16 July 2008

5 minute read

North America

This report is being written in Greensboro, NC where I am attending the National Association of County Agricultural Agents (NACAA) annual meeting. Agriculture agents from all over the U.S. are in attendance and have been sharing a wealth of information with me regarding crops in their respective areas. Short story … crops in Iowa and other flooded places aren’t in as bad a shape as one might expect. This could mean more bearish than bullish updated numbers from USDA in the next report. Conditions in reportedly droughty areas aren’t as bad as reported in the media either. Result? Crops are going to do better in these areas as well. Wheat yields and test weights are running 10%-15% better than expected. Cattle feeder producers in most areas are most likely going to have more hay this year than last amid falling feed prices. There are spotty areas that have had tremendous weather problems but according to many agents questioned over the last two days overall crop production is looking rather positive at this point in time. On a less positive note, input prices are not coming down at the same rate futures and cash commodity prices are. Whether the non-farming reader believes it not, farmers are facing prospects for a very tough year. Most Agriculture agents report their producers are going to barely cover variable input costs. Now, with that out of the way, on to the rest of the report.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down Monday. The AUG’08LC contract closed at $99.125/cwt, off $2.075cwt from Friday and $3.125/cwt lower than last Monday’s close. OCT’08LC futures were down $2.175/cwt at $106.400/cwt and $3.275/cwt lower than a week ago. Even though packer profits remain steady, cash markets were weaker on Monday. USDA put the 5-area price at $99.50/cwt vs. $101-$101.50/cwt a week ago. According to HedgersEdge.com, the average packer margin was $65.00/head based on the average buy of $101.200/cwt vs. a breakeven of $106.300/cwt. This was $15.45/cwt lower than this time last week. Sliding input prices and large export data were not supportive enough to keep prices from skidding as longs liquidated positions and worked bear spreads on chart signals amid trader expectations for the usual summer weakness in prices. It was reported on Monday that May beef exports were up 27.23% over last year. Early Monday choice cutout data were reported $0.42/cwt higher at $173.38/cwt. Cash sellers should have opportunities for higher cash prices over the next couple of weeks. It might be a good idea to price short-term corn inputs at this time.

FEEDER CATTLE at the CME closed lower on Monday. AUG’08FC futures were off $1.550/cwt at $110.175/cwt and $0.0850/cwt lower than last Monday. The SEPT’08 contract finished the day at $112.700/cwt, off $1.000/cwt but only $0.025/cwt lower than a week ago. Spillover pressure from live cattle, chart-based selling, and a bearish CME Feeder Cattle Index pressured prices. Bear spreading in the September/August was noted. The CME Feeder Cattle Index was placed $0.13/cwt lower at $111.76/cwt. Cash feeders were steady to firm closing up as much as $1/cwt. It may be a good idea to hold feeders to heavier weights if grass is available. Pricing near term corn inputs might not be a bad idea.

CORN on the Chicago Board of Trade (CBOT) finished down on Monday. Continued long liquidation, emerging suspicions that the U.S corn crop will be okay, and what looks like a decent growing season ahead are pressuring prices. The JULY’08 contract finished at $6.570/bu, off 23.0¢/bu and 59.4¢/bu lower than last Monday. The DEC’08 contract closed at $6.822/bu, off 27.0¢/bu and 64.8¢/bu lower than this time last week. Corn closed below $7.00/bu for the time in a month. USDA’s good-to-excellent condition of 64% (2% higher than expected) also pressured prices. Cash corn prices were steady at river ports on the Mississippi while cash corn bids in the U.S. Mid-Atlantic States were 27.0¢/bu– 32.0¢/bu lower in many locations. Patience in pricing anymore of the crop will most likely pay off if up to 60% of the ’08 crop has been priced.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were softer on Monday. The JULY’08 contract finished at $15.950/bu, down 35.4¢/bu from last Friday’s close but 6.0¢/bu higher than a week ago. The nearby July soybean contract closed at noon without any fanfare amid light trading activity. NOV’08 soybean futures closed at $15.590/bu, off 37.0¢/bu from Friday’s close and 2.0¢/bu cents lower than last Monday. Profit taking, spillover selling in corn, soyoil, and soymeal, good crop-development weather, and a firmer dollar weighed on prices. Cash soybeans along the river were steady to firm while those in the U.S. Mid-Atlantic States faltered between 37.0¢/bu -50.0¢/bu. New demand in China and lower freight rates were supportive. USDA put the U.S. soybean crop in good-to-excellent condition at 59% vs. expectations for 57%-58%. Soybeans inspectedfor- export were placed at 9.095 mi bu amid expectations for between 8-12 mi bu. It would be a good idea to hold off pricing any more of the ’08 crop at this time.

WHEAT futures in Chicago (CBOT) closed down on Monday. The JULY’08 contract closed at $8.100/bu, off 9.0¢/bu and 12.0¢/bu lower than last Monday. JULY’09 wheat futures closed off 14.6¢/bu at $8.860/bu and 16.0¢/bu lower than this time last week. Agriculture agents at this year’s NACAA conference in Greensboro, NC are reporting very good test weights and yields across the board. Exports and news that other world wheat growers have responded to recent low global stocks were bearish for prices. USDA placed the winter wheat crop at 62% harvested vs. the 70% 5-year average. Good-to-excellent crop ratings for the U.S. spring wheat crop were lowered 8% to 61% and provided some support. As stated here last week, hopefully the entire 2008 wheat crop has been sold by now.