Cattle herd reduction has been ongoing for 3 years, herd size has dropped 16 percent in the last two and is now the smallest since 1973. This year marks the lowest calf crop since 1950.
Feed use remains the largest part of demand for corn, soy-meal, wheat and distiller’s grain. Smaller livestock herds will use less feed and are therefore bearish for grain prices.
Smaller herds also foretell the market prices for animal products. Meat and milk prices will rise substantially in the near future.
The Canadian Pork Council has asked their government for 800 million dollars in bail out funding. That is $30 for every pig in Canada. That would make Canadian pork production much less expensive and take export business away from the United States.
Palm oil prices affect soy oil prices because each is a substitute for the other. When the price of one goes up, the other usually follows. Palm oil supplies will likely be adversely affected by an El Nino weather pattern in the south Pacific. Any increase in soy-oil demand will push soybean prices higher.
Current weather patterns in the United States continue to be bearish. Cool wet weather in the Corn Belt has increased crop production potential for late soybeans, however, soybean bloom is way behind average and the year is far from over.
Despite the near record acres planted to soybeans and current yield potential, soybean carryover stocks are tight and will probably remain tight. The weather is already factored into current pricing.
China has indicated an offer to export 500,000 tons of soybeans, also bearish but likely factored into current prices. China is trying to sell stored soybeans at a premium price, and those beans may go to nearby countries that do not often import beans from the United States. Argentina’s government is considering a reduction in soybean export taxes by at least one third.
Soybean condition ratings are 67 percent good to excellent where the average is 60 percent. Export inspections were above market expectations at 13.5 million bushels. Weekly export sales of over 700,000 tons have exceeded market expectations. The demand for soy oil and soy meal also increased. Soybean prices in China are going higher.
Traders are selling corn and weather in the Corn Belt is favorable to production. Any weather premium has been removed from current market pricing and a turn around in corn prices will require a change in weather that is unfavorable for production.
Some private estimates predict yields of 160 bushels per acre. That would push carryover supplies to over 2 billion bushels. Those number assumptions are extremely price bearish when only one third the corn has tasseled at the end of July. Ratings are 7 percent above average and over 70 percent is rated good to excellent.
Auto makers have joined oil companies in an attempt to delay adoption of higher ethanol blends in fuel.
Corn export inspections were below expectations at only 37 million bushels. Recent export sales have been three times that amount. Mexico bought 22 million dollars of U.S. grain sorghum this past week. The National Agricultural Statistics Service is expected to revise sorghum and corn acres to a lower number. Corn export sales were 1.33 million tons and again exceeded market expectations.
The trend in wheat markets has turned down. Kazakhstan has a bumper wheat crop on the way. Australia’s crop potential remains below average but has improved in the past week. Winter wheat harvest in the United States continues to pressure prices. Argentina, Australia and Canada have reduced production potential but world carryover supplies remain a burden on prices.
Export inspections of just over 342,000 tons were on the low end of market anticipation. Total wheat sales for the year are 2.128 million tons compared to 3.7 million tons last year which are less than projected.
The International Rice Institute in the Philippines has developed drought resistant rice. Genetic modification plays a role in this breakthrough technology. Rice is considered to be one of the most water-thirsty crops grown. Rice production could expand to areas currently unsuitable for rice production.
Any increase in prices in rice markets will be limited by large supplies in Thailand and Vietnam. India has stopped rice exports but exports from India were limited when the ban lifted. Thailand is limiting rice exports. Rice production in the United States will be lower than average – the question is how much lower. No one is yet able to put an actual number on U.S. production.
Short term cotton fundamentals remain negative. Every negative move in world stock markets pressures cotton prices. Weather in west Texas has improved with more rain in the forecast. This limits trader expectations of abandonment in Texas cotton. Traders have been taking profits from buy contracts in cotton markets. Taking money out of the long side of cotton markets is putting pressure on prices. Cotton exports are down 40 percent from last year.
Technical charts indicate cotton is overbought. Weekly export sales near 50,000 bales were below market anticipation. Cancellations over 1,500 bales were bearish.