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Corn And Cattle Prices Will Remain Volatile

06 April 2011

US - Last week was another volatile price week for both corn and cattle prices. On Thursday, March 31 USDA-NASS released its long anticipated annual Prospective Plantings Report, which many livestock producers hoped would show increased corn acreage for 2011, writes Tim Petry, Livestock Economist at North Dakota State University.

Increased acres were needed to replenish the relatively short supplies and slow the increasing prices of corn. On Monday through Wednesday the nearby May corn futures contract declined 26 ¼ cents a bushel and the new-crop December futures lost 14 ¼ cents, as trade expectations for increased corn acreage surfaced.

The NASS report estimated 2011 corn acreage at 92.178 million acres, about 0.34 million above pre-report trade estimates and almost 4 million acres higher than last year. While these acreage numbers looked promising to the livestock industry, all 2011 corn futures contracts increased the 30 cent per bushel limit after the report was released. On Friday, May corn surged upward another 42 ¾ cents with December climbing another 12 ¼ cents.

Prices actually increased due to another NASS report, Grain Stocks, which was also released on Thursday morning. NASS reported corn stocks in all positions on March 1 at 6.52 billion bushels, down 15 percent from a year ago and below pre-report trade expectations by about 170 million bushels. The December 2010 – February 2011 corn disappearance was 3.53 billion bushels, compared with 3.21 billion during the same period last year. So the report indicated that higher corn prices have done little to ration demand.

Corn prices will likely stay volatile due to the short stocks, the uncertainty of how many acres actually get planted, and subsequently, the potential for yields at harvest. For example, the 450,000 acre increase in prospective corn plantings in North Dakota and the 850,000 increase in South Dakota amount to 32.6 percent of the U.S. increase. As I look out my office window in Fargo, North Dakota, I still see lots of snow and very cool, wet conditions. Corn planting is likely several weeks away at best. And, of course, very dry conditions exist in the Southern Plains.

Not to be outdone, the live cattle futures market also continued to exhibit volatility. After closing down 65 cents per hundredweight on Monday, April live cattle futures closed higher on each consecutive day of the week to end at a contract high of $122.07 on Friday.

The Markets

The fed cattle market surged to new record highs last week. 5-area fed steer prices on a liveweight basis averaged $121.66 per hundredweight, up $7.40 from the previous week. Dressed weight prices climbed $11.40 to average $199.03 for the week, with prices as high as $201 reported in the North where supplies are seasonally tight and packers bid aggressively for cattle. Choice boxed beef prices moved up 40 cents per hundredweight to close at $188.06 for the week, with strength coming from seasonally higher prices for loins and ribs. The Choice-Select spread also continued its seasonal increase by moving up 83 cents to $2.91. A good demand continued for the shorter supply of lightweight feeder calves suitable for grass. Prices were $5 to $10 higher for 500-600 lb. steers in the Mountain States and Northern Plains where moisture is abundant. Prices in the Southern Plains were steady to $2 higher where dry conditions continue to exist. The 700-800 lb. feeder steers also moved several dollars higher. Corn prices in Omaha increased 16 cents per bushel to close at $6.89 on Thursday. Dry distillers grains in Nebraska lost 10 cents a ton while wet distillers gained about 90 cents.

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