15 December 2010

7 minute read

North America

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) were mixed on Monday. July 2011 futures and beyond closed down while nearby contracts up to that point closed up. DEC’10DA futures were down $0.02/cwt at $13.82/cwt and $0.06/cwt lower than last Monday. The MAR’11DA contract finished at $13.73/cwt; up $0.07/cwt and $0.03/cwt over last report. JULY’11DA futures finished at $14.99/cwt, down $0.04/cwt. The block/barrel spread compressed today with blocks falling $0.03 and barrels increasing slightly. Spot butter and Grade A milk pushed higher supporting dairy futures. Cheese exports topped imports for the first time in since 1970. The November “Milk Production” report from USDA comes out Friday and will give another indication of the supply situation. Last week CWT accepted another 14 bids for export assistance. Between May and October 2010 butter prices rose keeping Class IV milk prices higher than Class III milk prices. This has impacted Class I milk prices as well. Butter stocks have been lower than last year. Cream supplies are unseasonably tight. Seasonally, cream supplies tighten in the summer due to increased ice cream demand. Butter prices are normally flat through the year, however, this year butter jumped over $0.80/lb between January and September indicating something else is happening. Part of the increase could be attributed to higher export demand due to CWT’s Export Assistance program. Another factor supporting prices may be that on the supply side butterfat, the main ingredient in cream and butter has been low this year. Producers should consider pricing feed due to nearby strength in corn prices. Milk prices are coping with downward pressure so pricing the next 2 months production could be a plus.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished up on Monday. The DEC’10LC contract closed up $1.000/cwt at $101.950/cwt but $1.425/cwt under last report. The APR’11LC contract closed at $108.100/cwt, up $0.800/cwt but $1.150/cwt lower than a week ago. AUG’11LC futures closed at $106.000; up $0.825/cwt but $0.175/cwt lower than last Monday. A weaker US dollar, fund buying, and higher cash prices were supportive. USDA put the choice beef price at $166.05/cwt, up $1.31/cwt from Friday and $1.08/cwt over last week at this time. The increase is viewed as temporary due to holiday demand. Fund buying was triggered as a hedge against a lower US dollar. Exports were supportive. Monday, USDA released monthly export data showing October beef exports up 11.9 per cent from September and 17.6 per cent over a year ago. Cash cattle volume was light. USDA put the 5-area average at $100.93/cwt; $1.73/cwt lower than a week ago. According to HedgersEdge.com, the average packer margin rose $5.70/head to a negative $3.00/head based on the average buy of $101.90/cwt vs. the average breakeven of $101.676/cwt. It might be a good idea to hedge feed needs at this time.

FEEDER CATTLE at the CME finished up on Monday. The JAN’11FC contract finished at $119.200/cwt; up $1.025/cwt and $0.70/cwt over last report. APR’11FC futures finished at $120.175/cwt; up $0.800/cwt but $0.300/cwt lower than last week at this time. The AUG’11FC contract settled at $121.125/cwt, up $0.625/cwt and $0.025/cwt higher than a week ago. Feeders went higher in spite of higher corn prices on support of higher live cattle and higher cash feeder prices. Feedlots are expecting tight show lists near term. Cash feeders were steady to $3/cwt higher. Oklahoma City put estimated receipts at 9,500 head vs. 14,826 last Monday and 9,882 head this time last year. Demand continues to be very good for calves less than 500 lbs. The CME feeder index was placed at 118.09 ¢/lb; down 0.14 ¢/lb from last Friday but 63.0 ¢/lb over last report.

