Most Asian markets were lower overnight after China’s official Purchasing Managers’ Index fell to 50.3 in November from October’s 50.8 and close to a “flash” PMI by HSBC/Markit two weeks ago of 50.0, further proof the economy is losing traction and below market expectations of a 5.6 reading.
A 50.0 PMI Index is the dividing line between economic expansion and contraction, so a decline to 50.3 from 50.8 shows the Chinese economy is still expanding but at a slower rate and is nearly stalled.
The official PMI, which looks harder at official, government-owned businesses than the Markit survey, rekindled trader thoughts of more government intervention to boost the economy. Such moves might pressure China’s Yuan only to boost the value of the US Dollar, which would hurt US exports, especially to China, the world’s No. 2 economy.
As might be expected, overnight grain CBOT grain futures prices are lower.
CRUDE OIL WEAKNESS ADDS PRESSURE
Further weakness in crude oil also pressured corn and soybean prices as demand for ethanol and soybean oil declined.
Corn prices are lower, although soybeans bounced off the lows as bargain hunters stepped in to support the energy markets. The soy complex is being supported by record-wide crush margins, which are keeping the plants running hard and demanding soybeans.
Corn is suffering added pressure from a US Attache report from Russia increasing their grain production by 1 million tonnes. With a weak Ruble, Russian corn exports could expand to take market share away from the US.
CASH CATTLE EXPECTED WEAKER
Cash values for slaughter-ready cattle are expected to decline into spring, some analysts are saying. Taking the futures market as it stands and applying normal basis levels indicates cash prices in the $160- to $170-price range by the last week of the month through April.
Many sources disagree with that conclusion, however, and some are waiting until later in December to take long positions for the spring grilling season.
Cash prices normally drop in early December as the trade adjusts to less demand for ribs and loins and more demand for end cuts. Sources say this well-known seasonal tendency could take the market sharply lower for the next two weeks before a seasonal rally.
Wholesale beef movement into the spot market last week also was lame, declining 16% for the holiday week, while beef values rose 0.85%.
The USDA reported choice boxed beef cutout values Friday at $257.40 per cwt, up $0.27 from Wednesday. Select beef was up $1.85 at $245.85. A week earlier, choice was reported at $255.22 and select at $241.93.
Friday, the USDA reported that only 50 loads of fabricated product were sold into the spot market.
Cash cattle prices last week were about steady at $172 to $173 per cwt on a live basis the same range as a week earlier. On a dressed basis, cattle traded at mostly $267 per cwt.
Trading last week was very light, however, and slaughter weights continued to climb, leading some market analysts to conclude that cattle are backing up in the feedlots, which could add pressure to the market if prices take their seasonal dip.
A chart of the average choice cutout price shows a bump next week, although last year’s post-Thanksgiving day hump occurred the following week. The market then tails off for the Christmas holiday.
The CME Feeder Cattle Index was $240.00, down $0.71 from the previous day, while the Jan contract settled Friday at $231.07, up $0.57.