1 September 2011

7 minute read

North America

Everyone is okay now in the neighbourhood except one person who was tragically killed when a large oak tree blew over onto his bedroom. Please keep that family in your thoughts as he was the bread winner of the family. I have met more people in my neighbourhood now in one day than I have met in five years: people helping people.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday with deferreds again lower. The AUG’11DA contract finished at $21.58/cwt; up $0.01/cwt and $0.05/cwt higher than last report.

SEP’11DA futures finished at $18.64/cwt; up $0.02/cwt but $0.06/cwt under last report. Class III milk trade was quiet while traders focused on cash cheese market direction and intensity.

Cheese trading was active last Friday. Buying is expected to remain sluggish in the near term on cheese trading currently below $1.80/lb. The butter market was steady near the end of the month.

Milk production is mixed across the country while those in the Northeast are trying to get cranked back up from the effects of Irene. Class I milk is beginning to move on school demand amid firm general fluid demand.

July dairy cattle slaughter numbers decreased, according to USDA’s “livestock Slaughter” report released last Friday. It was the lowest processing month since June 2008.

This reflects the higher milk prices, even though higher input prices are still squeezing producers. The rate of milk production remains on the rise nationwide though slowing in Wisconsin and Minnesota.

US milk production was placed at 15.4 bi lbs last month; a one per cent increase for the same month last year. Wisconsin and Minnesota produced less milk this year than comparable periods.

Even though Wisconsin’s milk production fell four per cent from last year it still is solidly in second place behind California; producing over 2.2 mi lbs in July.

Minnesota’s milk production was placed at 735,000 lbs, a decline of seven per cent for same period last year. Average prices for Class III milk are: three months out = $19.53/cwt ($0.16/cwt higher than a week ago); six months out = $18.67/cwt ($0.20/cwt over last report); nine months out = $18.10/cwt ($0.11/cwt higher than this time last week); and 12 months out = $17.83/cwt ($0.10/cwt over last report).

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished down on Monday with deferreds beyond June 2012 gaining. AUG’11LC futures closed at $113.500/cwt; off $0.80/cwt and $1.15/cwt lower than a week ago.

The OCT’11LC contract closed at $114.600/cwt down $0.600/cwt and $1.100/cwt lower than last report. JUNE’12LC futures closed at $123.175/cwt; up $0.025/cwt and $0.750cwt over last report.

Cash trade volume was light. Outside markets were supportive. Prices were steady amid lower slaughter estimates; set at 660,000 head; down 9,000 head from last week.

Higher corn and soybean prices pressured livestock futures. Pit sources said there is hope that in light of higher equities and indications of better economic news consumer confidence will be renewed and cause shoppers to spend more on expensive meat cuts.

Some position squaring in the August contract was noted as we near the end of the month. USDA put the five-area average cash price at $112.96/cwt; $1.00/cwt lower than last report. The trend is still up but threatened by three straight weeks of decline (see chart).

Late Monday, 29 August, USDA put the beef cutout value at $186.20/cwt; down $1.59/cwt and $1.22/cwt lower than a week ago.

Beef packer margins remain supportive although packers remained cautious given the slower processing rates around Labor Day.

According to HedgersEdge.com, the average packer margin was raised $9.55/head from last report to a positive $67.30/head based on the average buy of $113.38/cwt vs. the average breakeven of $118.53/cwt. Comment: "The long and wearisome drought is not only hurting livestock producers or row croppers, it is also hurting consumers."

FEEDER CATTLE at the CME closed down on Monday. The SEP’11FC contract finished at $132.325/cwt, up $0.275/cwt. The NOV’11FC contract settled at $133.550/cwt, off $0.225/cwt and $2.350/cwt under last report.

Live cattle setbacks pulled feeders lower. Stockyards are also full of cattle that have come off dry land where there used to be grass. Higher grain prices weren’t helpful as it means higher input costs for cattle feeders and additional pressure on demand for yearling cattle.

The Oklahoma City Stockyards estimated receipts at 6,500 head vs. 6,057 last week and 11,457 this time last year. The Oklahoma National Stockyard will be closed Monday 9/5/2011 for Labor Day. There will be one sale on Tuesday, 9/6/2011.

Compared to last week steers were three dollars/cwt higher while heifers were two dollars/cwt higher. Steer and heifer calves were steady to two dollars/cwt higher. Demand was considered good for all classes.

