Written Commentary
SOYBEANS
Hurricane Beryl’s remnants are expected to move north out of Texas this week into Arkansas, Missouri, the southern half of Illinois, and Indiana. And that has added moisture chances to the drier eastern belt areas, which have been showing up on the latest Drought Monitor recently. This is pressuring markets as the week gets underway.
The US soybean area under drought increased by 2% to 9% last week, compared to 60% a year ago. Eight locks and dams are closed in Iowa and Missouri along the Mississippi River, making grain loading an issue. However, the lack of a major export program at the US Gulf means there is no urgency to get grain downriver to fill boats. The US attache to China says 2024/25 China bean imports should be unchanged from last year at 103 million tonnes. Weekly export sales on Friday were at the low end of expectations and near the same as last week. SAFRAS says Brazil farmer sales have reached 72% of the 2023/24 crop compared to 66% at this time last year. 2024/25 sales have reached 14.6%, up from 11.1% a year ago. ADM says they are ready to provide fully verified, traceable soybean meal and oil to the EU to satisfy the EU’s deforestation regulations that will take effect at year-end. Brazil is also working on its plans to meet the regulations.
SOYBEAN MEAL
This week has started with a significant weather change, and soybean complex prices are under renewed bearish pressure. Hurricane Beryl hit the central Texas coast over the weekend, and its remnants are now expected to move north into Arkansas, Missouri, Illinois, and Indiana. This new forecast offers additional precipitation chances for the Eastern bean belt, where the weekly Drought Monitor has shown an increase in abnormal dryness in the last few weeks. Furthermore, this keeps the hot temperatures out of the Midwest through the next two weeks.
US cash meal premiums were expected to weaken last week, with South American competition increasing, but instead, old crop meal has found support on US cash meal tightness while new crop months sink lower. US meal exports are expected to begin to slip lower as Argentina is likely to discount prices to gain market share. Despite last week’s holiday, the nearby crush was very strong and set new contract highs on July and August contracts.
CORN
The short covering gains seen Friday on December corn have disappeared as the forecasts now show tropical storm moisture from the remnants of Hurricane Beryl moving into the dry areas of the Eastern corn belt. The new path of the tropical moisture keeps extreme heat out of the Midwest for the next ten days, which is bearish as it will benefit early pollinating corn.
Mato Grosso’s corn harvest is speeding along. It is now 76.28% complete, way above the 5-year average of 59.34%. Weekly export sales were at the low end of expectations and at a 3-month low. According to private weather analysts, Black Sea crop stress is expected to cover two-thirds of the crop area over the next two weeks. FAO-AMIS says global cereals production stands at 2.854 billion tonnes, compared to 2.846 in their previous forecast.
WHEAT
EU markets were stronger on Thursday when the US was closed, which boosted US prices Friday. However, the market is again pulling back this morning on spillover weakness from corn and beans and higher Russian production from SovEcon.
There were 31 deliveries of SRW wheat overnight. Winter wheat area in the US under drought dropped 2% to 19%, compared to 54% at this time a year ago. HRS area under drought was 6% compared to 19% last year. French wheat yields are expected at an 8-year low of 6.4 million tonnes per hectare, down 13% from last season. While early yields in Southern Russia somewhat exceed expectations, the quality has been poor. The Buenos Aires Grain Exchange says Argentine wheat seeding is 85% complete. Weekly export sales were above the highest guess. Total commitments are at 254 million bushels, compared to 170 million last year at this time. SovEcon raised their Russian production estimate to 84.1 million tonnes, up from 80.7 previously, on better early yields. Tunisia says it is looking to make a fixed-price purchase deal with Russia, and Jordan and Algeria are tendering for wheat.
CATTLE
August futures closed higher Friday but well off the 8-month highs set earlier in the session. Cash trade held off until late in the day Friday and in the north was $198-$200 and the South steady with last week at $190. The 5-area, 5-day weighted average for the week was 194.57, up from 194.89 the previous week. 90% lean cow beef, which accounts for 50% of U.S. beef consumption, is at record highs, 127% above the same week last year, and ground beef demand remains very strong.
The USDA estimated cattle slaughter came in at 116,000 head yesterday. This brings the total for the week so far to 475,000 head, down from 593,000 last week at this time but up from 459,091 a year ago. The USDA boxed beef cutout was up $1.02 at mid-session Friday and closed 59 cents higher at $330.43, up from $323.33 the previous week. The previous low was $329.84 on July 3. The previous high was $333.04 on June 26, 2023. The estimated average dressed cattle weight last week was 846 pounds, down from 848 the previous week and up from 817 a year ago. The 5-year average weight for that week is 815 pounds. Estimated beef production last week was 436.4 million pounds, down from 437.5 million a year ago
HOGS
Hogs had a choppy week last week as positive technicals clashed with weak cash prices. Weekly export sales were strong, but prices could not hold Friday’s strength. Choppy conditions may prevail again this week until the market can get a convincing breakout.
Carcass weights are still above last year by 4 pounds. The cash hog index was lower for the 4th week in a row. The CME Lean Hog Index as of July 2 was 89.45, up from 89.31 in the previous session but down from 89.92 in the previous week. The USDA estimated hog slaughter came in at 456,000 head yesterday. This brings the total for the week so far to 1.885 million head, down from 2.358 million last week at this time but up from 1.798 million a year ago. The USDA pork cutout, released after the close Friday, came in at $94.24, up $1.85 from Wednesday but down from $94.36 the previous week. Estimated U.S. pork production last week was 438.2 million pounds, down from 521.5 the previous week and up from 409.7 a year ago. U.S. pork export sales for the week ending June 27 came in at 59,100 tonnes compared with the average of the previous four weeks of 30,200 tonnes. Cumulative sales for the 2024 marketing year have reached 1,095,300 tonnes, down 1.7% versus last year’s pace.
MILK – CLASS III
Despite recovering from hitting a six-week low last week, August Class III Milk ended with its third weekly loss.
The USDA reported that milk production is seasonally declining weekly, with more pronounced decreases in the West and Midwest regions, while the East had small pockets of steady production. The southern half of the US and West regions are experiencing summer heat, while the upper Midwest and East have had wetter conditions affecting production and availability. Public health officials in Colorado announced that an employee at a dairy farm who had been exposed to infected cattle tested positive for avian flu, which is the fourth human case reported since March.
Cream availability is generally tightening across the country, with spot load availability steady in the East and West regions and continuing to slide in the Midwest region as ice cream production is active. Domestic butter demand is steady to lighter in the East and West regions and ahead of expectations in the Midwest region, with steady to lighter churning paces as maintenance projects are taking place or are scheduled to take place soon.
Cheese production schedules are seasonally steady throughout the US. While tightening farm level output in the East region limited the amount of milk available for processing, the Independence Day holiday freed up some milk supplies. Cheesemakers in the Central and West regions have steady production schedules while demand is in-line with availability.
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