Weekly Roberts Market Report

US - With Standard & Poor cutting the US' top-tier credit rating from AAA to AA+, commodities have been pressured by ideas that a global economic slowdown will limit demand, writes Michael Roberts. US equity markets declined at the start of the week and crude oil took a 6.4 per cent dive to $8.31/barrel.
calendar icon 10 August 2011
clock icon 5 minute read

Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed even on Monday with the exception of November 2011, December 2011, and January 2012.

These finished down $0.15/cwt for two the day. The AUG’11DA contract finished at $19.98/cwt; even with last Friday’s close.

SEP’11DA futures finished at $19.45/cwt; even with last Friday but $1.35/cwt lower than last report. Follow through support was expected from gains last week and strong demand holding to the end of summer. Pressure from outside markets surrounding the downgrading of the US credit rating had an impact on the dairy complex.

Cheese prices are expected to remain stable in light activity. Butter prices are seen as holding well. Milk production has not rebounded due to hot weather. Western states have not had quite the heat and humidity of late but production there has not been enough to offset the 10 per cent or greater declines in other areas.

Oceania exports are expected to reach record numbers for the year while Argentina also forecasting production increases by four per cent over last year.

The European Union is expecting a one per cent increase in exports. The average prices for Class III milk are: three months out = $20.37/cwt ($0.86/cwt lower than a week ago); six months out = $19.04/cwt ($0.16/cwt over last report); nine months out = $18.34/cwt ($0.94/cwt higher than this time last week); and 12 months out = $17.99/cwt ($1.08/cwt over last report).

The long term trend looks down as growing global supplies pressure prices.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday. AUG’11LC futures closed at $114.100/cwt; down $0.025/cwt but $0.80/cwt higher than a week ago.

The OCT’11LC contract closed at $117.600/cwt; off $1.000/cwt and $0.200/cwt lower than last report. JUNE’12LC futures closed at $122.200/cwt; down $1.000/cwt and $1.025/cwt lower than this time last week.

Higher cash markets and strong beef exports limited declines. More cattle are headed for sale in Texas and Oklahoma while showlists in Kansas and Nebraska were seen as slowing. USDA put the five-area average cash price at $111.21/cwt; $2.62/cwt higher than a week ago.

USDA also noted that the five-area price for steers was $0.93/cwt lower than heifers. USDA on Monday put the beef cutout at $174.25/cwt; up $1.61/cwt and $0.12/cwt higher than last report.

According to HedgersEdge.com, the average packer margin was lowered $14.35/head to a positive $33.20/head based on the average buy of $109.21/cwt vs. the average breakeven of $111.74/cwt.

FEEDER CATTLE at the CME closed down on Monday. The AUG’11FC contract finished at $132.575/cwt, down $1.125/cwt and $4.250/cwt lower than last report.

The NOV’11FC contract settled at $136.000/cwt, up $1.275/cwt and $4.675/cwt under last report. The Oklahoma National Stockyards in Oklahoma City, OK estimated volume at 8,500 hd vs. 5,819 last week and 5,648 a year ago.

Compared to last week feeder steers were one to three dollars/cwt lower.

Feeder heifers and feeder calves were steady to two dollars/cwt higher. Steer calves were steady. Demand was considered moderate-to-good for feeder cattle and good for calves.

The cattle complex was pressured by a broad selloff in commodities and stock tied to ripple-effect debt troubles in Europe and the S&P downgrade of US Treasurys. The Dow Jones Industrial Average was down 499 points.

Late Monday Tyson Foods Inc. said in an earnings report that it expects improving conditions for both its pork and beef business in 2012 as demand world-wide outstrips supplies. The latest CME feeder cattle index was placed at $135.05; down $0.04 but $1.05 higher than this time last week.

In other news, the 2011-12 corn and soybean marketing year begins on 9/1/11. Corn and soybean consumption are slowing as the 2010-11 year winds down.

Many think USDA’s next World Agriculture Supply Demand Estimate (WASDE) report due out 8/11/11 will show larger-than-expected ending stocks.

Estimates from 12 analysts for ending stocks for 2010-11 for corn averaged 0.923 bi bu for corn vs. USDA’s 0.88 bi bu and 0.223 bi bu for soybeans vs.

USDA’s 0.200 bi bu. Ending stock average estimates from 20 sources for 2011/12 were: Corn – 0.741 bi bu vs. USDA 0.870; Soybeans 0.172 bi bu vs. USDA 0.175 bi bu; and Wheat – 0.671 bi bu. vs. USDA 0.67 bi bu.

  • For 2010-11 the market is bearish corn and soybeans
  • For 2011-12 the market is bullish corn and neutral for soybeans and wheat.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. SEPT’11 futures closed at $6.752/bu; down 17.75 ¢ /bu and 6.0 ¢ /bu lower than last Monday.

The DEC’11 contract closed at $6.860/bu; off 17.0 ¢ /bu but 0.5 ¢ /bu higher than last report.

Grain futures fell for the fourth day on Monday as investors ran to less-risky positions in gold. Traders set aside all fundamental thinking for safer havens.

Corn exports were neutral with USDA putting corn-inspected-for-export at 31.748 mi bu vs. estimates for 30-35 mi bu. USDA late Monday placed the US corn crop in good-to-excellent condition at 60 per cent; two per cent lower than last week and nine per cent lower than this time last year.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The AUG’11 contract closed at $13.092/bu; off 22.25 ¢ /bu and 49.5 ¢ /bu lower than a week ago.

NOV’11 soybean futures closed 24.5 ¢ /bu lower at $13.114/bu and 50.75 ¢ /bu lower than a week ago.

Hot weather was supportive as it is seen as hurting yield potential. Exports were neutral-to-bearish with USDA confirming a large shipment of soybeans contracted for delivery to China this year was put off until late next year.

USDA put soybeans-inspected-for-export at 5.642 mi bu vs. estimates for five to 10 mi bu. USDA late Monday raised the US soybean crop rating in good-to-excellent condition one per cent from last week to 61 per cent.

Ample global stocks are expected to keep soybean supplies sufficient for 2011-12 as long as the US crop doesn’t get hammered with major weather damage.

WHEAT futures in Chicago (CBOT) closed down on Monday. SEPT’11 futures finished 22.5 ¢ /bu lower at $6.564/bu and 20.0 ¢ /bu lower than a week ago.

The DEC’11 contract closed at $6.946/bu; off 28.25 ¢ /bu and 26.0 ¢ /bu lower than this time last week.

JULY’12 wheat futures finished at $7.586/bu; down 26.0 ¢ /bu and 25.75 ¢ /bu lower than last report.

European wheat futures also fell sharply on concern about a weakening global economy, pushing investors to sell risky commodities. Exports were supportive with USDA putting wheat-inspected-for-export at 25.238 mi bu vs. expectations for 17-22 mi bu. Funds increased net bear positions by 4,379 contracts.

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