1 February 2012

5 minute read

North America

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday. The JAN’12DA contract closed at $17.10/cwt, unchanged from last Friday but $0.01/cwt higher than a week ago. MAR’12DA futures closed at $16.70/cwt; down $0.02/cwt but $0.16/cwt higher than last report. The JULY’12DA contract closed down $0.04/cwt at $17.10/cwt. This contract gained $0.01/cwt over last Monday’s close. Spot trade was influenced by sell orders. Butter and Grade A NDM dropped $0.04-$0.07/cwt. Whey futures were down in the front months. Butter production is far exceeding demand right now. Butter production for 2011 was up more than 16% over 2010. Ending stocks were 29% higher than the previous year. CWT accepted more bids for export assistance on sales of 2.8 mi lbs of cheese and 11.0 mi lbs of butter for delivery through June 2012. Milk production continues to grow in the exceptionally mild US winter weather. Cow comfort is good boosting the cream supply over demand. Current average futures prices for Class III milk declined a range of $0.80 - $0.60/cwt. Prices were: 3 months out = $16.83/cwt (0.19/cwt higher than last Monday); 6 months out = $16.79/cwt (0.09/cwt over last report); 9 months out = $16.92/cwt (0.06/cwt more than a week ago); and 12 months out = $16.95/cwt (0.03/cwt over last report). Feed inputs should be bought hand-to-mouth for now and milk should be price up to 3 months out.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished down on Monday. The APR’12 contract finished at $127.750/cwt; down $0.70/cwt and $0.425/cwt lower than last report. JUNE’12LC futures closed at $126.850/cwt; off $0.325/cwt and $0.15/cwt lower than this time last week. DEC’12LC futures closed at $132.075/cwt; down $0.475/cwt and $0.775/cwt lower than a week ago. Cash prices reflecting upside-down fundamentals at meat packers pressured prices as buyers backed off. Cash prices have fallen after two weeks of price surge. Packers are cutting production because of losses. According to USDA, packers trimmed slaughter rates last week by 20,000 head for 608,000 head. Trade estimates show processors will cut slaughter rates again this week. Funds are also pulling some cash from the livestock positions in preparation for what they see as failed bailouts of the Greek and Portugal economies. Late Monday USDA put choice boxed beef prices at $182.88; down $1.25. Late Monday, January 30, USDA put the 5-area average price at $123.87. See Chart:

According to HedgersEdge.com, the average packer margin was placed at a negative $106.50/head based on the average buy of $125.78/cwt vs. the breakeven of $116.65/cwt. The record low of minus $112.10/cwt was set in early December.

FEEDER CATTLE at the CME finished down on Monday with the exception of the August ’12 contract. APR’12FC futures finished at $156.600/cwt; down $0.225/cwt but $1.20/cwt over last Monday’s close. The AUG’12FC contract closed up $0.050/cwt and $1.325/cwt over last report at $159.000/cwt. Feeder futures fell from record territory, weighed down by falling prices for fat cattle and general weakness across equity and commodity markets. Feeders failed to set a record high for the nearby spot contract for the first time in three weeks. The Oklahoma National Stockyard feeder cattle auction estimated receipts for Monday, 1/30/12 at 7,300 head compared to 9,432 last week and 9,405 a year ago. Compared to last week feeder steers were $2-$4 lower while feeder heifers were $2/cwt higher. Steer and heifer calves were $3-6/cwt higher. Demand was good for feeder cattle and calves. Quality for calves was mostly average. Late Monday the CME feeder cattle index for 1/30/12 was placed at $153.59; up $0.52 from the previous close.

CORN futures on the Chicago Board of Trade (CBOT) finished down on Monday. MAR’12 futures closed at $6.316/bu; down 10.0¢/bu but 11.75¢/bu over this time last week. The DEC’12 contract closed at $5.646/bu; off 6.25¢/bu but 8.5¢/bu higher than a week ago. Short covering, profit taking, a higher US dollar, improved weather in South America, and lower-than-expected exports weighed on corn prices. The dollar rose against the euro indicating a bearish signal for US grains. Crop-friendly rainfall is expected this week through all of Argentina and also Brazil. Several sources polled indicate bearish feelings that US corn prices may fall by as much as 15% by the end of the year. Much will depend upon the next key USDA expected plantings report. Exports were bearish for US corn. Late Monday USDA put corn-inspected-for-export at 22.690 mi bu vs. estimates for 29-33 mi bu. In addition, economic sanctions on Iran are holding up grain movements in the area increasing transportation costs. Iranian assets are frozen so cargoes will not be unloaded until someone agrees to pay for the grain. A recent graph by ERS shows that the US is still the world’s largest corn exporter. See below:

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The MAR’12 contract closed at $11.852/bu; down 33.75¢/bu and 32.25¢/bu lower than a week ago. NOV’12 futures closed at $11.944/bu; down 27.75¢/bu and 13.0¢/bu off from last report. Better crop weather in South America and a stronger US dollar weighed on prices. Exports were supportive. USDA put soybeans-inspected-for-export at 41.503 mi bu vs. estimates for 24-32 mi bu. One interesting development in soybean exports from Argentina allowed increased exports from that country. Port authorities in Argentina’s Rosario grains hub dislodged a vessel that ran aground earlier this month, and all delayed ships have been able to get going with their grain cargoes. This will most likely create pressure on US exports as importers meet needs with cheaper soybeans. Argentina is one of the world’s top suppliers of soybeans and soybean by-products. It might be a good idea to price a good portion of the 2012 crop at this time.

WHEAT futures in Chicago (CBOT) were down on Monday. The MAR’12 contract closed at $6.446/bu; down 2.5¢/bu but 25.0¢/bu higher than last report. JULY’12 wheat futures finished at $6.712/bu; off 3.5¢/bu but 17¢/bu lower than last week at this time. Prices were pressured on news from the USDA attaché in Australia report that wheat production in that country continues to increase. In the past the Australian wheat crop has been damaged by wet weather reducing wheat acceptable for export. Year-on-year production of wheat, barley, and sorghum has yielded back-to-back record wheat crops and are projected to support another banner year. See graph below:

Production declines in Europe on bitter cold temperatures are price supportive. Exports were somewhat supportive with USDA placing wheat-inspected-for-export at 18.655 mi bu vs. estimates for 15-19 mi bu. Wheat producers should not feel pressured to price the 2012 wheat crop at this time.