22 June 2011

6 minute read

North America

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) finished mixed with nearby up and deferreds off. The JUNE’11DA contract finished at $19.15/cwt; even with Friday’s close as well even with the close reported last Monday. JULY’11DA futures finished at $20.06/cwt; up $0.02/cwt and $0.29/cwt higher than this time last week. Dairy product prices have been increasing since the end of April. CME butter is staying over $2/lb and finished $2.14/lb last Friday. Cheddar started and remained strong all day. After Friday’s USDA milk-production report futures moved slightly higher in the front months. Dairy herds expanded in May with Washington increasing over 5,000 head, Texas over 4,000 head, California 3,000+ head, and Michigan increasing over 2,000 head of dairy cows. Milk production in California was up 3.7 per cent or 4.3 mi lbs on a total increase of 23,000 cows over the last five months. Production per-cow is also up 1.8 lb/cow to a record high 66.9 lbs/cow. Various factors are responsible for the strength but dairy exports are seen as the major factor impacting price increases. Fluid milk sales are sluggish except for organic beverage milk. Compared to a year ago, conventional milk sales were down 2.9 per cent while organic milk sales are 19.9 per cent higher than this time last year. Milk sales are expected to fall some from August through December but milk prices are extremely sensitive to small changes in milk production, sales, and exports so it’s anyone’s guess right now. The market is betting milk prices will be lower the latter half of 2011.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday. The JUNE’11LC contract has expired. The OCT’11LC contract closed at $111.85; up $2.075/cwt. AUG’11LC futures closed at $111.975/cwt; up $1.775/cwt and $7.950cwt higher than last Monday. USDA’s report last Friday was bullish and cash markets are expected to go higher this week. Last Friday put the June 1 feedlot supply at 104 per cent of this time last year, May placements at 89 per cent of a year ago, and May marketings at 107 per cent of a year ago. Higher marketings are bullish for June and August while lower placements support October and December futures. Cash cattle were bid41/cwt higher after trading $3-$4 higher last week. USDA put the 5-area-average at $109.25/cwt; $3.21/cwt higher than last report. USDA on Monday put choice beef prices at $172.94/cwt; up $0.78/cwt and $0.40/cwt higher than this time last week. According to HedgersEdge.com, the average packer margin was lowered $13.90/head from a week ago to a positive $35.10/head based on the average buy of $108.04/cwt vs. the average breakeven of $110.83/cwt.

FEEDER CATTLE at the CME closed up on Monday. The AUG’11FC contract settled at $135.500/cwt, up $2.850/cwt and $10.67725 higher than a week ago. The NOV’11FC contract settled at $137.500/cwt, up $2.750/cwt and $8.725/cwt higher than last report. Supplies will continue to tighten and as long as they continue in this trend cash prospects will stay strong. The bullish reaction to Friday’s report plus higher cash prices pushed feeder cattle to a six-week high. Estimated receipts in Oklahoma City were put at 8,200 head vs. 7,707 last Monday and 6,048 a year ago. to last week demand was steady-to-firm for feeders weighted stock were $-600-$10 higher while young calves were steady to $1/cwt higher. The latest CME feeder cattle index was placed at $124.58; up $0.23 and $0.25over last report.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’11 contract closed at $7.004/bu; up 0.25 ¢/bu but 82.0 ¢/bu lower than a week ago. The DEC’11 contract closed at $6.604/bu; down 0.5 ¢/bu and 44.0 ¢/bu lower than this time last week. Short covering and support from rising crude oil prices broke a five-session losing streak in CBOT corn. Exports were supportive with USDA putting corn-inspected-for-export at 42.978 mi bu vs. trade estimates for 29.0-33.0 bu. USDA late Monday rated the US corn crop in good-to-excellent condition at 70 per cent, up 1 per cent from last Monday and in line with trader’s expectations. Soils are saturated with good moisture but rain in the forecast in the major US corn growing states has given traders cause for flooding concern. After interviewing several ethanol industry players today I have come to the conclusion that the US ethanol seems to be shrugging of the US subsidy loss recently nixed by Congress. Makes one think they had it good too long. Some ethanol producers are making plans to shut down production in order to cut supply and boost prices. Cash corn prices have leveled off due to slower demand. Falling futures and users scaling back on poor margins are keeping basis in check. The tightest corn supplies in 15 years have corn prices near $8/bu.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed higher on Monday. The JULY’11 contract closed at $13.356/bu; up 2.75 ¢/bu but 476.0 ¢/bu lower than last report. NOV’11 soybean futures closed 5.25 ¢/bu higher at $13.354/bu but 41.25 ¢/bu lower than last report. A short-covering bounce by speculators lifted the market on Monday. Firm cash markets in Brazil on recent Brazilian exports to China were supportive. USDA increased the good-to-excellent condition for the US crop to 68 per cent. China canceled a buy of 120,000 tonnes (4.41 mi bu) for 2010/11 delivery due to high delivery costs. Meanwhile USDA put soybeans-inspected for-export at 4.182 mi bu vs. expectations for 9-10 mi bu. Rain forecasts are expected to help develop the US crop … if not too much falls. Floods in the Missouri River valley are still causing delivery interruptions. Signs of price weakness continue to show.

WHEAT futures in Chicago (CBOT) closed down on Monday. JULY’11 futures finished 13.0/bu lower at $6.592/bu and 83.75 ¢/bu lower than last report. The DEC’12 contract closed at $7.452/bu; off 8.0 ¢/bu and 71.25 ¢/bu lower than this time a week ago. Technical selling, good crop development weather and harvest pressured prices. USDA put wheat inspected-for-export at 20.918 mi bu vs. trade estimates for 19-23 mi bu. Libya rebels reportedly bought 100,000 tonnes (3.67 mi bu) of US wheat. Jordan bought the same amount, while Saudi Arabia said Monday it would buy 360,000 tonnes (13.2 mi bu). US crops are turning out to be better than expected on recent harvest reports. Wheat prices are lower as U.S crops look to be in better shape than expected. Lastly poor economic conditions in Europe are slowing global demand for wheat. Wheat prices should continue to weaken if harvest numbers stay good and good crop prospects continue the status quo in Europe.

LEAN HOGS on the CME closed up on Monday. The JULY’11LH contract closed at $97.550/cwt; up $1.900/cwt. AUG’11LH futures closed at $96.675/cwt; up $1.825/cwt and $4.300/cwt higher than last report. Last week’s higher cash hog and pork markets were supportive and pushed futures to a seven- week high. Cash hogs were $0.50/cwt-$1/cwt higher. A seasonal reduction in supply is seen as limiting marketings. Additionally, the average weights on hog slaughter are tapering off. USDA put the pork cutout at $95.77/cwt; up $2.8396/cwt and $5.06/cwt higher than last report. According to HedgersEdge.com, the average packer margin was raised $3.60/head to a negative $4.75/head based on the average buy of $70.73/cwt vs. the average breakeven of $68.99/cwt. The latest CME lean hog index was placed at $93.68; up $1.17 and $3.11 higher than this time last week.