USDA corn crop estimates keep inching lower but are still higher than what private analysts were anticipating following the devastating spring floods in the Midwest. In Thursday’s WASDE report, the USDA cut its corn production forecast, but it also raised yield per acre and lowered projected corn usage for ethanol and exports.
Following a 10-year fight, the World Trade Organization finally sided with the U.S. in a case involving subsidies the European Union gives to Airbus (the top Boeing competitor). As a result, the U.S. Trade Representative (on Oct 2) announced a plan to impose retaliatory tariffs on European products. The tariffs will go into effect on Oct 18.
The U.S. pork industry continues to be driven by two distinct narratives: 1) very large current pork supplies, and 2) the prospects for a huge increase in future exports due to China’s African Swine Fever hog losses. In Friday’s quarterly Hogs and Pigs report, the USDA reported total U.S. herd inventories on Sept 1st at 77.7M head, up 3.4% from a year ago and a half-point above analyst’s expectations.
Friday’s Cattle on Feed Report was bullish for prices. The USDA said new placements onto feedlots in Aug were 9.0% below a year ago, and that the Sept 1st feedlot inventory, at 11.0M head, was down 1.3%. In last week’s Livestock, Dairy & Poultry Outlook, the USDA highlighted the Aug 9 fire at a Tyson Foods plant in Holcomb, KS, and how capacity constraints will slow the pace of cattle slaughter through year’s end.
In Thursday’s WASDE report, USDA crop estimates got a little closer to what private analysts were anticipating following spring floods in the Midwest. Corn output for 2019/20 was revised downward, from 13.9B bushels (Aug) to 13.8B, while average private trade estimates have increased from 13.1 to 13.5B. Corn futures, which hit highs of $4.54 on 7/12, fell to $3.40 (9/9) before recovering post-report to $3.55 on Friday (9/13).
After years of abundant grain and protein supplies (and modest prices) the cycle appears to be turning. For starters, the USDA has absolutely no handle on the real damage to this year’s corn and soybean crops. There are large variances between government and private estimates - and the argument will not likely be settled until this year’s harvest is in.
In the August Livestock, Dairy & Poultry Outlook, the USDA again reduced 2019 milk output to just 0.1% above a year ago. Steadily declining dairy cow numbers have been mostly offset by increases in milk yield per cow. In the Aug 22 cold storage report, the USDA said Aug 1st butter supplies were 1.1% higher than July and 3.6% above a year ago. That indicates weaker summer demand and is bearish for prices.
In Friday’s Cattle on Feed Report, the USDA said new placements onto feedlots in July were down 2.1% from a year ago, but that the Aug 1st feedlot inventory, at 11.1M head, was still up 0.2%. The big news in beef is the fire that occurred on Aug 9 at the Tyson Fresh Meats plant in Holcomb, KS. The plant processed 6,000 head of cattle per day or 6.2% of the country’s total capacity. The shortfall will be very difficult to make up based on already tight industry capacity.
Last week’s Crop Production report shocked the corn market. The USDA said that U.S. farmers planted 90.0M acres of corn this year, down from last month’s 91.7M forecast. But traders had expected big, flood-driven losses in the 3M-6M acre range.
In the August Dairy Products Report, the USDA said total cheese output was up 0.6% (from a year ago) in June and that YTD production is up 0.8%. However, cheddar output is down 2.8% YTD. Since block cheddar is what’s used to settle contracts at the CME, cheese “market” prices are likely to remain well supported through year’s end.