3 May 2012

7 minute read

North America

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’12 contract closed at $6.342/bu; up 8.75¢/bu and 12.25¢/bu higher than last Monday’s close. The DEC’12 contract closed at $5.432/bu; up 4.5¢/bu but 2.25¢/bu lower than last report. Fund buying off the strong rally last week and spillover from soybeans were supportive. Exports were bearish with USDA putting corn-inspected-for-export at 24.921 mi bu. This is below the 34 mi bu needed to stay on pace with USDA’s export projection of 1.7 bi bu.

The national average corn basis is at 4.0¢/bu over July futures indicating that the export pace has slowed due to the lack of corn available to end users. Concerns about strong demand draining supplies continue to support corn futures. Cash corn was steady-to-firm on slow farmer selling. USDA put corn crop progress at 53% vs. 28% last week and the 5-year average of 27% for this time of year.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The MAY’12 contract closed at $15.030/bu; up 6.25¢/bu and 68.75¢/bu higher than last report. NOV’12 futures closed at $13.810/bu; up 19.0¢/bu and 36.75¢/bu lower than a week ago. Late buying, strengthening inverse-to-new-crop spreading, and bullish soybean fundamentals were supportive. Given both May and July contracts closed above $15/bu increased technical buying is expected. Exports were bullish with China ordering another 220,000 tonnes (4.4 mi bu) for 2012-13 delivery. USDA put soybeans-inspected-for-export at 15.45 mi bu. vs. the 11.4 mi bu needed to stay on pace with USDA’s 1.29 bi bu projected demand for 2012.

As of Sunday, soybean seedings have exceeded the 5-year average by 7% with USDA putting plantings at 12%. Fundamentals are bullish amid concerns that 2013 stockpiles of soybeans won’t be large enough to keep up with strong demand, particularly with South American production reduced drastically by drought.

WHEAT futures in Chicago (CBOT) closed up modestly on Monday. The MAY’12 contract closed at $6.476/bu; up 5.5¢/bu and 22.75¢/bu higher than this time last Monday. JULY’12 wheat futures finished at $6.544/bu; up 4.5¢/bu and 22.0¢/bu higher than a week ago. Futures were behind nearly all session until near the end when funds jumped in to buy late in the session. Spillover buying from the surge in other grains; thin commercial buying; feed-wheat demand; and talk of freeze damage to a portion of the SRW crop were supportive. For the week ending April 29 USDA put the Winter wheat crop in good-to-excellent condition at 34% vs. 58% the previous week. USDA put wheat-inspected-for-export at 19.831 mi bu vs. the 18.4 mi bu needed to stay on pace with USDA’s 1.0 bi bu demand projections for 2012. Spring wheat planting continued at a quick pace with USDA putting wheat seedings at 74% vs. 57% last week and

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday with nearby’s up and deferreds down. APR’12DA futures closed at $15.73/cwt; even with Friday’s, as well as last week at this time close. The MAY’12DA contract closed at $14.94/cwt; up $0.06/cwt and $0.15/cwt higher than a week ago. JULY’12DA futures closed at $14.74/cwt; up $0.05/cwt but $0.03/cwt lower than last report. Class III May through August contracts closed higher while September and later contracts finished lower. Declining milk prices and high feed prices have tightened income quite a bit. This has moved many producers to negative cash flow. The preliminary April 2012 milk-feed price ratio is 1.45 according to USDA’s agricultural prices report released today. A milk-feed price ratio of 1.45 means that one pound of milk can buy 1.45 lbs of 16% protein dairy feed. This is the lowest since June 2009 when dairy farm profitability hit rock bottom. Factors in the milk-feed ratio include: the All Milk Price at $16.90/cwt; down $0.30/cwt from last month; prices received for corn at $6.14/bu, down 21.0¢/bu; soybeans at $13.80/bu, up 80.0¢/bu and alfalfa at $207/ton, $7/ton higher. The milk margin ending March 2012 was placed at $8.792/cwt. See chart.