Volume was light for this time of year but was reasonable as producers sold ahead last spring on good prices and sold again this summer due to drought and extreme heat.

The latest CME feeder cattle index was placed at $134.39; down $0.19 and $0.28 lower than this time last week (See trend chart below). The CME feeder index reported stands at $133.60, down $0.19 and $1.05 over last report.

CORN futures on the Chicago Board of Trade (CBOT) closed up on small gains Monday. SEPT’11 futures closed at $7.562/bu; up 3.75¢/bu and 35.75¢/bu higher than last Monday.

The DEC’11 contract closed at $7.00/bu; up 3.0¢/bu and 35.75¢/bu over last report. Corn futures were supported by estimates for lower-than-expected yield expectations, gains in equities, and a weak dollar.

Pro Farmer on Friday put its estimate for 2011 US corn production at 12.484 mi bu; well below USDA’s last forecast for 12.914 bi bu. USDA will release an updated forecast on 12 September. Profit taking on overbought technical signals was a limiting factor.

Exports were bearish as USDA on Monday put corn-inspected-for-export at 27.314 mi bu vs. expectations for 30-34 mi bu. Cash corn was steady-to-firm as farmers sold more corn at these higher prices.

The national average cash price for corn was $7.49/bu with the national average basis placed at 19.0¢/bu; down 1.0¢/bu from the previous day. Futures prices are expected to continue to rally on expectations for a poor US corn yield.

SOYBEAN futures on the Chicago Board of Trade (CBOT) rallied on Monday in active trading with volume 17 per cent higher than the previous 30-day average. The SEP’11 contract closed at $14.380 /bu; up 23.25¢/bu and 61.75¢/bu over last report.

NOV’11 soybean futures closed 23.5¢/bu higher at $14.470/bu and 88.75¢/bu higher than a week ago. The MAR’12 contract closed at $14.570/bu; up 24.5¢/bu and 59.5¢/bu higher than this time last week.

Fears that dry weather in the US Midwest will push this year’s harvest lower than expected, higher equities, and a lower US dollar were supportive. Soybeans were further supported by talk that China’s soybean crop was also suffering under adverse conditions.

Exports were steady with USDA putting soybeans-inspected-for-export at 8.244 mi bu vs. expectations for seven to 11 mi bu. Fund money is rolling into speculative soybeans. Funds doubled the size of net bull positions in CBOT soybeans for the week ended 23 August to 94,835 lots; up 49,954 contracts from the previous week.

This is the largest weekly increase in 13 months. Pro Farmer’s recent tour estimated the US soybean crop higher than USDA estimates so far. On Friday Pro Farmer pegged the US soybean crop at 3.083 bi bu based on yield estimates of 41.8 bu/ac.

USDA’s latest forecast was 3.056 bi bu based on yield estimates of 41.4 bu/ac. The national average cash soybean price was placed at $13.70/bu with a national average basis of 29.0¢/bu; down 2.0¢/bu from Friday. The market is waiting for China to get into the market without results. China is buying less expensive South American soybeans.

WHEAT futures in Chicago (CBOT) finished mixed on Monday with nearbys September and December lower and deferreds higher. Volume was 32 per cent below the 250-day average at 70,000 contracts.

SEPT’11 futures finished 5.0¢/bu lower at $7.572/bu but 21.75¢/bu over last week at this time. The DEC’11 contract closed at $7.950/bu; down 2.0¢/bu but 29.0¢/bu higher than this time last week.

JULY’12 wheat futures finished at $8.422/bu; up 6.5¢/bu and 32.75¢/bu higher than last report. Exports were supportive with USDA putting wheat inspected-for-export at 23.411 mi bu vs. estimates for 17-22 mi bu.

A weakening US dollar encouraging exports and higher equities were supportive. Some profit taking limited gains with large speculators (mostly funds) cutting net bear positions in CBOT wheat to 40,513 lots; the lowest in a month.

Cash wheat was steady-to-firm with the national average basis for SRW wheat at -28.0¢/bu; HRW wheat at -54.0¢/bu; and HRS wheat at -36.0¢/bu. Light demand and slow farmer selling are holding nearby basis levels steady in domestic and export markets. Markets are soft for Soft Red and Hard Red Winter wheat while farmers are holding onto Hard Red Spring wheat in anticipation of rising prices, even though the carry is weak.