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New Weather Outlook Bogs Down Soybeans
The soybean market ended the week on a negative note during what was one of the quietest trading days we have seen in a long time. The announced sales of new-crop beans gave the market some support early, but a cooler and wetter midday forecast trumped the demand news, and the market sold off.
The market has seen some pent-up demand the past few days. On Wednesday, an unknown buyer picked up 240,000 tonnes of new-crop U.S. soybeans. Yesterday it was announced that 708,000 tonnes of new crop was purchased by China. This morning, an unknown buyer bought 464,000 tonnes of new-crop beans, while China bought 116,000 tonnes. This brings new-crop year-to-date soybean sales to 1.528 million tonnes, which converts to 56 million bushels. We are quickly making up for the slow sales pace we had early in the summer. As of July 10, we had 451 million new crop booked. In the previous two years, it we had 489 and 525 million bushels sold.
As for the weather, early in the week the trade was worried about some heat coming into the Corn Belt, but now the heat is only forecast to be around for a few days, so it won't cause too may problems. Truth be told, most of the bean crop could stand to see some heat and dryness after the cool, wet weather we have seen. Allendale still anticipates beans to work down to the $10.00 level into the fall, but we anticipate the pace of the drop will moderate into more of a two-sided grind lower instead of the free fall we have seen over the past few weeks.
The updated forecast Sunday night will determine the markets direction early next week. -Jim McCormick
Lean Hog Commentary
There has been a lot of talk in the industry about falling hog weights. It is true: Weights fell from 215 dressed out in May down to 211 currently. What has not been addressed correctly is that this is a normal seasonal issue. Weights normally bottom from late-July through August. In actuality, we have done nothing to address the real problem. Weights were 5% over last year a few weeks ago, and they're 5% over last year right now. This move has pretty much negated much of the pricing situation that we could be seeing right now. As of yet, we still have much cheaper corn from last year and no serious effort from packers to clamp down on weights.
This week’s kill ran 1.833 million head. It represents yet another new low for the year and even all the way back to 2006 (nonholiday weeks). That would be 8.9% to 9.3% under last year. It will also be a new low among weekly kills since 2006 (excluding holiday weeks). On a seasonal basis, we typically see a small bump up in slaughter numbers into the first week of August. Then, in mid-August, we see the first real big increase for the transition from summer to winter. The real key for right-now pricing is whether the increasing PED problem (remember that PED did not peak until February) actually offsets this initial increase. We still suggest $140 for cash hogs on this move but for August futures to be limited to $133/$134. Remember, these are all based on assumptions of PED damage. Everyone and their brother knows that those weekly PED findings reports are not statistically accurate.
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