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Demand to Low to Overcome Hides From Large Kills

Posted on Jul 14, 2017 in Hide & Leather

It appears that there was not enough demand this week to overcome the wave of hides coming from the large kills prompted by very positive packer margins. Prices this week slipped $1 to $2 on most trading with volume reported to be less than a week’s worth of production. It should be noted that a reporting issue for last week’s export sales and shipment numbers could inflate this week’s numbers on the USDA export report next Thursday if any missed numbers are carried over. In a falling market, pinpointing prices is a moving target and this week was no exception which saw prices changing as the week progressed. Packer HNS, for instance, sold for $67 at the beginning of the week and slipped to $65 toward the end, BBS went from $64 to $62, and HTS from $61 to $60 FOB plant—and there are some unconfirmed reports with much wider ranges. Several people noted that the lack of volume sales made it difficult to get a good feel for prices on some selections.

Week-Ending Slaughter

The week’s estimated cattle slaughter was 637,000. The previous week’s kill was 546,000 and the corresponding week last year it was 598,164. Year-to-date slaughter at 16,678,862 is up 5.2% from 2016.

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Soybean export sales for the 2016/17 marketing year fell 38%

Posted on Jul 14, 2017 in Biodiesel, Vegetable Oil, and Grain

Soybean export sales for the 2016/17 marketing year fell 38% to 228 TMT and were 19% less than the prior 4-week average of 282.3 TMT. New crop sales totaled 455 TMT, up dramatically week over week and lifting combined season sales to 683 TMT. Combined crop year sales were up 56% from last week and exceeded analyst expectations that ranged from 250 to 600 TMT. 2016/17 export commitments are 105% of the USDA forecast with 8 weeks to go. Current sales are 16% ahead of last year’s pace. Major purchases were reported for the Netherlands, Egypt, and Indonesia.

Soybean meal sales for the 2016/17 marketing season were 3.7 TMT, a marketing year low, down 92% week over week, and 97% less than the prior 4-week average. New crop sales totaled 137 TMT, lifting total sales to 140.7 TMT. Combined season sales were up 75% week over week but and within analyst expectations that ranged from 25 to 250 TMT. Accumulated export commitments for the 2016/17 marketing year are 93% of forecast with 12 weeks to go. Major purchases were made by the Philippines, Canada, and Mexico.

Soybean oil 2016/17 export sales of 16,200 metric tons were up 145% from last week and 3% more than the prior 4-week average. There were no new crop sales, leaving total sales at 16.2 TMT. Total sales were within analyst expectations that ranged from 10 to 20 TMT. Old crop commitments are 92% of forecast and 9% less than last year’s commitments over the same period. Major purchases were made by Mexico, South Korea, and the Dominican Republic.

Weekly corn export sales for the 2016/17 marketing season of 161.2 TMT was up 15% from last week but 59% less than the prior 4-week average of 396.5 TMT. New crop sales totaled 279.7 TMT. Total sales of 440.7 TMT were up 105% week over week and within analyst expectations that ranged from 350 to 700 TMT. Increases were reported for Mexico, Japan, and Spain. 2016/17 export commitments are 99% of the USDA forecast. Export sales exceed last year’s pace by 16%.

Wheat export sales for the 2017/18 marketing year totaled 357,700 metric tons, down 5% from last week and 20% less than the prior 4-week average. There were no new crop sales, leaving total sales at 357.7 TMT. Combined sales were down 5% from last week and within analyst expectations that ranged from 300 to 500 TMT. Export commitments are 33% of the USDA forecast with 47 weeks to go. Export sales are currently on par with last year’s commitments. Major purchases were made by the Philippines, Japan, and Malaysia.

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Tallow Prices Find a Toe Hold, and Stabilize After Slide

Posted on Jul 14, 2017 in Animal Fats & Oils

Trading was quiet to wrap up the week. There was a report of tech tallow offered steady with the current Chicago pricing, but as of press time there was no action reported. Other market indications from buyers and sellers were echoes of the market tone that have been present throughout the week, lower bids for CWG and YG out of bio and steady sales into feed.

