Pure Hedge – Livestock and Grain

Bill AllenGeneral Commentary


 All of the Grains and the Cattle Markets were much lower today. The Soybean Market headed lower today, after running higher earlier this week, and before the WASDE Report on Friday. July’24 Soybeans were 18 ¾ cents lower and settled at 1227 ¾. Today’s high was 1248 and the 1-month high is 1256 ½. Today’s low was 1225 ½ and the 1-month low is 1145 ¾. Since 4/8 July’24 Soybeans are 33 ¼ cents higher or almost 3%. July’24 Corn was 8 ½ cents lower today and settled at 458 ½. Today’s high was 467 and the 1-month high is 472. Today’s low was 457 ½ and the 1-month low is 435 ¾. Since 4/8 July’24 Corn is 10 ¾ cents higher or almost 2 ½%. July’24 Wheat was 8 ¾ cents lower today and settled at 634. Today’s high was 649 ¼ and the 1-month high is 653 ¾. Today’s low was 628 ¼ and the 1-month low is 550. Since 4/8 July’24 Wheat is 52 ¾ cents higher or more than 9%. As we wait for the WASDE Grain Report on Friday, some of the numbers are already changing. On Tuesday, I said that the harvest in Rio Grande, the flooded area of Brazil, had 40% of their Soybean crop left to harvest. Yesterday, it was reported that only 25% of the same crop was left to harvest. Obviously, they were not harvesting Beans underwater, so why do you think the numbers changed by 15%? I wonder…

The port facility in Rio Grande is operating normally as well. There are transportation and infrastructure problems, with blocked roads, washed-out highways, and collapsed bridges, and trucks have to travel an additional 400 kilometers to get to the port, but they can, and they are getting there.  Argentina’s workers union is holding a nationwide strike tomorrow, and will be joined by the oilseed union, but is only scheduled for one day. Sounds like a waste of time. Argentina will also end the import tariff on fertilizer, to motivate Farmers to use more of it to enhance their yields. The USDA released its weekly Crop Progress Report earlier this week, and it showed that 25% of the Soybean Crop had been planted, with the 5-year average being 21%. The weather looks good for planting, for the next week, and I sure Farmers will take advantage of it. I spoke to many Farmers this week, and all but one, said they were planting more Soybeans this year, and so did everyone around them. The Farmer who did not plant more Beans, said most Farmers he knew, planted more Soybeans, if they were able to. Soybean exports continue to be poor. Bean inspections are more than 18% below last year’s numbers. I believe there will be more Soybean acres planted in the U.S.A. then were reported or expected this year. The open interest in July’24 Soybean Puts continues to climb. Yesterday, before the open, there were more than 77,000 open contracts in the strikes between the 1100puts and 1200puts, and total put open interest in July’24 Soybean Puts was over 133,000. This morning the open interest had increased by 3,226 contracts. The Corn in Argentina is in bad shape, and Dr Cordonnier dropped his Corn estimate by 2mt, to 47mt and left the Brazil Corn number unchanged, at 112mt. The USDA has 55mt for Argentina Corn, and 124mt for Brazil. The Wheat Market has been strong, but a pull back is expected before the report Friday. Canadian Wheat stocks were lower than expected. Stats Canada Wheat stocks were 11.8mt compared to the 12.2mt that were expected, and down 15.4% from last year. I am still Bearish Soybeans and think the Corn and Wheat can continue to rally. I feel the WASDE Report will show more acres of Soybeans were planted in Brazil then expected, and that the yields will be large. I also believe the stocks number here, will be huge, and if the Brazilian number, is anywhere near the USDA number of 155, I think it would be possible to see July’24 Beans with a $10 dollar handle. 

     The Cattle Market’s continued to slide lower today. June’24 Live Cattle were 1.15 lower and settled at 176.47 ½. Today’s high was 178.07 ½ and the 1-month high is 179.65. Today’s low was 176.25 and the 1-month low is 170.25. Since 4/8 June’24 Live Cattle are 3.15 higher or almost 2%. The Feeders gave back two bucks. August’24 Feeder Cattle were 2.02 ½ lower today and settled at 252.40. Today’s high was 254.95 and the 1-month high is 261.80. Today’s low was 251.67 ½ and the 1-month low is 243.27 ½. Since 4/8 August’24 Feeder Cattle are 4.20 higher or more than 1 ½%. The Hogs were able to stay positive today. June’24 Lean Hogs were 40 cents higher today and settled at 98.72 ½. Today’s high was 99.45 and the 1-month high is 109.65. Today’s low was 97.22 ½ and that is also the new 1-month low. Since 4/8 June’24 Lean Hogs are 9.22 ½ or more than 8 ½%. Grocery stores and restaurants are worried about losing business from customers who think the price of beef is too high, and if there will be demand moving forward with rising inflation. On Monday, 1,960 head traded in Iowa/Minnesota with an average price of $184.98, compared to an average of $186.61 the week before. The heavy Cattle weights and full feedlots will limit any upside momentum for a while. The average dressed Cattle weight last week was 848 pounds. That is 29 more pounds, than this time last year. If the Hogs were to continue to break, it could trigger the funds to start selling. The Funds have an almost record long position, and if a selling frenzy develops, it will get ugly fast. On Monday, Tyson Foods warned that their customers can’t afford the persistent inflation, as their sales for the quarter fell short of estimates. I feel the Cattle Markets will continue to move lower for a couple more months. 



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Bill Allen

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