2 November 2012

8 minute read

North America

The DEC’13 contract closed at $6.356/bu; up 0.5 ¢ /bu and 2.5 ¢ /bu higher than a week ago. Hurricane Sandy kept, no fresh news, and weak demand kept traders on the sidelines. Cash prices for all the grains ended lower keeping basis levels firm. The national average basis is -13 ¢ /bu under CBOT December futures. With the harvest nearly complete farmers have slowed selling in anticipating of higher prices on tighter U.S. supplies. Basis in North Carolina ranged from +25 ¢ /bu to +29 ¢ /bu of December futures with cash prices ranging from $7.62/bu to $7.66 ¢ /bu.Exports were supportive in the near-term but should be viewed as bearish. USDA put corninspected-for-export at 15.516 mb vs. estimates for 8-15 mb. Although 5.038 mb more than last week’s report from USDA, this was well below the 22.7 mb needed to stay on pace with USDA’s most recent demand projection of 1.15 bb. Year-to-date inspections total 143.3 mb; 19% behind the 176.9 mb needed to stay on pace year-to-date. Please see chart.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. NOV’12 futures closed at $15.272/bu; down 34.0 ¢ /bu and 19.25 ¢ /bu lower than last report. The MAR’13 contract closed at $15.056/bu; down 31.25 ¢ /bu and 12.0 ¢ /bu lower than a week ago. NOV’13 futures closed at $13.290/bu; off 10.75 ¢ /bu and 8.0 ¢ /bu lower than last Monday. The November 2012 contract expires Friday. Expect volatility this week providing opportunities for both profit … and … loss. Soybean futures returned to a downtrend wiping out last week’s gains amid light trading volume. Hurricane Sandy kept traders on the sidelines. Rains forecast for Brazil improving the outlook for South American soybean crops pressured prices. Soybeans traded under last week’s low of $15.265 leaving it susceptible to additional noncommercial long-liquidation. The measuring objective is near $14.857/bu with long-term support near $14.52/bu. On the other hand, soybean futures were supported by doubts that South American production will be strong this crop year, tight soybean stocks, and strong technical signals amid long liquidation. Exports are bullish with USDA putting soybeans-inspected-for-export at 63.358 mb vs. estimates for between 40-60 mb. This is well above the 22.7 mb needed to stay on track with the agency’s 1.265 bb demand projection. Please see chart:

Soybean basis levels rose on the Mississippi river amid lower barge freight rates. The latest national average soybean basis was placed at -45.0 ¢ /bu under the Chicago November futures contract. Basis in North Carolina was -$1.10/bu to -12.25 ¢ /bu under November 2012 futures with cash prices ranging from $14.09 -$15.17/bu.

