13 June 2013

7 minute read

North America

Bottom line – I think corn acres won’t be as big as USDA has predicted and soybean acres will increase. Wheat looked very good in the Plains and combines were rolling in the Texas and Oklahoma panhandles. Many cattle feedlots were empty but in spots where there was irrigation there was plenty of wheat, rye, and alfalfa being grown to feed the grazing stockers and the few populated cattle feedlots nearby. I took so many photos it will take some time to get some of them out but out they will come in future issues of the Roberts Report.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The JULY’13 contract closed at $6.500/bu; down 16.25¢/bu. SEP’13 corn futures closed at $5.772/bu; off 14.25¢/bu. The DEC’13 contract closed at $5.460/bu; down 12.5¢/bu. Corn futures are still holding above the gap left after the Memorial Day holiday and the 50-day moving average. Rainy weather continued in the Corn Belt.

From what I saw and heard from farmers and merchangisers this past three weeks I would not be surprised if the late June acreage reports show a 15%-18% reduction although some farmers were planting short-day corn seed … when they could find it. However, most fields were still unplanted as of a week ago.

Profit taking was noted amid short-covering offset one another. Late Monday USDA’s crop progress report showed the U.S. corn crop 95% planted. This doesn’t say however, how many acres have been replanted (too late for that) and how many will go to soybeans. Wednesday’s World Agriculture Demand Supply Estimate (WASDE) report will most likely not change much but look out for the crop acreage report due later this month. Exports remain bearish. USDA put corn-inspected-for-export at 6.365 mb vs. estimates for 7-12 mb. This was below the 16.1 mb needed this week to keep pace with the USDA demand projection of 750 mb. Please see chart:

The national average basis for corn firmed to +34.0¢/bu over CBOT July futures.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The JULY’13 contract closed at $15.115/bu; down 16.5¢/bu. NOV’13 futures closed at $13.190/bu; down 11.25¢/bu. Expectations for USDA to increase ending stocks and profit-taking weighed on prices while some short-covering was noted. Planting will remain a challeng in soggy fields with more rain expected in many soybean growing areas. The 6-10 day forecasts show above average precipitation for many states where plnating conditions remain wet. The fundamental outlook for soybeans so far remains slightly bullish. Exports are bearish with USDA putting soybeans-inspected-for-export at 3.059 mb vs. estimates for 1-5 mb. This was below the 6.1 mb needed to keep on pace with USDA’s demand projections of 1.35 bb. Please see chart:

Cash soybean prices were weaker with the latest national average soybean basis placed at -17.0¢/bu under CBOT July futures.

WHEAT futures in Chicago (CBOT) closed down Monday on spillover from corn and soybeans. The JULY’13 contract closed at $6.896/bu; down 6.5¢/bu. DEC’13 wheat futures closed at $7.136/bu; down 5.5¢/bu. Favorable global wheat crop outlook continue to weigh on wheat prices. Some production/quality concerns have been raised for U.S. wheat but from what I saw and heard quality will not be a problem. Exports should be viewed as bullish. USDA put wheat-inspected-for-export at 24.370 mb vs. estimates for 13-18 mb. This was more than what was needed t stay on pace with USDA’s demand projection of 925 mb. Wheat basis firmed with the Soft Red Winter wheat basis index placed at -23.0¢/bu under CBOT July futures; Hard Red Winter Wheat basis index at -18.0¢/bu under Kansas City July futures. Hard Red Spring Wheat weakened 6.0¢/bu to -38.0¢/bu under the Minneapolis July futures.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed up on Monday. JUNE’13DA futures closed at $18.11/cwt; up $0.02/cwt. The JULY’13DA contract closed at $18.62/cwt; up $0.04/cwt. NOV’13 futures closed at $18.59/cwt; up $0.05/cwt. Stronger block cheese prices were supportive however, it was reported that buyers may have reached their limit due to recent price increases. Supply increases have the market wary about buyting too much at this time. High feed prices continue with reports of really high hay prices in pockets of the country where hay harvestin is way behind and corn has not been planted due to wet weather. Several dairy producers I visited with the past few weeks are even considering getting out of the business rather than look at another year of struggle to feed the cows. With school out school demand for cheese and milk has virtually come to a standstill. Butter remains strong. The dairy budgets will be updated this week and resume in next week’s report. Some dairies are irrigating and looking good across Texas and the Plains.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday. JUN’13LC futures closed at $119.575/cwt; down $0.925/cwt. The AUG’13LC contract closed at $118.425/cwt; down $0.800/cwt. The FEB’14LC contract closed at $125.825/cwt; down $0.625/cwt. Futures were pressured from a weaker cash market and wholesale beef prices amid slacking demand for beef. Low cattle numbers are still supportive. Cattle feed yards remain ghost facilities across the heartland.

