Weekly Roberts Market Report

US - Profit taking and a stronger US dollar weighed on soybean prices, writes Michael T. Roberts.
calendar icon 12 April 2012
clock icon 6 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 mostly lower on Monday. APR’12DA futures closed at $15.62/cwt; up $0.12/cwt but $0.22/cwt lower than this time last week. The MAY’12DA contract closed at $15.31/cwt; even with last Friday’s close but $0.50/cwt lower than a week ago. JULY’12DA futures closed at $15.95/cwt; down $0.08/cwt and $0.47/cwt lower than last report. The latest Weekly Dairy Product Prices Report showed increased butter prices, block cheese prices up $0.025/lb, and barrels adjusted to 38 per cent moisture up 3.6 per cent. Total cheese product for February 2012 was 857.8 mi lbs; up 2.6 per cent. vs. last year but 0.7 per cent greater than January 2012. Dry whey prices fell $0.057/lb; non-fat dry milk lost $0.039/lb. Oceania milk volume was up significantly with Australia milk production up 4 per cent and New Zealand production up 9 per cent. Markets were closed last Friday for the Easter weekend but resumed Sunday night. Class III futures were: 3 months out = $15.39/cwt ($0.45/cwt lower than last report); 6 months out = $15.93/cwt ($0.73/cwt over a week ago level); 9 months out = $16.14/cwt ($0.17/cwt less than this time last week); and 12 months out = $16.16/cwt ($0.12/cwt under a week ago). Producers should keep pricing feed hand-to-mouth as feed prices are expected to weaken on increased plantings.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday with exception of the June and August contracts. JUNE’12LC futures closed at $115.775/cwt; off $0.05/cwt and $5.75/cwt lower than last report. The AUG’12LC contract closed at $118.375/cwt; down $1.000/cwt and $1.875/cwt lower than a week ago. DEC’12LC futures closed at $126.275/cwt; up $0.300/cwt but $1.65/cwt lower than last week at this time. The front month April gained on increased trading volume. Short-covering was supportive while worries over beef retail demand weighed on prices and led to some profit taking. Seasonal demand at this time of year amid spring-grill-crank-up is expected to increase demand for steaks and hamburgers. Prices have been weakening for several weeks. Record beef prices and rising gasoline costs have consumers buying cheaper cuts of meat amid negative news over ground-beef filler named “pink slime.” USDA on Monday put box beef prices at $177.61/cwt; down $0.90/cwt; $6.49/cwt lower than a week ago and $14.31/cwt lower than two weeks ago! Cash markets were slow as processors had a short week last week and ample supplies to get started this week. USDA reported 100,000 head processed last week vs. 124,000 the week before and 127,000 head this time last year. According to HedgersEdge.com, the average packer margin was lowered $13.80/cwt to a negative $121.20/head based on the average buy of $123.34/cwt vs. the breakeven of $112.40/cwt. This is an estimate of packer returns on processed cattle expressed in the form of an index. Late Monday, April 9, USDA put the 5-area average price at $121.90/cwt; $3.77/cwt lower than last report. See graph next page.

FEEDER CATTLE at the CME closed mixed on Monday. APR’12FC futures finished at $148.150/cwt; off $0.757/cwt and $1.375/cwt lower than a week ago. The AUG’12FC contract closed $0.075/cwt higher at $151.025/cwt but $1.625/cwt lower than last report. Short covering and expectations for shorter cattle numbers were supportive amid trader concerns over a still-shaky economy. Feeders generally followed live cattle. At the closely watched Oklahoma City market estimated receipts were put at 3,454 head vs. last week’s 6,758 head and 12,174 head a year ago. Compared to last week feeder steers and heifers were not tested. Steer and heifer calves were $2-$6. Quality was plain to average with few attractive. The CME feeder cattle livestock index was placed at 150.28; off 0.88 and 3.65 lower than this time last week.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The JULY’12 contract closed at $6.412/bu; off 11.0¢/bu and 9.75¢/bu lower than last Monday’s close. The DEC’12 contract closed at $5.502/bu; even with last Friday’s close but 5.25¢/bu higher than last report. Traders were squaring positions and taking profits ahead of the World Agriculture Supply Demand Estimate (WASDE) report due out tomorrow morning at 8:30 am. The March planting report showed farmers planting the largest US corn crop since 1937. Traders expect the report to show tight old-crop supplies, however, USDA report surprises in the past have made traders gun-shy on taking big chances ahead of the report. Exports were not supportive. USDA put corn-inspected-for-export at 23.364 mi bu vs. estimates for 28-34 mi bu. However, 17.2 mi bu were needed to stay on track with USDA’s 1.7 bi bu demand projection. Ukraine announced China bought corn and wheat from them. This is significant in that it is the first time China has imported corn from the Eastern European nation. US cash corn basis levels remain firm amid slow supply movements as farmers plant spring corn. Grain buyers say heavy selling in recent weeks ahead of planting has provided adequate inventories. Corn growers should again seriously consider selling all old crop supplies at these prices; pricing up to 50-60 per cent of the 2012 crop; and 10 per cent of the 2013 crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed mixed on Monday with deferreds up and nearbys decreasing. The MAY’12 contract closed at $14.310/bu; down 3.0¢/bu but 10.0¢/bu over last report. NOV’12 futures closed at $13.200/bu; up 0.5¢/bu but 65.25¢/bu lower than a week ago. Traders evened positions ahead of tomorrow’s WASDE report pressuring nearby prices. Profit taking and a stronger US dollar weighed on prices but solid commercial buying tied to strong demand offset that pressure. Exports were strong with USDA putting soybeans-inspected-for-export at 26.396 mi bu vs. estimates for 23-28 mi bu. This was nearly double the amount needed to stay on pace with USDA’s 1.275 bi bu demand projection. Look for follow-through buying interest emerging in the near-term. Traders in the pits indicate they believe the soybean market is particularly vulnerable to a downward price correction. Producers should consider selling all old crop soybeans at this time while getting to 40 per cent sold in the 2012 crop and 20 per cent sold in the 2013.

WHEAT futures in Chicago (CBOT) closed up on Monday with the exception of the May 2013 contract. The MAy’12 contract closed at $6.430/bu; up 4.5¢/bu but 14.0¢/bu lower than this time last Monday. JULY’12 wheat futures finished at $6.490/bu; up 2.75¢/bu but 20.5¢/bu lower than a week ago. Concerns of the state of the US economy, mainly from the poor jobs report issued Friday didn’t slow down bullish trading today. Some short-covering ahead of the WASDE report was supportive. Wheat prices are not expected to lead a rally though as domestic and global supplies are still ample, even if USDA lowers US wheat ending stocks. Commercial buying was noted. Exports were steady-to-bullish with USDA putting wheat-inspected-for-export at 17.605 mi bu vs. estimates for 13-20 m bu. However, exports fell further behind the pace needed to meet USDA’s demand projections of 1.0 bi bu. More than 34 mi bu in exports was needed this week to meet that pace.

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