Tallow Prices Find a Toe Hold, and Stabilize After Slide

Tallow prices are attempting to find a toehold, following the recent decline from the highs above 37.  With bean oil and other vegetable oils rising in the wake of the hot dry conditions in the U.S., tallow prices could stabilize.  Prices appear to be forming a bull flag pattern which is a continuation pattern where there is a pause that refreshes higher.  Support is seen near the 20-week moving average at 35. Resistance is seen near the Bollinger band high which is 2-standard deviations above the 20-week moving average at 38.  The Bollinger bands are near the wideest levels seen in 2017, and are now contracting reflecting decelerating historical volatility.

Momentum has turned positive as the MACD (moving average convergence divergence) index recently generated a crossover buy signal. This occurs when the spread (the 12-week moving average minus the 26-week moving average) crosses above the 9-week moving average of the spread. The MACD histogram is printing in the black with an upward sloping trajectory which points to higher prices.

The daily MACD is relaying a different story. Here the MACD recently generated a sell signal.  This occurs as the spread (the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the spread. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices for tallow.

The relative strength index (RSI) which is a momentum oscillator that measures accelerating and decelerating momentum, has stabilized near the 60 level, and has declined from oversold territory. The current reading is on the upper end of the neutral range, but reflects consolidation.

For any comments or questions in regards to Tallow Prices Find a Toe Hold, and Stabilize After Slide, please contact David Becker at davesbecker@gmail.com

Please contact Ryan Standard at 563.223.9021 or ryan@thejacobsen.com with any questions, comments or trading.

Broiler-fryer slaughter under federal inspection for 14-Jul-17 and 15-Jul-17 is estimated to be 33,622,000 head down 7.05 percent from a week ago and down 1.3 percent from a year ago. (Last week 36,173,000, last year 34,072,000)

Weekly broiler-fryer slaughter under federal inspection for the week ending 15-Jul-17 is estimated to be 165,955,000 head up 16.98 percent from a week ago, and up 1.84 percent from a year ago.(Last week 141,867,000, last year 162,953,000

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Heating Oil Gains are Offset by OPEC Report

Posted on Jul 14, 2017 in Biodiesel, Vegetable Oil, and Grain

Heating oil prices moved higher following a larger than expected draw in crude oil inventories, but were unable to hold its gains mid-day on Wednesday, after hitting resistance levels. Offsetting the positive news, was a report from OPEC that showed that Saudi Arabia increased its production in June, despite a promise to extend its production cuts in May to March of 2018.

Saudi Arabia has been a key player in reducing global stocks of oil, by reducing exports, and lowering production. In its most recent report, OPEC revealed that Saudi Arabia action increased production in June. While the number released by OPEC is production, it’s not clear if those barrels will show up in the United States, or consumed by another region.

A decline in imports has helped heating oil prices stabilize after declining by nearly 20% since mid-May. The EIA reported that U.S. crude oil imports averaged over 7.6 million barrels per day last week, down by 132,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.8 million barrels per day, 3.0% below the same four-week period last year.

Inventories Dropped

The decline in imports has also helped reduced inventories. The EIA reported that U.S. commercial crude oil inventories decreased by 7.6 million barrels from the previous week. Expectations were for a decline of 3-million barrels. Gasoline inventories decreased by 1.6 million barrels last week, while distillate fuel inventories increased by 3.1 million barrels last week.

On the demand front, total product demand over the last month averaged over 20.7 million barrels per day, up by 2.8% from the same period last year. Over the last month, gasoline demand averaged over 9.7 million barrels per day, down by 0.3% from the same period last year. Distillate fuel demand averaged 4.1 million barrels per day over the last month, up by 8.8% from the same period last year. Jet fuel demand is up 10.7% compared to the same four-week period last year.

Prices were unable to breach resistance near a downward sloping trend line that comes in near 1.50. Support is seen near the 10-day moving average at 1.4702. Momentum remains positive as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices.

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