Texas Daily Ag Market Summary 6/19/14

Posted 10 years 162 days ago by

Feeder cattle mostly $3-$8 higher; futures limit down.
Fed cattle cash trade inactive; futures lower; beef prices higher.
Cotton higher.
Grains and soybeans higher.
Crude oil and natural gas lower.
Stock markets higher.

Regarding drought relief, State Climatologist Dr. John Nielsen-Gammon said, “We’ve basically had a lot of good rain in areas that had been particularly hard hit by drought, but it takes a lot more than that to actually get them out of drought completely. For now, it appears the best chances of summer rain are going to be in the northern and northwestern areas, which would encompass the Texas High Plains cotton region. However, what’s needed to give real drought relief is enough rain to recharge the subsoil moisture profile and refill reservoirs and lakes, and the best chances for that come from an El Nino this fall.”

This week’s U.S. Drought Monitor (click here for the Texas map or here for the U.S. map and summary) showed a slight decline in overall conditions in Texas, with 90% of the state rated in some degree of drought or abnormal dryness, up from 89% a week ago. Areas in extreme drought declined, but areas in moderate drought expanded. Much of East Texas and a section of South Texas remain drought-free. Nationally, the total area experiencing abnormal dryness or some degree of drought declined by 1 point to 45% of the contiguous states.

Feeder cattle prices reported by Texas auctions mostly $3-$8 higher per cwt, with a few steady and some as much as $15 higher. Feeder cattle futures were down the daily $3 per cwt limit on all contracts as traders liquidated their positions, partly due to “technical” chart-based reasons and partly due to notions that the recent rally in futures prices might have gone too far. Whatever the initial reason, reports said a large trader joined in the exit and that sparked even more active selling, leading to the limit-down move. Prices will likely rebound somewhat today as the market fundamentals – very tight supplies and good demand – continue to support the prices. The fed cattle cash trade was mostly inactive yesterday, though a few head were reported sold in Nebraska at $148 for delivery 2 weeks out. That’s down $2 from last week’s average and not good news for Texas feedlots as prices here tend to run a couple dollars lower than on the Northern Plains. Wholesale boxed beef values were higher again yesterday and have now gained about $8 per cwt for the week. Estimated cattle slaughter through Wednesday totaled 346,000 head, up 1K from last week, but 23K lower than a year ago. Fed cattle future were lower.

“What will drive the next cow herd expansion?” Good overview from the University of Kentucky of the factors that will impact cattle herd rebuilding, on the Drovers Cattle Network web site.

Cotton cash prices and futures were higher yesterday after traders took notice of the ongoing drought conditions in Texas. Recent rains have boosted crop prospects in many areas, but most of the major cotton-growing areas of the state remain in drought, with areas around Lubbock still in severe to exceptional drought. Reports noted that much of the crop looks good now, but more rain will be needed soon. On top of that, the most recent storms have also included locally-devastating high winds and hail. Still, there is every reason to think that this year’s crop could come in larger than currently projected. In fact, Dr. Carl Anderson, “cotton guru” and professor emeritus at Texas A&M University said yesterday, “We could be looking at a 16.5 million bale crop vs. USDA’s June WASDE call for 15.0 million bales.” Reports that a slow start to the monsoon season in India may have also added to the market support.

Wheat prices were higher yesterday, mostly due to reports of poor yields and harvest delays on the U.S. Southern Plains.

Corn and grain sorghum prices were also higher, mostly following wheat as there was little fresh news to move markets much in either direction. Record high weekly ethanol production was somewhat supportive. As long as the weather remains favorable, the potential exists for a large corn crop this year, even larger than currently projected, and that will keep a lid on any price gains.

Stock markets closed higher yesterday after Federal Reserve Chairwoman Janet Yellen said that “interest rates will stay low for a long time,” which was a relief to those investors who were worried that a sharp rise in rates could hinder the U.S. economic recovery. The Fed’s projections for its benchmark Fed Funds rate, now at .09%, show it rising to 1.2% by the end of 2015 and 2.5% by the end of 2016. Chairwoman Yellen also said that “improvement in the job market and easing credit conditions could produce above-trend economic growth.”

Disclaimer: The information compiled in the Daily Market Summary is obtained from a variety of sources, including those available on the Internet, that are believed to be reliable and accurate, but are in no way guaranteed. This information is intended to provide only a summary of market trends and a daily snapshot of agricultural markets and economic indicators. It should not be relied upon as a sole source of market information. Commentary is the author’s alone and does not in any way convey official TDA policies.