In the April 24th Cattle on Feed report, the USDA said new placements onto feedlots in March were down 22.7% from a year ago, and that the April 1st feedlot inventory fell to 11.3M head, 5.5% below last year. A feedlot supply backup has led to the drop in new placements. Lack of processing capacity has left feedlots with no place to send finished cattle for slaughter. Since mid-March, cow slaughter is down roughly 25%.
Read MoreA week ago (4/20) the spot futures contract for a physical commodity (WTI crude oil) closed at minus $37.63 per barrel. How is that possible? As an oil futures contract expires, you either need to sell out of your position or take physical delivery of 1000 barrels or 42,000 gallons of crude oil in Cushing, OK. Given large world oil supplies and the sharp decline in consumption due to COVID-19, U.S. land-based oil storage facilities are full.
Read MoreFood supply chains are in chaos. For starters, no amount of retail demand can make up for the loss of foodservice. Produce is being plowed under, milk is getting dumped, bacon and chicken wing prices have plummeted. Secondly, foodservice specs and packaging are not easily adapted for retail sales. Finally, plant closures are threatening supply gaps.
Read MoreIn Thursday’s WASDE report, the USDA made two COVID-19 related changes to its 2019/20 corn forecast. The USDA said that reduced demand for gasoline has hit ethanol makers hard. Projected corn usage for ethanol production was lowered by 6.9% to 5.05B bushels. Partly offsetting that decline is a big bump in corn demand to make alcoholic beverages.
Read MoreThe USDA’s March 26 Quarterly Hogs and Pigs Report was very bearish for hog prices. The number of market hogs on March 1 were higher than expected at 71.25M head, 4.3% above a year ago. Hog futures plummeted 39% post-report, from $65.85/cwt (3/25) to $40.23 on Friday (4/3). However, looking forward, the breeding herd (6.38M head) was lower than expected, up just 0.4% from last year.
Read MoreWe all want to know when life will be back to normal. Unfortunately, there are too many unknowns in trying to forecast the trajectory of COVID-19, the biggest problem being lack of widespread testing. Here’s what we do know. The lag from exposure to death is at least one month. If we currently have 2468 U.S. deaths, then given a 1.5% death rate, it means we had roughly 164,533 cases a month ago. With a 6-day doubling rate, we could have over 5M cases right now.
Read MoreIn Friday’s Cattle on Feed report, the USDA said new placements onto feedlots in Feb were down 7.9% from a year ago, and that the March 1st feedlot inventory fell to 11.81M head, just 0.2% above last year. The drop in placements is likely the result of uncertainty surrounding COVID-19. Live cattle futures plummeted by 27.9%, from highs of $127.43/cwt in mid-Jan, to lows of $91.85 a week ago. But retail panic buying has help cattle futures recover a bit.
Read MoreWeeks of confusion and debate about COVID-19 finally gave way to reality over the past week, with a tidal wave of event, school and business closures. On Saturday, the House of Representatives passed legislation that would make virus testing free and provide paid sick leave to certain workers affected by the outbreak. On Sunday, the Federal Reserve fired its last bullet, slashing the federal funds rate effectively to zero.
Read MoreCOVID-19 is threatening the U.S. economy. Last week, most economists cut their 2020 GDP forecasts: IHS Markit from 2.1% to 1.8%; Oxford Economics from 1.7% to 1.3%; Deutsche Bank from 2.2% to 1.6% and the Federal Reserve Bank of NY from 2.2% to 1.5% for the first half of 2020. The Federal Reserve cut interest rates by a half-point last week, its largest cut since its response to the Lehman Bros. collapse in 2008. On the flip side there was some good news.
Read MoreThe coronavirus outbreak has sparked a huge sell-off in commodity prices. Raw materials sensitive to shifts in global growth have been the hardest hit with crude oil is at the top of the list. West Texas Intermediate (the U.S. benchmark) fell 16.15% last week to close at $44.76/barrel on Friday - the lowest price in over a year and the biggest weekly decline since Dec 2008.