WHEAT futures in Chicago (CBOT) closed down on Monday. DEC’12 wheat futures finished at $8.580/bu; off 5.75 ¢ /bu and 20.25 ¢ /bu lower than a week ago. The JULY’13 contract closed at $8.622/bu; down 2.5 ¢ /bu but 5.75 ¢ /bu higher than last report. Spillover selling from a stronger U.S. dollar and weaker soybean futures pressured wheat prices. Persistently lower production forecasts from Australia and dry conditions in the U.S. Plains amid tightening global supplies were supportive. Exports were bearish with USDA putting wheat inspected for export at 9.7 mb vs. estimates for 10-17 mb. This was below the 23.7 mb needed to stay on pace with USDA’s demand projections. Soft Red Winter Wheat’s national average basis was placed at -37 ¢ /bu under CBOT December futures. Hard Red Winter Wheat was placed at - 54 ¢ /bu under Kansas City December futures. Hard Red Spring Wheat national average basis was placed at -64 ¢ /bu under the Minneapolis December futures contract. New crop wheat in North Carolina ranged from $7.28-$8.02/bu.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday with nearbys down and deferreds up. The OCT’12DA contract closed even with Friday’s close at $21.03/cwt. This was $0.$0.02/cwt lower than last report. DEC’12DA futures closed at $19.97/cwt; down $0.31/cwt and $0.52/cwt lower than a week ago. The MAR’13DA contract closed at $18.85/cwt; down $0.14/cwt and $0.35/cwt lower than last report. Hurricane Sandy may prove supportive. A significant amount of milk is produced and consumed in the affected areas. Almost 20% of U.S. milk production is located along the East Coast. More than 45% of this milk is consumed via fluid form. Fluid milk sales spiked ahead of the storm. That’s good for sales. However, if electricity is lost and product spoils, a major restocking will be needed. Additionally, areas of milk production hardest hit by damaging winds and floods may struggle to ship milk while power outages could force dairy processors from running plants. Result: a lot of dumped milk and stronger dairy product prices in the near-term. Lower cheese and butter prices are expected in the long-term. Milk components are improving nationally increasing output. Bottling demand is steady. Cream supply is plentiful with some other Class II products requiring more for holiday production. Class III futures were: 3 months out = $20.62/cwt ($0.09/cwt lower than last report); 6 months out = $19.83/cwt ($0.27/cwt lower than a week ago); 9 months out = $19.45/cwt ($0.22/cwt lower than last Monday); and 12 months out = $19.22/cwt ($0.16/cwt under last report). This week variable cost of production for the average. North Carolina conventional 200 cow dairy with a 23,000 lb average is $22.85/cwt; $0.30/cwt higher than last Monday.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday. The OCT’12LC contract closed at $125.375/cwt; down $0.125/cwt and $1.025/cwt lower than last report. DEC’12LC futures closed at $125.275/cwt; up $0.025/cwt but $2.000/cwt lower than a week ago. APR’13LC futures closed at $133.425/cwt; up $0.025/cwt but $1.525/cwt under this time last week. Thin volume as traders waited on the effects of Hurricane Sandy and light demand were market “non” movers. Choppy trade was marked by managed fund selling. Cash cattle were called steady with little or no activity as both bid and ask prices were poorly defined. Pit sources said after the markets closed that beef shipments and near-term consumer demand are expected to slack off as a result of the severe weather. As the storm approached no one was interested in buying meat for freezers that could be without power. Later this week trade should pick up as buyers limited efforts in collecting new show lists. Analysts 4 across the board on Monday anticipated the storm will weigh on cattle markets for longer than the duration of the storm as retailers prepared to place orders for meat, and shipments may be delayed in the near-term creating a de facto “backlog” of beef and pork supplies. However, as these problems work through the system tightening beef supplies should support prices in the coming weeks as business returns to normal. USDA’s latest boxed-beef prices were placed at $197.50/cwt; up $0.68/cwt but $0.85/cwt lower than last report. According to HedgersEdge.com, the average packer margin was lowered $40.00/hd to a negative $54.30/head based on the average buy of $126.64/cwt vs. the breakeven of $122.32/cwt. Late Monday, October 22, 2012 USDA put the 5-area weekly steer average at $126.60/cwt $0.44/cwt over last week at this time. Please see graph:

FEEDER CATTLE at the CME finished mixed on Monday. NOV’12FC futures closed at $145.925/cwt; up $0.600/cwt but $1.2825/cwt lower than last report. APR’13FC futures closed at $151.300/cwt; even with last Friday’s close but $2.100/cwt lower than a week ago. Light volume and lack of interest for show lists provided no direction for futures. For Monday 10.29.12 estimated receipts at the closely watched Oklahoma City market were put at 9,000 head vs. last week’s 9,324 head and 9,905 head this time last year. Compared to last week feeder steers and heifers were not tested. Stockers opened steady with moderate-to-good demand. Weather remains cool and dry in Oklahoma. Wheat pastures in the U.S. plains to Texas to generally east of the Mississippi where stockers are raised on winter pasture remain dry. Moisture levels for the year in Central Oklahoma are running 4 inches below normal.

The CME feeder cattle livestock index was placed at 145.31 up 0.39 and 0.28 higher than last report. Please see chart:

LEAN HOGS on the CME finished down on Monday. The DEC’12LH contract closed at $77.800/cwt; off $1.100/cwt and $0.875/cwt lower than last report. APR’13LH futures closed at $89.500/cwt; down $0.750/cwt and $0.95/cwt lower than this time last week. The JUN’13LH contract closed at $100.000/cwt; down $0.675/cwt and $0.90/cwt lower than a week ago. Storm-related influences and slumping demand pressured prices. Short-term demand will be next-to-nothing on the upper East Coast for this week. Packers aren’t buying. Demand for pork as expressed in orders to meat processing plants cannot be retrieved. It’s a done deal. Seasonal slacking of demand usually occurs this time of year as the Thanksgiving holiday approaches and retailers begin promoting turkey products. On Monday there were reports that at least two pork processing plants east of the Mississippi would not operate on Tuesday due to the uncertainty over the weather, weakened near-term demand, and other circumstances related to Hurricane Sandy. Additionally, heavier supplies will put pressure on prices for several weeks to come. USDA put the lean pork cutout at 85.26 late Monday, up $0.09/cwt but $3.38/cwt under last report. According to HedgersEdge.com, the average packer margin was lowered $5.45/hd to a positive $2.35/head based on the average buy of $60.29/cwt vs. the breakeven of $61.15/cwt. The latest CME Lean Hog index was estimated at 81.89; down 0.37 and 2.77 under last report.

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