According the USDA’s Production, Disposition, and Income report, the average milk production/cow totaled 21,345 lb/cow, 197 lb higher than 2010. Cash receipts from marketings were placed at $39.4 bi; 26% over 2012. Producer returns average $20.35/cwt, 23% higher than 2010. 2011 was a good year but do not reflect what is going on now. CME spot barrel cheese closed down $0.75 on four trades from $1.4250-$1.4275/lb. Blocks were unchanged with no trading. Spot butter was offered $0.05/lb lower and closed at $1.3550/lb. Fundamentally there is more milk volume right now than the pipeline can handle. Class III futures were: 3 months out = $14.96/cwt ($0.07/cwt over last report); 6 months out = $15.15/cwt ($0.02/cwt lower than a week ago level); 9 months out = $15.38/cwt ($0.09/cwt less than this time last week); and 12 months out = $15.43/cwt ($0.16/cwt under a week ago).

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished up on Monday. JUNE’12LC futures closed at $114.150/cwt; up $1.300/cwt but $0.425/cwt lower than last report. The AUG’12LC contract closed at $116.200/cwt; up $0.650/cwt but $2.400/cwt under a week ago. DEC’12LC futures closed at $124.050/cwt; up $0.600/cwt but $2.975/cwt lower than last week at this time. Easing fear over the U.S.’s 4th case of mad-cow disease and June futures’ discount to current cash prices were supportive. Technical buying was noted. The April contract expired during the session. Investors were relieved on the lack of new developments related to the BSE case disclosed last week. The animal appears to have been infected with a “naturally” forming strain of the brain-wasting disease and didn’t pose a threat to the U.S. meat supply. Indonesia was the only country to move to ban U.S. beef imports. Last year Indonesia bought 1.4% of U.S. beef exports. Late Monday USDA put the boxed beef cutout at $190.40; up $0.29/cwt. Cash cattle markets were quiet Monday with no bids reported through mid-day. Monday’s slaughter was placed at 115,000 head vs. 120,000 last week and 129,000 head a year ago. Year-to-date processing is down 5.1% from last year. Recent gains in wholesale beef prices off last week’s decline in cash cattle prices have improved processor margins. According to HedgersEdge.com, the average packer margin was raised $27.95/cwt from this time last week to a positive $8.75/head based on the average buy of $121.06/cwt vs. the breakeven of $121.75/cwt. Until last week the index had been negative since mid-September. Late Monday, April 30, USDA put the 5-area average price at $122.119.80/cwt; $2.68/cwt lower than this time last week. See graph.

FEEDER CATTLE at the CME closed up on Monday. MAY’12FC futures finished at $149.825/cwt; up $1.050/cwt. The AUG’12FC contract closed $1.650/cwt higher at $153.725/cwt; $1.650/cwt under last report. Monday’s estimated receipts at the closely watched Oklahoma City market were put at 9,800 head vs. last week’s 9,014 head and 7,805 head this time last year. Feeder steers and heifers were weaker at $2-$4/cwt lower. Stocker steers and calves were $4-$8/cwt lower. Stocker heifers and heifer calves were steady to $4/cwt lower. Demand was considered moderate for all classes. Cattle coming off pastures were in fleshy conditions. Quality was average. The CME feeder cattle livestock index was placed at 148.40; down 0.45 and 1.560 lower than this time last week. See chart.

LEAN HOGS on the CME finished mixed on Monday. May-August 2012 and May 2013 and later finished down while the December 2012 through April 2013 contracts finished up. MAY’12LH futures closed at $83.675/cwt; down $1.825/cwt and $4.850/cwt lower than this time last week. AUG’12LH futures finished $0.400/cwt lower at $87.600/cwt and $1.350/cwt lower than last report. Wholesale prices 16% lower than this time last, technical selling, and weak pork demand well off last year’s record-setting pace pressured prices. Non-commercials are now net-short in aggregate positions. Seasonal strength hasn’t materialized. Poor processing margins off weak wholesale prices will continue to weigh on prices. Light volume for cash hogs on Monday was noted with top hog prices expecting to range from $54-$58/cwt on a live basis later this week. USDA on Monday estimated the daily processing at 410,000 head vs. 413,000 head last Monday and 393,000 a year ago. USDA put the pork carcass cutout at $77.94/cwt, off $1.05/cwt but $0.53/cwt higher than a week ago. According to HedgersEdge.com, the average packer margin was lowered $0.35/hd to a negative $11.60/head based on the average buy of $59.21/cwt vs. the breakeven of $55.05/cwt. The latest CME lean hog index was estimated at 82.53; down 0.15; but 3.52 over last report.

Further Reading

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