Weekly Roberts Market Report

US - All futures contracts increased an average of $0.34/cwt. Butter showed no price change on inactivity.
calendar icon 2 February 2011
clock icon 6 minute read

Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) were up on Monday. The MAR’11DA contract finished at $18.19/cwt; up $0.75/cwt and $1.19/cwt over last report. JULY’11DA futures finished at $16.70cwt; up $0.32/cwt but $0.09/cwt lower than last week at this time. Blocks and barrels both increased fueling March futures. All futures contracts increased an average of $0.34/cwt. Butter showed no price change on inactivity. Farm profitability narrowed in January 2011 with corn averaging $5.37/bu; soybeans $12.60/bu and alfalfa near $121/ton. Meanwhile the all-milk price for January was estimated at $16.20. This put income-over-feed-cost at $7.15/cwt. 2011 should continue to be a transition year, while dairies recover and balance margins. High feed costs are expected to continue while milk prices are forecast lowest in the first and second quarters of 2011. Cull cow prices are expected to be strong for 2011. Gains in per-cow milk are likely to continue leading overall gains in total US production. Exports are expected to decrease somewhat from 2010 record levels but will depend on: Oceania production and the rate of the economic recovery.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday. The FEB’11LC contract closed up $1.450/cwt at $108.950/cwt and $2.175/cwt over last report. The APR’11LC contract closed at $114.050/cwt, up $1.275/cwt and $2.375/cwt higher than last Monday. AUG’11LC futures closed at $114.850/cwt; up $0.950/cwt and $2.475/cwt over this time last week. Cattle were encouraged by higher hog prices. Prices for beef and pork are high now as a supply disruption in one market can support higher prices in the other. Hog movement to market has been severely restricted by bad winter weather. In addition, recent snow storms are slowing weight gains as reflected in recent cattle sales in Nebraska. Last Friday USDA’s cattle inventory report showed the smallest US cattle herd in 53 years … but traders said that was expected. Additionally, the report showed the US beef herd continuing to shrink. I conducted random producer interviews this week and found that producers are selling breeding stock because they expect feed prices to remain high. USDA put the choice beef cutout at $173.31/cwt; up $0.46/cwt but $0.31/cwt lower than a week ago. Cash cattle traded at $104-$105/cwt last week. USDA put the 5-area average cash cattle price at $104.35/cwt down $1.50 from this time last week. Processors are concerned with transportation disruptions and higher retail prices at meat displays slowing sales. According to HedgersEdge.com, the average packer margin was raised $18.05/hd to a positive $45.75/head based on the average buy of $105.34/cwt vs. the average breakeven of $108.75/cwt.

FEEDER CATTLE at the CME closed up on Monday. The MAR’11FC contracts finished up $1.775/cwt at $128.000/cwt and $1.650/cwt over last report. APR’11FC futures finished at $129.075/cwt; up $1.900/cwt and $2.750/cwt higher than this time last week. The AUG’11FC contract settled at $129.975/cwt, up $1.475/cwt and $2.675/cwt higher than last report. Feeder cattle found strength following the lead of late-summer delivery month in live cattle futures. This signals feedlots are expecting to be compensated for higher-priced feeders. Estimated receipts in Oklahoma City on Monday were put at 9,500 head vs. 9,829 last Monday. The CME 7-day average price for 65-849 lb feeders for 1/28 was put at $125.55/cwt; down $0.10/cwt. The CME feeder cattle index was placed at 125.65 ¢/lb; down 0.53 ¢/lb from Friday and 1.62 ¢/lb lower than a week ago.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The MAR’11 contract closed at $6.594; up 15.5 ¢ /bu and 4.25 ¢ /bu higher than last week at this time. The DEC’11 contract closed at $5.912; up 14.75 ¢/bu and 4.0 ¢/bu over last report. Wheat strength, a weaker dollar, higher crude oil, a port strike in Argentina, and end-of-month fund buying were supportive. Wheat prices affect corn prices as they are both used for feed. US corn is more affordable on the world market when the US dollar is weaker compared to other currencies. London’s Brent crude closed over $101/barrel on fears Egypt’s unrest could spread to oil producing areas. Corn prices have been tracking crude prices for some time now as corn is correlated to fuel. Fund buying near month end is a result of account balancing on profits or losses from energy investments, primarily crude oil. Funds bought over 8,000 lots. Exports were weaker than expected as USDA put corn-inspected-for-export at 18.690 mi bu vs. expectations for 25-30 mi bu. Cash corn was steady-to-firm at US Midwest elevators and ports. Crops are battling for acres. Demand for ethanol remains strong as the US approved use of E-15 in vehicles newer than 2005. However, after talking with congressional representatives last week there is a strong desire in Washington to reduce or eliminate the blender’s credit. This could produce a fundamental shift in demand.

SOYBEAN futures on the Chicago Board of Trade (CBOT) finished up on Monday. The MAR’11 contract closed at $14.130/bu; up 15.0 ¢/bu and 8.75 ¢/bu over last report. NOV’11 soybean futures closed up 18.0 ¢/bu at $13.410/bu and 4.5 ¢/bu higher than last Monday at this time. A strike in Argentina, spillover support from wheat, a weak US dollar, firm crude, and end-of-month fund balancing were supportive. The Argentine union indicates the grain port strike may grow. Exports were weak with USDA putting soybeans-inspected-for-export at 29.69 mi bu vs. expectations for 39-43 mi bu. Cash soybeans were steady-to-firm at elevators while river bids were weaker. Funds bought nearly 5,000 lots. Soybean prices look competitive and most likely will compete for corn acres.

WHEAT futures in Chicago (CBOT) closed up on Monday. The MAR’11 wheat contract closed at $8.406/bu; up 15.0 ¢/bu and 5.5 ¢/bu over last report. JULY’11 futures finished up 14.75 ¢/bu at $8.894/bu and 10.75 ¢/bu higher than this time last week. Floor sources said that worries about winterkill in the southern US Plains this week by a major storm could affect yields. The light snowfall totals will leave the crop vulnerable to crop damaging frigid temperatures. Flooding in Australia is hampering wheat shipments from that country. The US, the world’s top wheat exporter, is seen as one of the last places to get high-quality wheat. Egypt is the world’s largest importer of wheat. Protests there are slowing global wheat trade. USDA put wheat-inspected-for-export at 21.313 mi bu vs. trade estimates of 20-25 mi bu.

LEAN HOGS on the CME finished mixed on Monday with futures from February 2011 through August 2011 up and deferreds lower. The FEB’11LH contract closed up $1.500/cwt at $87.250/cwt; $8.22/cwt higher than last week at this time. The APR’11LH contract closed at $94.000/cwt; up $0.375/cwt and $7.750/cwt over last report. AUG’11LH futures closed at $97.325/cwt; up $0.225/cwt and $0.825/cwt higher than last week at this time. October futures and beyond were lower an average of $0.65/cwt. Short covering, end-of-month buying, and the winter storm supported higher hog prices. In other news South Korea signaled willingness to increase imports and lower tariffs. Cash hogs traded $1-$2/cwt higher on Monday. USDA on Friday put the pork cutout at $88.57/cwt; up $0.88/cwt and $2.93/cwt higher than last Monday. According to HedgersEdge.com, the average packer margin was lowered $4.20/hd to a positive $11.75/hd based on the average buy of $59.57/cwt vs. the average breakeven of $63.67/cwt. The latest CME lean hog index was placed at 78.32 ¢/lb; up 0.62 ¢/lb and 2.18 ¢/lb over last report.

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