Agricultural Commodities Seen Choppy Into Reports

Aside from lean hogs, which dropped the daily limit on Tuesday, agricultural futures markets appear to be moving sideways ahead of Monday’s USDA Quarterly Stocks report and the Prospective Plantings report.  The markets are choppy and vulnerable to the latest news headlines.\r\n   Volume is light, and traders expect these key reports to bring even more volatility on Monday.\r\n   Hogs were limit-down Tuesday amid profit taking and ideas summer hog supplies may not be as short as some were thinking.  Speculative profit taking was the rule of the day as the index rose, even though cash markets were slightly weaker.  Further declines were seen in overnight trading.\r\n   Some said fewer reports of Porcine Epidemic Diarrhea virus led speculative traders who were looking for an excuse to liquidate anyway, to think the worst of this disease was behind us.\r\n   Those ideas may change, however, after a Rabobank report that PEDv will cause North American hog numbers to decline significantly through 2015.  PEDv will cause a significant 12.5% two-year shortfall butcher hogs from 2013 levels, slicing 18.5 million head out of the herd.\r\n   Rabobank said the decline in hog numbers could mean a 6% to 7% decline just in 2014, the most in more than 30 years.\r\n   The winner will be the US poultry industry.  US beef production is expected to decline nearly 6%, and with pork production expected lower, consumers likely will turn to chicken. \r\n   However, chicken output growth could be strained by a limited breeding flock and high demand for fertilized eggs from Mexico.\r\n\r\nCASH CATTLE STEADY TO HIGHER\r\n\r\n   Cash cattle markets traded steady to $2 per cwt higher than last week on Tuesday in a light trade.  Many cattle owners rejected packer bids figuring that steady packer demand at near-record prices on a Tuesday could mean even higher demand and prices later in the week if packers don’t get filled up.\r\n   Cattle traded Tuesday in a range from $150 to $152 per cwt on a live basis in the southern Plains with some up to $154 in Nebraska, which would be $2 higher.\r\n   Plains trading also may be getting some support from steady to smaller feedlot showlists.  The estimated number of cattle that were put up for sale this week was near flat in Nebraska, Kansas and Colorado but was down significantly in Texas.\r\n   Beef markets are mixed with the USDA reporting choice boxed-beef Tuesday at $241.25 per cwt, up $0.13 and select down $1.48 at $234.45.  The choice/select spread widened to $6.79, and the number of fabricated loads sold into the spot market was only 62.\r\n   Slaughter Tuesday was 118,000 head, steady with a week ago and only slightly behind the 120,000 of a year ago.  \r\n   The CME Feeder Cattle Index for the seven days ended Monday was $177.02, up $0.36 while the March futures contract settled Tuesday at $177.22, up $0.52.\r\n\r\nANALYST THEORIES ABOUND AHEAD OF USDA REPORTS\r\n\r\n   Ahead of the USDA reports Monday, analyst theories about what the report will say abound as they try to get customers to examine their market positions.  The result has been a two-sided trade that is likely to continue until sometime next week.\r\n   Some analysts wonder if the USDA will revise downward its previous estimate of second quarter US corn feed and residual use or make some adjustments to soybeans that indicate last year’s soybean crop was understated.\r\n   Informa was out Tuesday with its estimates, calling for 93 million acres of corn and 81.2 million of soybeans.  This aligns well with many pre-report estimates and compares with a USDA estimate of 92.0 in February and 95.4 million last year.  Last month, the USDA estimated 79.5 million soybean acres, and last year 76.5 million were planted.\r\n\r\nIN OUR OPINION\r\n\r\n–Cold soil temperatures threaten late planting – could mean some corn acres are switched to soybeans.\r\n–Slipping HRW wheat condition may bring more grazeout\r\n–Consumers likely to pay up for meat as beef, pork supplies decline and chicken supplies rise slowly.\r\n–Meat imports could rise\r\n