25 May 2011

7 minute read

North America

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed in tentative trading on Monday with 2011 futures down and some rise in 2012 prices. The MAY’11DA contract finished at $16.48/cwt; even with Friday’s close but $0.08/cwt higher than last report. JULY’11DA futures finished at $18.78/cwt; down $0.18/cwt but $1.21/cwt higher than this time last week. Cheese and butter bid slightly higher but no sales were reported. Class III futures were volatile, trading higher through the weekend, selling down on Monday and then recovering most of the losses by closing. Butter futures were limit up in several months after Friday’s USDA inventory report showed a slippage of stocks to 10- year lows. Fluid milk sales remained sluggish. For the 1st quarter of 2011 sales were down 1.3 per cent from this time last year and 2.3 per cent lower than two years ago. Milk prices may weaken further into May but are still above analyst’s expectations. USDA’s April milk report showed the growth in milk production may be slowing with April’s estimated production for the US. up only 1.5 per cent over a year ago compared to increases averaging 2 per cent month-after-month. The slow down comes off of a smaller increase in milk-per- cow, up just 0.7 per cent from a year ago. Milk cow numbers have increased since October 2010. Of the 23 reporting states 17 had more milk cows over a year ago and 13 had less milk-per-cow. Only 6 states experienced a decline in milk production. If production continues to slow milk prices may hold near current levels.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday with some contracts limit down. The JUNE’11LC contract closed at $102.150/cwt, down $2.825/cwt and $6.175/cwt lower than a week ago. AUG’11LC futures closed at $104.100/cwt; down $3.000/cwt and $5.650/cwt lower than last report. The DEC’11LC contract closed at $113.825/cwt; down $3.000/cwt and $3.450/cwt lower than this time last week. Fat cattle futures were sharply lower after last Friday’s USDA report showed more cattle in feedlots than analysts expected. The report showed an increase of 7.4 per cent from last year vs. trade estimates for a 6.5 per cent increase year-over-year. The increase in April placements was bearish for August and October. Extremely dry conditions in many parts of the Southern Plains are forcing cattle from grazing into feedlots earlier than normal. That, coupled with higher prices encouraged more feeder cattle imports from Mexico and more US. dairy calves into feedlots. Additional pressure came from lower crude oil prices, a lower stock market, and a strong dollar seen as limiting exports. Additionally, worries that Europe was in deeper-than-expected debt trouble fueled selling in equities and thus commodities had to balance. USDA reported choice beef cutout at $175.27/cwt; down $0.32/cwt and $1.12/cwt lower a week ago. USDA put the 5-area-average at $108.28/cwt; $4.53/cwt lower than a week ago. According to HedgersEdge.com, the average packer margin was raised $40.95/head from a week ago to a positive $30.70/head based on the average buy of $110.15/cwt vs. the average breakeven of $112.59/cwt.

FEEDER CATTLE at the CME closed down the limit except for the May ’11 contract on Monday. The MAY’FC11 contract closed at $123.800/cwt; down $1.650/cwt and $4.150/cwt lower than a week ago. The AUG’11FC contract settled at $122.750/cwt, down $3.000/cwt and $8.475/cwt lower than last report. The May contract expires on Thursday and some profit-taking-jockeying was taking place near the close. The USDA cattle report was more bearish in feeder cattle placements than traders expected and prices took it on the chin. Lower outside markets fueled the limit losses. Seasonally, placements usually increase in May but continued drought, lower calf slaughter, and higher dairy feeder calf placements supported the increased numbers. Placements usually decline in June. Fewer feeders will likely be available in the future due to the smaller national calf crop. Estimated receipts at the Oklahoma City National Stockyards were placed at 5,500 head vs. 7,297 last week and 11,266 a year ago. Compared to last week feeder cattle were $8-$10/cwt lower. Stocker calves and cattle were $5-$8/cwt lower. The latest CME feeder cattle index was placed at $128.02; down $0.56 and $1.33 lower than last report.

