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Weekly Roberts Market Report

06 March 2012

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

US - Good crop weather boosting prospects for spring seedings contributed to mixed corn futures, writes Michael T. Roberts.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed up on Monday with the exception of the nearby and the January 2013. Short-covering limited upside. The FEB’12DA contract closed at $16.01/cwt, down $0.01/cwt. MAR’12DA futures closed at $15.40 /cwt; up $0.12/cwt. CME butter came under pressure falling $0.025/lb to $1.3950/lb. Cash cheese markets closed unchanged with blocks still at $1.4675/lb. Milk price has not found support and is expected to follow underlying cash prices lower. Reports indicate strong milk production continues amid good weather and cow comfort. This will most likely continue to pressure milk prices. There are reports of concern over the inclusion of a US-New Zealand Trans-Pacific Partnership free trade agreement. One dairy company in New Zealand maintains about 90% of the market share of the milk producers there. This could give the company a share of more than one-third of the world dairy market. The partnership could open up new US export market potential. On the other hand, according to a respected analyst, expansion of the US-New Zealand dairy trade might cost dairy farmers in lost income over 10 years if US dairy tariffs are eliminated for New Zealand’s benefit. Under the proposed agreement tariffs would be lowered or eliminated. Prices for Class III futures were: 3 months out = $15.58/cwt; 6 months out = $15.61/cwt; 9 months out = $15.83/cwt; and 12 months out = $15.91/cwt. Price outlook continues disappointing. Feed inputs should be bought hand-to-mouth. Depending on the planting reports corn prices could be pressured in the future if farmers follow through with planting intentions.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday. The APR’12 contract finished at $128.625/cwt; off $0.875/cwt. JUNE’12LC futures closed at $126.700/cwt; down $1.050/cwt. DEC’12LC futures closed at $134.000/cwt; off $0.625/cwt. Profit taking and concerns over possible retail sticker shock overpowered firm cash prices and a supportive USDA supply report. Deferreds were lower than nearbys on fears that increasing gasoline prices and record-high prices for beef will push shoppers to cheaper cuts. I know my wife said prices had more than doubled in the retail case in the last four weeks and I was moving from steak to hamburger. I guess we’ll see about that. Oh yeah, I’ve been married for 41 years so I guess it’s hamburger and stew meat for a while. Packers have trimmed meat production this year after costs for scarce cattle this autumn and winter have made processing and selling beef a tough business to be in. Last week’s total slaughter was lowered 63,000 head from this time last year to 592,000 head. Total year-to-date cattle slaughter is running 6% behind last year. Late Monday USDA put choice boxed beef prices at $198.56/cwt; up $1.64/cwt. According to HedgersEdge.com, the average packer margin was placed at a negative $30.40/head based on the average buy of $128.26/cwt vs. the breakeven of $125.06/cwt. Late Monday, February 27, USDA put the 5-area average price at $127.49/cwt; down $0.10/cwt.

FEEDER CATTLE at the CME finished lower on Monday. APR’12FC futures finished at $159.552/cwt; off $0.750/cwt. The AUG’12FC contract closed $1.025/cwt lower at $162.350/cwt. Feeder futures were lower on a rally in US grain futures. Feeder cattle buyers are willing to pay higher prices for gain already on cattle. The Oklahoma National Stockyard feeder cattle auction estimated receipts for Monday, 2/27/12 at 14,000 head compared to 9,368 last week and 13,599 a year ago. Compared to last week, feeders were steady to $2/cwt. Steers and heifer calves were steady. Demand was moderate to good. Quality was average to attractive. The weather has been unusually warm this winter creating ideal growing conditions for wheat pasture and wheat pasture cattle. Lighter calf numbers are beginning to drop off. The CME feeder cattle livestock index was placed at 157.44; up 0.94.

CORN futures on the Chicago Board of Trade (CBOT) closed mixed on Monday. MAR’12 futures closed at $6.444/bu; up 3.75¢/bu. The JULY’12 contract closed at $6.506/bu; up 4.5¢/bu. The DEC’12 contract closed at $5.570/bu; down 1.0¢/bu. Support was provided by spillover from soaring soybeans. Good crop weather boosting prospects for spring seedings contributed to mixed corn futures. Without support from soybeans some corn prices would most likely have finished in the red range. Exports were disappointing. US corn is somewhat expensive for global importers. USDA put corn-inspected-for-export at 27.037 mi bu vs. estimates for 31-37 mi bu. Corn volume topped 425,000 contracts. Funds bought an estimated net 9,000 lots. Corn producers should consider pricing up to 10% of the 2012 crop. Users should hold off pricing at this time.

SOYBEAN futures on the Chicago Board of Trade (CBOT) soared on Monday. The MAR’12 contract closed at $12.936/bu; up 14.75¢/bu. NOV’12 futures closed at $12.812/bu; up 10.5¢/bu. Soybean futures ended higher for the sixth straight session, reaching a five-month high on expectations of continued US export demand from China amid shrinking soy crops in South America. Outlooks for dwindling US soybean supplies were supportive. Brazil’s 2011/12 soybean crop outlook was reduced again Monday. The market is still trying to digest figures from USDA’s outlook forum on 2/12/12 that projected a decline in 2012/13 US soybean stocks and an increase in US corn stocks. The next USDA World Agriculture Supply Demand Estimates (WASDE) report is due out Friday, March 9. Cash soybeans were reported topping $13/bu in some places for the first time in five months. Some profit taking was noted. Prices for oil, gasoline, and gold were lower drawing fund money out of commodities. Fund buying nearly reached 7,000 lots on Monday. Producers should consider pricing another 10% of the 2013 crop at this time.

WHEAT futures in Chicago (CBOT) closed up on Monday. The MAR’12 contract closed at $6.456/bu; up 4.75¢/bu. JULY’12 wheat futures finished at $6.634/bu; up 10.5¢/bu. Wheat futures closed higher on Monday amid short-covering and profit taking after prices dropped early in the session. Deferred contracts made bigger gains than front-months. Speculators raised net short-positions to a record high as of February 21. On Monday 2/27/12 funds recouped some long positions buying more than 4,000 contracts. Crop friendly snowfall moisture watered the crop over the weekend while more snow is expected this week. Exports were bearish with USDA putting wheat-inspected-for-export at 9.375 mi bu vs. estimates for 18-22 mi bu. Some pressure is expected from Europe with the European Union increasing the 2012/13 wheat production forecast 2.5%. This has the potential to continue to put more pressure on global prices. Producers should consider pricing up to 25% of the 2012/ crop.

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