17 April 2013

7 minute read

North America

CORN futures on the Chicago Board of Trade (CBOT) closed mixed on Monday with the two nearby contracts up and the rest down. MAR’13 corn futures closed at $6.334/bu; up 4.5¢/bu but 99.75¢/bu lower than last report. The DEC’13 contract closed at $5.320/bu; down 3.0¢/bu and 40.0¢/bu lower than last report. Prices were pressured futher by a higher US dollar, short-covering, and technical selling on continued uncertainty of just how the US corn crop will turn out. The CFTC data show a decrease of 66,692 contracts in the net-short position therefore showing that funds are more bullish on corn prices than the market might show. Pit soucrces say they expect the US corn ending stocks estimate to be placed between 825-875 mb in the next World Agriculture Supply Demand Estimate (WASDE) report due out this Wednesday. Exports are still weighing on prices with USDA putting corn-inspected-for-export at 10.098 mb vs. estimates for 35-40 mb. This is well below the 17.9 mb needed to stay on pace with USDA’s demand projection of 825 mb. Please see chart:

Corn cash prices weakened Monday on price uncetianty. The national average basis for corn was weaker at +6.0¢/bu over CBOT nearby May futures; 2.0¢/bu lower last report. Producers who have priced some of the 2013 corn crop to cover cost of production are in good shape. There should be more pricing opportunities if the US corn crop is not what it is cracked up to be again this year. On the other hand, if a good crop year is shaping up prices could decline further. Wednesday will shed more light on this.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The MAY’13 contract closed at $13.780/bu; up 16.25¢/bu but 59.25¢/bu under last report. NOV’13 futures closed at $12.322/bu; up 4.25¢/bu but 36.75¢/bu lower than last report. Friday’s CFTC data showing funds and traders in 21,870 fewer bearish positions was supportive. Pit sources said bull-funds were buying while merchandisers were not hedging as much yet. Exports were bullish with USDA putting soybeans-inspected-for-export at 15.251 mb vs. estimates of 12-17 mb. This was well above the 6.1 mb needed to stay on pace with USDA’s demand projection of 1.345 bb. Please see chart:

Cash soybean prices were firmer today. The latest national average soybean basis was placed at -6.0¢/bu under the Chicago May 2013 futures contract; 3.0¢/bu better than last report. Producers who have priced soybeans on previous considerations in this report should have cost or production covered. The rest is profit. For those who have not priced any of the 2013 crop it would be a good time to wait and see what the USDA report will conclude on Wednesday.

WHEAT futures in Chicago (CBOT) closed up on Monday. MAY’13 wheat futures finished at $7.124/bu; up 13.5¢/bu but 14.75¢/bu under last report. The JULY’13 contract closed at $7.174/bu; up 13.25¢/bu but 11.75¢/bu lower than last. Weather concerns over unseasonally below-freezing temperatures and little rain supported wheat futures. Temps are expected to warm in wheat country amid persisting dry conditions. Heavy snow is expected in the Dakotas Monday through Thursday. Not much of the spring wheat crop has been planted at this time vs 21 per cent planted this time last year. Exports were bullish with USDA putting wheat-inspected-for-export at 27.161 mb vs. estimates for 17-24 mb. This was well above what is needed to meet USDA’s export demand projection. However, there were reports from India they may lower their prices to move some of their massive hard-red wheat inventory which would undermine US wheat global sales. Wheat basis was steady-to-weaker with the Soft Red Winter wheat basis index placed at -21.0¢/bu under CBOT May futures; down 1.0¢/bu from last report. Hard Red Winter Wheat basis index was steady at -29.0¢/bu under Kansas City May futures; same as last report. Hard Red Spring Wheat average basis index weakened 3.0¢/bu from last report to -26.0¢/bu under the Minneapolis May futures. To ensure covering cost of production wheat producers should consider pricing up to 25 per cent of the 2013 crop at this time.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday. The APR’13DA contract closed at $17.60/cwt; up $0.08/cwt. MAY’13DA futures closed at $18.62/cwt; up $0.28/cwt and $0.50/cwt higher than last report. The JULY’13DA contract closed at $19.56/cwt; up $0.19/cwt and $0.56/cwt over last report. The number of loads of excess milk moving around for processing has declined. Higher cheese and butter prices are encouraging processors to hold on to extra milk from increased receipts. Pit sources say they don’t believe these cheese and butter prices can continue to hold. Milk production continues to increase amid the spring flush. Cow numbers continue to hold while milk production continues to increase. Please see chart by Rick Kment:

Class III futures are: 3 months out = $18.57/cwt ($1.07/cwt higher than last report); 6 months out = $19.03/cwt ($0.82/cwt higher than last report); 9 months out = $18.95/cwt ($0.55/cwt over last report); and 12 months out = $18.64/cwt ($0.37 higher than last report). Feed purchasers should consider continuing to purchase hand-to-mouth as grain prices could weaken further. It all depends what this week’s USDA report will show. This week the variable cost of production for the average North Carolina conventional 200 cow dairy with a 23,350 lb average is $18.51/cwt. The price sensitivity table below reflects the variable cost differences if inputs or gross receipts changed by percentage noted.