LEAN HOGS on the CME closed sharply lower on Monday. The JUNE’11LH contract closed at $89.250/cwt; off $2.750/cwt and $4.350/cwt lower than a week ago. AUG’11LH futures closed at $90.500/cwt; off $3.000/cwt and $2.925/cwt lower than last report. Hog futures were pulled lower by cattle and outside markets. Last Friday’s USDA report showed 545.8 mi lbs of pork in storage, down from March but up from a year ago. USDA put the pork cutout at $95.52/cwt; down $1.09/cwt but $0.17/cwt higher than last report. Seasonally speaking, pork prices should move lower now that retailers have most of what they think they can sell for the Memorial Day holiday. In other news, South Korea is expected to extend tariff-free pork imports beyond the end of the first half of this year. According to HedgersEdge.com, the average packer margin was lowered $3.40/head to a negative $1.85/head based on the average buy of $69.50/cwt vs. the average breakeven of $68.81/cwt. The latest CME lean hog index was placed at $95.20; up $0.75 and $3.11 over than last report.

CORN futures on the Chicago Board of Trade (CBOT) closed up Monday with the exception of the July 2011 contract. The JULY’11 contract closed at $7.540/bu; down 5.5 ¢/bu but 56.75 ¢/bu higher than this time last week. The DEC’11 contract closed at $6.704/bu; up 4.0 ¢/bu and 35.0 ¢/bu over last report. Corn futures started lower on a strong dollar, lower crude oil, and unwinding bull spreads but recovered by the end of the day. The unwinding bull spreads held July back while boosting the new-crop December contract. Monetary trouble in Italy and Greece caused a spike in the value of the US. dollar. The continued wet weather that slowed planting and drowned a significant number of planted corn acres, as well as slow farmer selling drove prices near the end of trading. Rain seems to be the market maker. Funds cut net long positions in CBOT corn futures. Late Monday USDA put US. corn seedings at 79 per cent complete vs. 92 per cent this time last year and the 87 per cent five-year average. The US corn crop, according to USDA, was 45 per cent emerged vs. 69 per cent this time last year and the 59 per cent five-year average. Exports were steady as USDA put corn-inspected-for-export at 35.801 mi bu vs. expectations for 32-36 mi bu. Bullish pressure continues on corn stocks with upward channeling in chart signals. If you haven’t sold all you want to it would be a good consideration to hold off as prices look to retain some upward momentum.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday with the exception of the November ’11 and the May ’12 contracts. The JULY’11 contract closed at $13.736/bu; off 6.5 ¢/bu but 47.25 ¢/bu over last report. NOV’11 soybean futures closed 0.25 ¢/bu higher at $13.506/bu but 9.75 ¢/bu lower than last report. Fund sold an estimated 4,000 lots further pressuring prices. Continued rain is slowing wheat and canola planting in the northern US. so more farmers there will reportedly turn to planting soybeans if they can get them in the ground in time. Lower crude oil, a higher US. dollar, and prospects that some land planted to corn will now be replanted to soybeans weighed on prices. Exports were encouraging with USDA placing soybeans-inspected-for-export at 7.77 mi bu vs. trade expectations for 5-7 mi bu. Trade volume was light. Some spot cash soybean prices remained firm on slow farmer selling. Fundamentally soybeans are on the brink of bearish influences. It would be a good idea to advance sales in the 2011 crop at this time.

WHEAT futures in Chicago (CBOT) closed up on Monday with the exception of the front month, July 2011. JULY’11 futures finished 3.5 ¢/bu lower at $8.030/bu but 66.75 ¢/bu higher than this time last week. The DEC’12 contract closed at $8.982/bu; up 5.25 ¢/bu and 57.75 ¢/bu over last report. Funds sold only 1,000 lots. While the firm dollar pressured CBOT wheat futures concerns about the developing crop propped up prices in deferred months. The global wheat crop is still being influenced by a host of weather issues that is seen as trimming production prospects. Cool, wet weather in the northern US. Plains is slowing crop plantings but is not seen as enough to really help reverse drought conditions. Canada is seeing its share of wet-planting-days while dry conditions are plaguing Europe, Germany, France, the Ukraine, western Russia, and especially England. Exports were bullish with USDA putting wheat- inspected-for-export at 30.159 mi bu vs. estimates for 27-30 mi bu. A producer survey of farmers in North Dakota showed they will not get all their intended wheat, corn, and canola acres seeded due to heavy rains and flooding and will plant either soybeans or sunflowers as an alternative. USDA put the US. winter wheat crop in good-to-excellent condition at 32 per cent, the same as last week and 34 per cent lower than this time last year. Fundamentally wheat prices remain bullish.