Lackluster beef demand and falling wholesale beef prices keep hanging over the market, although wholesale prices rebounded somewhat Monday. Cash markets were quiet Monday. USDA put the 5-area average price on Monday at $122.60/cwt. Please see chart:

Beef processors indicate they have ample supplies for this week following last Friday’s purchases. It is probable that active buying won’t resume until later in the week. USDA put boxed beef prices at $203.16/cwt; up $1.59/cwt from Friday. The latest HedgersEdge packer margin was placed at a positive $22.30/head based on a $124.65/cwt buy vs. a breakeven of $126.20/cwt.

FEEDER CATTLE at the CME finished mixed on Monday with nearbys down and deferreds firm. The AUG’13FC contract closed at $143.425/cwt; off $0.200/cwt. NOV’13FC futures closed at $149.300/cwt; off $0.100/cwt. Feeders traded higher throughout front half of the session thanks to the break in corn prices but late session profit-taking and spillover selling caused most conracts to settle lower. For Monday 06/10/13 estimated receipts at the closely watched Oklahoma City market were put at 11,500 head vs. 7,992 head last week and 9,269 head this time last year. Cash prices were $1-$3/cwt higher for feeder steers and heifers. Demand was good for feeder cattle. Quality was mostly average. Supply included several heavy weight feeder cattle. The CME index for Monday 6.10.13 was estimated at 135.58 lb; up 1.74/lb. Please see chart:

This table shows the maximum price a producer could pay for feeder cattle and still break even, assuming the costs and conversion/performance factors listed above. Producers should remain aware that calculations are based on averages. Courtesy DTN.

LEAN HOGS on the CME finished mixed on Monday. JUN’13LH futures closed at $99.200/cwt; up $1.075/cwt. The JUL’13LH contract closed at $97.900/cwt; up $1.700/cwt. OCT’13LH futures closed at $83.700/cwt; off $0.900/cwt. Investors seemed to step back from commodities following last week’s sharp rally and amid worries when the Fed might scale back its stimulus program. This pressured deferreds lower as speculative money was taken out of hog futures. Strong bullish activity was present in the summer (front) months thanks to ongoing cash strength and speculation concerning the possibility of more export business with China thanks to the Smithfield sale to Shuanghui International Holdings Ltd. Carcass value continues to improve on good deman with all primal cuts quoted significantly higher. Consumers are leaving beef and grilling pork chops and BBQing ribs and shoulders. Cash hogs were steady-to-$1.50/cwt higher amid strong packer demand. Supplies are short on seasonal expectations. Late Monday USDA put the pork cutout at $97.92; up $1.41. The latest CME two-day lean hog index was placed at 97.48/lb; up 0.33/lb. The latest HedgersEdge packer margin was placed at a negative $6.85/head based on a $71.18/cwt buy vs. a breakeven of $68.71/cwt.

This table shows the maximum price a producer could pay for feeder pigs and still break even, assuming the costs and conversion/performance factors listed above. Producers should remain aware that calculations are based on averages. Courtesy DTN.