18 April 2012

6 minute read

North America

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed down with the exception of the May 2012 contract. APR’12DA futures closed at $15.79/cwt; down $0.01/cwt but $0.17/cwt higher than this time last week. The MAY’12DA contract closed at $15.98/cwt; up $0.01/cwt and $0.67/cwt higher than a week ago. JULY’12DA futures closed at $15.64/cwt; down $0.05/cwt and $0.31/cwt lower than last report. Recent reports show that farms are liquidating because of cash flow and financial difficulty. This is not surprising as milk price and profit margins has been sinking for some time now. On the other hand, many farms are increasing cow numbers on heavier-than-usual culling rates due to good cull-cow prices. Even with the higher culling rates US dairy cow numbers have been increasing as more replacements come online. Fundamentally, milk prices show bearish tendencies on increasing milk-supply. Cheese and butter prices are relatively stable for now. Current price activity indicates a bottom may be approaching. Class III futures were: 3 months out = $15.24/cwt ($0.15/cwt lower than last report); 6 months out = $15.67/cwt ($0.26/cwt under a week ago level); 9 months out = $15.88/cwt ($0.26/cwt less than this time last week); and 12 months out = $15.95/cwt ($0.21/cwt under a week ago). Producers should continue to keep pricing feed hand-to-mouth as feed prices are expected to continue to weaken.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished mixed on Monday with the nearby April and June contracts up and deferreds lower. JUNE’12LC futures closed at $116.150/cwt; up $0.075/cwt and $0.375/cwt higher than last report. The AUG’12LC contract closed at $119.025/cwt; down $0.025/cwt but $0.650/cwt over a week ago. DEC’12LC futures closed at $127.350/cwt; down $0.150/cwt but $1.075/cwt higher than last week at this time. Some light bull-spreading was noted amid a lackluster day, volume speaking. Cash cattle on Monday were steady-$1/cwt higher amid light volume. USDA on Monday put box beef prices at $181.26/cwt; up $2.75/cwt and $3.65/cwt higher than a week ago. Estimated packer margins are projected to remain poor but processors will continue to buy cattle to meet near-term retail demand. According to HedgersEdge.com, the average packer margin was raised $32.30/cwt from last week at this time to a negative $88.90/head based on the average buy of $122.03/cwt vs. the breakeven of $113.68/cwt. On Monday USDA reported 112,000 head processed vs. 97,000 the week before and 120,000 head this time last year. Late Monday, April 16, USDA put the 5-area average price at $122.50/cwt; $0.60/cwt higher than last report. See graph.

FEEDER CATTLE at the CME closed higher on Monday with the exception of the nearby April contract. APR’12FC futures finished at $150.350/cwt; off $0.175/cwt but $2.200/cwt higher than a week ago. The AUG’12FC contract closed $0.250/cwt higher at $155.475/cwt and $4.450/cwt over last report. Short covering and better cost-of-gain margins were supportive. The discount of the cash index held prices back somewhat. Monday’s estimated receipts at the closely watched Oklahoma City market were put at 5,400 head vs. last week’s 3,454 head but nowhere near the 12,762 head sold a year ago. Compared to last week feeder steers and heifers were $3-$5/cwt higher. Steer and heifer calves were steady amid light volume. Demand was moderate-to-good with increased demand for light fleshed cattle bound for grazing in the summer heat. Stocker buyers were aiming to put grass gain on and backed away from buying fleshy calves. Quality was plain-to-average. The CME feeder cattle livestock index was placed at 149.26; up 0.12 but 1.02 lower than this time last week. See chart.

This table shows the maximum price a producer could pay for feeder cattle and still break even, assuming the costs and conversion/performance factors listed above. While these assumptions are continually reviewed and updated producers should remain aware that calculations are based on averages, totals that may or may not reflect the feeding realities of specific operations. In short, this table produces general margin guidelines only that must be fine-tuned according to individual situations. Courtesy DTN.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The JULY’12 contract closed at $6.132/bu; off 7.5¢/bu and 28.0¢/bu lower than last Monday’s close. The DEC’12 contract closed at $5.262/bu; off 10.75¢/bu and 24.0¢/bu lower than last report. Corn futures were pressured by profit-taking via non-commercial liquidation, short-covering, and forecasts for improved crop-planting weather. The USDA crop-production report (usually out on Monday) will be delayed until Tuesday due to a small fire in USDA electrical equipment. Corn exports were bullish with USDA putting corn-inspected-for-export at 42.875 mi bu vs. estimates for 25-30 mi bu. See chart.

US corn plantings remain ahead of schedule with weather encouraging early corn planting. This could ease worries over tight supplies if harvested corn hits the market earlier than normal next fall. Fundamentally, expectations for a large US crop amid a lack of fresh news weighed on prices. Cash corn prices have remained steady-to-strong as farmers hold onto old crop supplies while buyers are pushing for immediate shipment of deliveries at the same time remaining hesitant to over-extend themselves in today’s market.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The MAY’12 contract closed at $14.200/bu; down 16.75¢/bu and 11.0¢/bu lower than last report. NOV’12 futures closed at $13.500/bu; down 11.75¢/bu but 30.0¢/bu higher than a week ago. Traders with bullish sentiments are more nervous after today’s sharp losses. Profit –taking by non-commercials and short covering by hedgers pressured prices. Speculative traders and funds are holding their largest long and net-long positions on record and the market may be due for a correction. With corn being planted so early pit sources tell me that traders are thinking an increase in soybean supplies may be in the offing therefore a market correction lower is not far off. With the inverse in the November-to-January spread replaced by a weak carry and the inverses in the January-to-March and March-to-May weakening, the market may be in for a larger correction than anticipated. Exports were bearish with USDA putting soybeans-inspected-for-export at 18.065 mi bu vs. estimates for 25-30 mi bu. Over 30 mi bu were needed this week to get back on pace with USDA’s export projections. See chart.

USDA’s crop production report usually out Monday afternoon was delayed. This report should shed some light on farmer intentions.

WHEAT futures in Chicago (CBOT) closed down on Monday. The MAY’12 contract closed at $6.162/bu; off 7.25¢/bu and 26.75¢/bu lower than this time last Monday. JULY’12 wheat futures finished at $6.212/bu; down 9.0¢/bu and 27.75¢/bu lower than a week ago. Commercial selling on profit-taking was noted despite wind and hail damage to a portion of the US winter wheat crop. Traders are not convinced enough damage was done to lower crop production estimates. Heavy rains in the US helped to recharge soil moisture. A strong carry in new-crop spreads seems to show bearish long-term fundamentals. Exports were bullish with USDA putting wheat-inspected-for-export at 25.745 mi bu vs. estimates for 16-21 mi bu. Global supplies are expected to remain relatively stable even with the European Union (EU) winterkill and drought.