14 September 2011

5 minute read

North America

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday with deferreds lower. The market just does not have much faith in price strength into 2012. SEP’11DA futures finished at $18.92/cwt; even with Friday’s close. The JAN’12DA contract closed at $17.30/cwt; off $0.06/cwt.

October 2011 through December 2011 milk futures were supported on short-covering. Butter prices were lower in the nearby contracts. Barrels were offered higher with no takers. USDA released its World Agriculture Supply Demand Estimates (WASDE) report early Monday showing estimated milk production for next year down 300 mi lbs.

Commercial exports for 2012 were lowered 100 mi lbs to 8.6 bi lbs. USDA left 2012 all-milk price unchanged in a range of $17.80-18.80/cwt. All milk price for 2011 was lowered $0.15/cwt to a range of $20.15-20.35/cwt.

Class III price was lowered this year by $0.20/cwt to a range of $18.25-18.45/cwt. Average prices for Class III milk are: three months out = $18.55/cwt ($0.98/cwt lower than two weeks ago); six months out = $17.96/cwt ($0.71/cwt under week before last); nine months out = $17.62/cwt ($0.58/cwt lower than two weeks ago); and 12 months out = $17.49/cwt ($0.34/cwt under last report).

Dairy producers should try and price near-term-only feed needs or think about increasing wheat in the diet. Silage prices could be expected to increase as well due to higher fuel costs. It would be a good consideration to lock in milk prices up to three months out if possible.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished up on Monday. The OCT’11LC contract closed at $119.400/cwt up $0.950/cwt. JUNE’12LC futures closed at $124.800/cwt; up $0.650/cwt. Stronger beef prices and follow-through buying were supportive. However, showlists were light with Texas volume down over 2,000 head.

Lackluster domestic consumption is being offset partly by strong export demand. Exports were up 27 per cent over last year. Drought is still pushing cattle to feedlots and the large supply is being picked by packers.

Eventually these higher numbers will taper off when the supply dries up (no pun intended). USDA put the five-area average cash price at $117.59/cwt. The trend is still up; correcting after several weeks of decline (see chart 9/12/11 chart).

Late Monday, 29 August, USDA put the beef cutout value at $181.83/cwt; up $1.70/cwt. According to HedgersEdge.com, the average packer margin was lowered $54.05/head from last report to a positive $13.25/head based on the average buy of $113.96/cwt vs. the average breakeven of $114.97/cwt. It might be a good idea to price near-to-intermediate feed needs while pricing cattle up to two months out.

FEEDER CATTLE at the CME closed up on Monday. The SEP’11FC contract finished at $133.400/cwt, up $0.175/cwt. The NOV’11FC contract settled at $136.400/cwt, up $0.725/cwt. Feeders were higher on spillover from fat cattle but gains were limited by higher corn prices. The Oklahoma National Stockyards estimated Monday’s volume at 16,200 head vs. 10,070 head a year ago.

The sale was closed last Monday but opened amid light volume last Tuesday. Compared to last week steers were $2- $3/cwt lower while heifers were steady-to-$2/cwt lower. Steer calves were $3-$6/cwt lower. Heifer calves were $2-$3/cwt lower.

Demand was considered for steers and moderate-to-good for heifers. Volume waslight for this time of year but considered reasonable as producers sold ahead last spring on good prices and sold again this summer due to drought and extreme heat. The latest CME feeder cattle index was placed at $132.10; up $0.67 (see chart).

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. SEPT’11 futures closed at $7.342/bu; up 8.25¢/bu. The DEC’11 contract closed at $7.454/bu; up 9.0¢/bu.

Commercial buying on lower prices and USDA’s September crop report released Monday were supportive. USDA cut its harvest outlook for the second straight month on weather related concerns. USDA put 2011 US corn production at 12.497 bi bu, 22 mi bu lower than expected and 395 mi bu lower than the August report.

USDA put 2010/11 old-crop ending stocks at 920 mi bu; 35 mi bu lower than estimates. 2011/12 ending stocks were placed at 672 mi bu. USDA lowered corn yield while keeping harvested acres the same as last report.

Corn was supported by spreading with traders buying corn and selling soybeans or wheat. Funds bought 9,000 corn contracts and sold net 9,000 soybean and 2,000 wheat contracts. High US corn weakened exports with USDA putting corn-inspected-for-export at 16.542 mi bu vs. expectations for 22-27 mi bu. Corn-for-ethanol demand remained sharp amid positive margins for biofuel producers.

Prices will limit use in the coming weeks. Economists are now predicting food prices will be increasing next year due to the 2011 summer that was unseasonably hot. Corn producers should consider pricing up to 50 per cent of the 2011/12 crop. End users should price near-to-intermediate grain needs due to upside potential in corn price.

SOYBEAN futures on the Chicago Board of Trade (CBOT) fell on Monday. The SEP’11 contract closed at $13.674 /bu; down 29.0¢/bu. NOV’11 soybean futures closed 30.75¢/bu lower at $13.960/bu. The MAR’12 contract closed at $14.130/bu; off 29.5¢/bu.

Monday’s USDA report raised its US crop production outlook on increased yield expectations despite forecasts for a smaller crop due to hot, dry weather. USDA increased production 29 mi bu to 3.085 bi bu. Ending stocks were increased 10 mi bu to 165 mi bu. Larger global supplies, sluggish US exports, and poor external financial market prospects over European debt issues weighed on prices.

Export influence this week is positive with USDA putting soybeans-inspected-for-export at 11.757 mi bu vs. expectations for seven to 11 mi bu. China cut its US soybean imports by 15.7 per cent since July 2011.

Unwinding of long-soybean / short-corn inter-market spreads weighed on prices. South American soybean prices decreased over 3.3 per cent on world economic woes. It looks like storing soybeans won’t pay at the moment due to the carry. However, soybean producers should not be too eager to price their soybeans. Soybean users should consider pricing up to three months use at this time.

WHEAT futures in Chicago (CBOT) finished down some on Monday. SEPT’11 futures finished 1.25¢/bu lower at $6.996/bu. The DEC’11 contract closed at $7.272/bu; down 2.5¢/bu. JULY’12 wheat futures finished at $7.864/bu; off 3.0¢/bu.

Wheat fell again to a one-month low on USDA’s forecast for a large increase in US and global ending stocks. Session losses were limited on corn gains near closing. USDA raised its outlook three per cent from August due to increased output estimates for Canada, Europe, and the Ukraine US export predictions were decreased due to increased global competition.

USDA on Monday raised its estimate for 2011/12 US ending stocks by 90 mi bu (13 per cent) to 761 mi vs. expectations for 663 mi bu. Exports were bearish with USDA putting wheat-inspected-for-export at 15.716 mi bu vs. expectations for 18-23 mi bu. Wheat prices were also supported by spillover strength from CBOT corn and hoped-for-increases in domestic consumption. Livestock producers seem to be turning more to wheat for feed due to high corn prices. Wheat producers should consider pricing up to 40 per cent of the 2012 crop. End users should think about pricing only near-term needs.