About The Author

Alan Brugler

While some argue that the expanding number of COVID-19 cases isn’t a second wave (they claim the first wave never ended or got small enough), that’s one of those debates like arguing how many angels can dance on the head of a pin. A number of things are pointing toward a sequel to the spring COVID meltdown. Hospital bed counts are going up. States and cities are implementing selected stay at home orders, and cutting back on gathering sizes, bar hours, etc. With no CARES act on the horizon, most don’t have the appetite for the economic consequences of a full shutdown. The livestock markets appear to be nervous about losing either packing capacity or institutional demand, slumping badly on Friday. Crude oil also took a hit. The stock market appeared to be unconcerned, still rallying on the promising news about vaccine trials that appear to be successful.  One thing that is different this time around is the approach to supply chains. After last spring’s disruptions, both companies and countries are trying to ensure larger stockpiles. Deficit countries are importing food aggressively. Exporters like Russia are looking at quotas or announcing quotas in order to ensure that adequate supplies are available at home. Beef prices in the US were up sharply this week, possibly on stock up demand.

Corn futures rallied 0.9% this week, adding 3 ¾ cents to last week’s advance. Trade estimates for Tuesday’s USDA report anticipated a 45 million bushel cut in US production, but USDA delivered a 215 mbu cut. They also jacked up their export estimate 325 million bushels. The bottom line was ending stocks might only be 1.702 billion bushels and they now anticipate a $4.00 cash average price for the year. USDA’s weekly Export Sales report showed that 978,300 MT were sold in the week ending 11/5, down 63% from the previous week. Price rationing is kicking in. The FAS showed total export commitments are now 34.168 MMT (1.345 billion bushels), 51% of the revised full year WASDE export estimate. We would typically only have 38% booked by now. Unshipped sales on the books on Nov 5 totaled 26.583 MMT vs. the five year average for that date of 11.574 million. The potential for cancellation or deferral is the bulls’ Achilles heel. CFTC data is delayed until Monday due to the mid-week Veteran’s Day holiday.

The three wheat markets were all lower this week despite a Friday short covering bounce. Minneapolis spring wheat was down 0.5% for the week.  KC HRW dropped 0.6% and Chicago SRW was down 1.4% as it lost some more of the spread premium vs. the other classes. The weekly Export Sales report showed a  drop in wheat bookings during the week ending 11/5, to 300,500 MT. Total commitments for 20/21 exports are now 17.197 MMT, 65% of the USDA full year forecast. Unshipped sales on the books are up 45% from last year, though only 18% above the 5 year average. USDA made only minor changes in the Tuesday WASDE report for wheat. They cut projected ending stocks 6 million bushels on a 5 million hike in expected food use and a 1 million bump in seed use. That national average cash price (which encompasses all classes) was left UNCH at $4.70. CFTC data is delayed until Monday.

Soybean futures shot up 4.2% or 46.5 cents per bushel this week, mostly on Tuesday. Nearby meal was up 1.5%. Soybean oil rose 5.1%, helped by the highest Malaysian palm oil futures since 2012 and a 40-month high in canola. USDA/NASS cut projected US average yield by 1.2 bpa vs. October, shrinking the crop estimate 98 million bushels. USDA cut projected US soybean ending stocks to only 190 million bushels, a 4.2 stocks/use ratio. That necessitated yet another huge boost in the cash average price estimate (now $10.40). The USDA weekly Export Sales report on Friday showed a drop to 1.47 MMT for the week ending November 5, the slowest sales of the marketing year. That takes the total commitments for the new crop marketing year to a massive 49.9 MMT. That is 83% of the full year USDA forecast, vs the 55% average for this week. This can mean USDA is under-estimating the full year total, or it can mean that the program is heavily front end loaded and sales/shipments will be unusually low in the second half due to competing supplies from South America. On the bull side, weekly shipments were record large. 

Cotton futures dropped 0.2% for the week. December posted the highest spot month futures price since May 2019 on October 28 but has been working lower since then. Expected US ending stocks are still seen comfortable by WASDE at 7.2 million bales. The weekly Export Sales report showed current year upland cotton export bookings jumping from 115,600 RB during the week ending on 10/29 to 236,800 RB for the week ending November 5. Total commitments are now 9.102 million RB, down 8% from last year at this time. They are 67% of the full year WASDE forecast, well above the 59% average pace.  

Live cattle futures were up 1.2% for the week. Feeders were down 0.2% from Friday to Friday. Higher corn more than offset higher fats in the feeder price equation. The CME feeder cattle index was $137.35, up 72 cents from last week.  Weekly beef production was up 0.9% from the previous week, and 0.1% smaller than the same week last year. Total YTD beef production is still 1.1% lower than 2019 on 3.7% fewer cattle slaughtered. Wholesale beef prices were sharply higher this week. Choice boxes were up $11.66 or 5.4%. Select boxes were up $10.97/cwt or 5.5% on the week. The Export Sales report dropped weekly beef sales to 14,300 MT. China was still buying.

Lean hog futures were UNCH for the week, marking time while they see whether their discount to the cash index is justified. The CME Lean Hog index dropped 20 cents from the previous week, to $71.32. US pork production was down 0.6% from the previous week, and down 1.6% from year ago. YTD production is 1.8% higher on 0.9% more animals harvested. The pork carcass cutout value sank 4.7% this week, $3.92/cwt. The pork belly primals were still under pressure (-14% for the week), as were hams. USDA showed weekly pork export sales hit a combined 58,600 MT for 2020 and 2021 combined. China bought more than 30,000 MT of that. Pork shipments were similar to recent weeks.

Market Watch

USDA Export Inspections will be released on Monday morning, as will the month NOPA soybean crush report. Crop Progress data will be out Monday afternoon. Wednesday will include the weekly EIA ethanol production/stocks data. USDA will release their weekly Export Sales report on Thursday morning, with November feeder cattle futures and options expiring that day as well. The monthly USDA Cattle on Feed report is due out on Friday.  December Grain options expire on Friday as well.

Visit our Brugler web site at https://www.bruglermarketing.com or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

There is a risk of loss in futures and options trading. Similar risks exist for cash commodity producers. Past performance is not necessarily indicative of future results.


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