CORN futures on the Chicago Board of Trade (CBOT) finished up on Monday. DEC’10 corn futures closed up 15.0 ¢/bu at $5.752/bu and 21.75 ¢/bu over last report. The MAR’11 contract closed at $5.884; up 14.25 ¢/bu and 20.5 ¢/bu higher than a week ago. The DEC’11 contract closed at $5.400; up 10.75 ¢/bu and 10.75 ¢/bu over last Monday. A weak US dollar, bullish funds, and better-than-expected exports were supportive. A weaker US dollar makes US commodities more attractive to foreign buyers while at the same time providing a hedge against inflation for speculators. Funds bought nearly 9,000 lots. USDA put corn-inspected-for-export at 32.033 mi bu vs. expectations for 26-31 mi bu. Dry weather in Argentina corn country is stressing that crop while Brazil weather is making for a good crop there. In other news, it has been reported that US Senator Dianne Feinstein will offer an amendment to the tax bill to cut the ethanol tax credit to $0.36/gal. The current tax credit is $0.45/gal. Cash corn was steady-to-firm amid slow farmer selling. One of my clients in Nebraska said, “It’s just too cold to haul corn to the elevator!” It would be a good idea to hold off pricing more than 60 per cent at this time as chart are signaling a narrowing of prices (see chart below).

SOYBEAN futures on the Chicago Board of Trade (CBOT) finished up on Monday. JAN’11 futures closed at $13.024/bu, up 29.5 ¢/bu and 14.0 ¢/bu over last report. The MAR’11 contract closed at $13.120/bu; up 29.5 ¢/bu and 16.75 ¢/bu higher than a week ago. NOV’11 soybean futures closed up 29.0 ¢/bu at $12.224/bu and 23.75 ¢/bu over last Monday’s close. Firmer crude oil prices, a weaker US dollar, and moderate fund buying were supportive. Funds bought over 6,000 lots. Exports pressured prices as USDA put soybeans-inspected-for-export at 33.536 mi bu vs. expectations for 43-47 mi bu. Soybean demand for crush was down 2 per cent from October and off 7 per cent from a year ago. Brazil’s soybean growing area was receiving plenty of rain and is seen as hurting the crop there. Cash soybeans were steady to firm amid slow farmer selling. It would be a good idea to price another 10 per cent of the 2011 crop taking you to 60 per cent.

WHEAT futures in Chicago (CBOT) finished up on Monday. The DEC’10 wheat contract closed at $7.402/bu; up 4.75 ¢/bu but 11.75 ¢/bu under last report. JULY’11 futures finished up 10.0 ¢/bu at $8.146/bu and 7.0 ¢/bu higher than a week ago. A weaker US dollar boosted the market in addition to ongoing concerns over harvest delays and deteriorating crop conditions in Australia. Prices were held in check over higher-than-expected US and world wheat stocks reported by USDA last week. USDA raised US ending stocks by 1.2 per cent from last month to 858 mi bu and raised global stocks by 2.4 per cent to 176.7 mi tonnes (6.47 bi bu). Fund buying was neutral with funds buying near 2,000 lots. Exports were lower than expected as USDA put wheat-inspected-for-export at 18.015 mi bu vs. expectations for 19-23 mi bu. Recent heavy rains in Australia continue to delay and lower the quality of the wheat harvest there while dry weather in the US Plains stressed the US crop. Russian grain stocks were down 24.6 per cent for the year while Ukrainian officials report lower, quota-bound November exports. Worries about crops domestically and around the world underpinned the wheat market. Hopefully 75 per cent of the 2011 wheat crop has been priced so you can speculate with the rest.

LEAN HOGS on the CME finished up on Monday. DEC’10LH futures finished at $69.525/cwt; up $0.075/cwt and $1.175/cwt over last report. The December contract will expire Tuesday at 1:00 pm, EST. The FEB’11LH contract closed down $1.175/cwt at $76.325/cwt and $1.075/cwt higher than this time last week. The APR’11LH contract closed at $80.050/cwt; up $1.050/cwt and $1.00/cwt over a week ago. Hog futures rose on active fund buying amid chart-based buy orders. The weak US dollar again was the player. USDA put the average cash pork price at $78.50/cwt; down $0.03/cwt but $1.38/cwt over last report. Cash prices are expected to weaken this week. In other news, USDA on Monday put October pork exports up 5.3 per cent from September but 10.5 per cent lower than this time last year. The CME lean hog index was placed at 68.64 ¢/lb; up 0.02 ¢/lb and 0.54 ¢/lb over last week at this time. According to HedgersEdge.com, the average packer margin was lowered $0.90/hd to a positive $16.55/hd based on the average buy of $50.21/cwt vs. the average breakeven of $56.22/cwt.