The variable cost calculations for a hybrid grazing/conventional herd of 200 cows in NC with a 16,007 lb average. That VC as of Monday, April 8, 2013 is 18.38/cwt.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday. APR’13LC futures closed at $126.275/cwt; up $0.250/cwt but $0.175/cwt under last report. The AUG’13LC contract closed at $122.750/cwt; up $0.500/cwt but $0.400/cwt under last report. The FEB’14LC contract closed at $129.450/cwt; down $0.050/cwt. Cattle futures rebounded after last Friday’s sell off amid continued fears that beef and pork demand are estimated too high. Friday futures were weighed down by the uncertain demand picture. The delayed grilling season along with higher meat prices is thought to have a pressuring effect on demand owing to the delay in the seasonal uptick in prices. Shorter showlists and warmer weather are supportive. Also, the retail beef counter clearance of was better last week. Cash markets were slow in the Plains and western cornbelt while cash cattle asking prices were $1-$1.50/cwt higher in more southerly climes. USDA put the choice beef cutout at $190.09/cwt; off $1.23/cwt from Friday and $0.47/cwt lower than last report. The latest HedgersEdge packer margin was lowered $30.50/hd from last week placed at a negative $45.30/head based on a $128.03/cwt buy vs. a breakeven of $123.66/cwt. Grain users should continue to consider buying hand-to-mouth. USDA put the 5-area average at $1128.26/cwt; $3.51/cwt over last report. Please see chart:

FEEDER CATTLE at the CME finished up on Monday. APR’13FC futures closed at $142.750/cwt; up $0.175/cwt and $4.350/cwt over last report. The AUG’13FC contract closed at $151.750/cwt; up $0.550/cwt and $3.575/cwt higher than last report. NOV’13FC futures closed at $155.100/cwt; up $0.525/cwt. Feeders followed fat cattle higher. Profit taking and weakness in outside markets (corn and grain) were supportive. For Monday 04/08/13 estimated receipts at the closely watched Oklahoma City market were put at 6,850 head vs. 4,747 head last week and 3,454 head this time last year. Compared to last week feeder steers were $3/cwt lower. Feeder heifers were steady-to-$2/cwt lower. Demand was considered uneven. Stocker steers and steer calves were steady-to-$2/cwt higher. Stocker heifers and heifer calves were steady. Demand was considered good for stockers and calves as producers look to fresh spring pastures amid quickening rains. Quality was considered average. The CME index for Monday 4.08.13 was estimated at 140.09/lb; down 0.18/lb but 6.47/lb over last report. Please 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. Producers should remain aware that calculations are based on averages. Courtesy DTN.

LEAN HOGS on the CME closed up on Monday. The APR’13LH contract closed at $80.525/cwt; up $0.500/cwt and $2.050/cwt over last report. MAY’13LH futures closed at $87.300/cwt; up $0.400/cwt but $1.40/cwt under last report. The JUL’13LH contract closed at $90.250/cwt; up $0.700/cwt. The Friday selloff was too sharp and live hogs rebounded on Monday as traders took advantage of making up some profits. The April was very active, set to expirt this Friday. However, the most active June hog futures gained the most of any contract. Seasonal demand was supportive. Late Monday USDA put the latest pork carcass cutout at $77.12; off $2.48 and $0.84 lower than last report. Negative profit margins are squeezing packers to cut back on purchases for processing. The latest HedgersEdge packer margin was lowered $15.10/hd from last week to a negative $5.40/head based on a $59.24/cwt buy vs. a breakeven of $57.28/cwt. The latest CME two-day lean hog index was placed at 80.19/lb; up 0.22/lb and 5.50/lb higher than last report.

This table shows the maximum price a producer could pay for feeder pigs and still break even, assuming the costs and conversion/performance factors listed above. Producers should remain aware that calculations are based on averages. Courtesy DTN.