Read MoreIn Friday’s Cattle on Feed report, the USDA said new placements onto feedlots in Jan were down 0.6% from a year ago, but that the Feb 1st feedlot inventory, at 11.93M head, was still 2.2% above last year. Several macro issues will affect beef this year and next.
Read MoreIn Friday’s WASDE, the USDA lowered its corn export estimate while increasing corn usage for ethanol – and left most other numbers (yield, planted acres, production) unchanged. The USDA’s 2019/20 planted acreage forecast at 89.7M acres, is up from 88.9M a year ago. But another year of saturated soil (so far) makes that forecast suspect.
Read MoreFollowing near panic just 10 days ago, markets appear to have adjusted to the Coronavirus scare. The Dow Jones Industrial Average dropped 2.3% on Jan 31, from 28,858 to 28,200. However, fears subsided, and the Dow rebounded by 3.2% to 29,101 last week. Investors appear to be betting that the virus won’t put a big dent in U.S. growth.
Read MoreIn its biannual inventory report, the USDA said total cattle and calves (feedlots + pasture) in the U.S. were 94.4M head on Jan 1, down 0.4% from 94.8M a year ago and the first decrease in 6 years. Cow and heifer numbers at 40.7M head are down 0.7%, while heifers on feedlots (headed for slaughter) are up 4.0% and now account for 38.3% of feedlot inventories. Traditionally, when the percentage of heifers on feedlots rises above 36% for an extended period, it indicates producers are not retaining enough females for herd expansion.
Read MoreIn Friday’s Cattle on Feed report, the USDA said new placements onto feedlots in Dec were 3.5% above a year ago and the Jan 1st feedlot inventory, at 11.96M head, was 2.3% above last year. Heifers on feed are up 4.0% and now account for 38.3% of feedlot inventories - a level that indicates producers are not retaining enough females for continued herd expansion.
Read MoreThe Trump Administration signed “Phase One” of a trade agreement with China last week. This should have lit a fire under protein and grain prices - but it didn’t. What Phase One said was that China commits to purchase an additional $12.5B of agricultural products from the U.S. in 2020 above a baseline year of 2017. There were no specific targets for individual commodities – so it could potentially be 80% soybeans. What was not in the agreement was any change to the punitive import tariffs on U.S. pork.
Read MoreFriday’s WASDE report should have been bearish for corn prices. The USDA increased 2019/20 corn yield from 167.0 to 168.0 bushels per acre, bumped production from 13.66 to 13.69M bushels and cut projected exports from 1.85 to 1.78M bushels. Instead, traders are locked in on the prospects for a bump in exports associated with phase-one for the U.S.-China trade deal.
Read MoreIn Dec’s Cattle on Feed report, the USDA said new placements onto feedlots in Nov were 4.9% above a year ago. That helped push the Dec 1st feedlot inventory to 12.03M head, 2.5% above last year. In Dec’s Livestock, Dairy & Poultry Outlook, the USDA reduced projected 2020 beef output to 1.4% above a year ago – and that meager increase will be more than offset by a 7.6% jump in exports and a 5.4% decline in imports.
Read MoreIn its quarterly (12/23) Hogs & Pigs Report, the USDA pegged the Dec 1 inventory at 77.34M head, up 3.0% from Dec 2018. Market hogs (to be slaughtered from Dec-May) were 70.88M head, 3.1% higher than a year ago. The breeding herd (6.46M head) was 2.1% larger than last year. Those numbers point to record large pork supplies in 2020.
Read More‘Twas the night before Christmas and all through the House, the Dems had decreed “impeach that tweet mouse.” The Articles were hung by the chimney with care, in hopes that the Senate might soon grow a pair. The Donald was nestled all snug in his bed, watching Fox News without any dread. Then up on the Hill there arose such a clatter, I drove to DC to see what was the matter.
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