 million as there was a 75 million reduction in feed use. 2017/18 ending stocks were predicted to come in at 2.325 bb, up 215 million bushels from the June report. The stocks to use ratio for 2017/18 increased from 14.8 percent in June to 16.2 percent in July. World stocks for the current crop year came in at 227.5 million metric tons, up 2.9 million metric tons from June.
Strategy and outlook
Look to make sales and lock in prices during rallies over the next 4 weeks.
Soybeans closed the week 10 cents lower. Last week, private exporters reported sale of 1.3 mmts of soybeans to China.
Weekly export sales of soybeans showed a total of 25.1 mb (683,000 mt) with 8.4 mb (228,000 mt) for the 2016-2017 marketing year. This raised total sales to 2.203 bb, or 5 percent above USDA’s July demand projection of 2.100 bb. U.S. soybean crop conditions are now 62 percent good/excellent versus 63 percent expected (61-63 percent range of ideas), 64 percent last week, 71 percent last year, a 2 percent decline. Iowa is rated 67 percent good/excellent; Illinois is 66 percent, Minnesota 73 percent with North Dakota 47 percent and Nebraska 66 percent good/excellent. The July supply/demand report was bearish as soybean production came in at 4.260 bb, up just 5 mb from the June report as the USDA left yield forecasts unchanged at 48.0 bpa. 2016/17 soybean ending stocks were lowered by 40 million bushels to 410 mb, which was nearly 25 million bushels below average trade guesses. 2017/18 stocks came in at 460 mb vs. 490 mb that was estimated.
World stocks for 2016/17 saw a 1.6 million ton increase to 94.8 million tons. This was well above trade estimates of 93.2, which matched the USDA’s June estimate.
Strategy and outlook
Producers need to make new crop sales on rallies during the next 4 weeks as large supplies of product will be hitting the market.
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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