26 April 2012

5 minute read

North America

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed down on Monday. APR’12DA futures closed at $15.73/cwt; down $0.04/cwt and $0.06/cwt lower than this time last week. The MAY’12DA contract closed at $14.79/cwt; down $0.36/cwt and $1.19/cwt lower than a week ago. JULY’12DA futures closed at $14.77/cwt; down $0.42/cwt and $0.87/cwt lower than last report. Supply is ample and production is up pressuring futures. Prices are expected to remain lower for longer than previously indicated. Some data show that production may be peaking in Florida and Arizona while production in other milk producing areas is still increasing. As schools wind down and let out for the summer demand is expected to seasonally decrease moving more fluid milk to manufacturing. Class III futures were: 3 months out = $14.89/cwt ($0.35/cwt lower than last report); 6 months out = $15.17/cwt ($0.50/cwt under a week ago level); 9 months out = $15.49/cwt ($0.39/cwt less than this time last week); and 12 months out = $15.59/cwt ($0.36/cwt under a week ago). Fundamentally unless hot weather begins to slow milk supply supplies are expected to remain heavy weighing on prices. Short term outlook is bearish and “any” rallies should be used to price production. Floor sources say slowing production and better exports in the fall of 2012 could help prices. Feed can be priced further out than hand-to mouth but not more than two months.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished mixed on Monday. JUNE’12LC futures closed at $114.575/cwt; down $0.875/cwt and $1.575/cwt lower than last report. The AUG’12LC contract closed at $118.600/cwt; down $0.250/cwt and $0.425/cwt under a week ago. DEC’12LC futures closed at $127.025/cwt; up $0.175/cwt but $0.325/cwt lower than last week at this time. CME cattle were pressured by lower outside markets, a higher US dollar, and a USDA Cold Storage report showing slower domestic demand amid renewed publicity over a certain ground-beef product additive. Beef stocks rose 7.9 per cent from the previous month and 14 per cent over a year ago. USDA on Monday put box beef prices at $188.57/cwt; up $0.56/cwt and $7.31/cwt over a week ago. Estimated packer margins are projected to remain poor but processors will continue to buy cattle to meet near-term retail demand. According to HedgersEdge.com, the average packer margin was raised $69.70/cwt from this time last week to a negative $19.20/head based on the average buy of $122.55/cwt vs. the breakeven of $119.27/cwt. On Monday USDA estimated cattle slaughter at 120,000 head processed vs. 109,000 the week before and 93,000 head this time last year. Monday’s cash cattle were called $0.50-$1.00 lower. Late Monday, April 23, USDA put the 5-area average price at $122.48/cwt; $0.02/cwt lower than this time last week. See graph.

FEEDER CATTLE at the CME closed lower on Monday. APR’12FC futures finished at $149.425/cwt; off $0.700/cwt and $0.925/cwt lower than a week ago. The AUG’12FC contract closed $1.100/cwt lower at $155.225/cwt and $0.250/cwt under last report. Feeders were pressured by higher corn futures slowing demand. Some profit taking was noted. Monday’s estimated receipts at the closely watched Oklahoma City market were put at 9,500 head vs. last week’s 5,451 head. This time last year 4,193 head were sold. Feeder steers and heifers were steady-to-$1/cwt lower. Stockers and calves were steady-to$2/cwt higher. Demand was considered moderate-to-good. The CME feeder cattle livestock index was placed at 149.96; down 0.22 but 0.0270 over this time last week. 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.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’12 contract closed at $6.224/bu; up 10.0¢/bu and 9.25¢/bu higher than last Monday’s close. The DEC’12 contract closed at $5.454/bu; up 8.75¢/bu and 19.025¢/bu higher than last report. Exports, speculative buying new crop corn, and continued commercial buying of old crop contracts were supportive. Funds decreased net-bull positions to 210,431 lot down 28,838 contracts. Corn basis was steady-to-firm with end users raising bids trying to keep grain flowing. Farmer selling is slow due to early corn crop plantings. Exports were bullish with USDA putting corn-inspected-for-export at 29.386 mi bu vs. estimates for 28-34 mi bu. Weekly exports needed 3this week 3.8 mi bu to stay on pace with USDA export demand expectations. See chart.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The MAY’12 contract closed at $14.372/bu; down 9.5¢/bu but 17.25¢/bu higher than last report. NOV’12 futures closed at $13.414/bu; down 14.5¢/bu and 8.75¢/bu lower than a week ago. Lower exports from South America and rumors that Brazil will halt exports this week were supportive. US exports were weak with USDA announcing soybeans-inspected-for-export at 12.005 mi bu vs. estimates for 19-25 mi bu. Weekly inspections needed to be 11.5 mi bu to stay on pace with USDA’s 1.29 bi bu demand projection. See chart.

WHEAT futures in Chicago (CBOT) closed up on Monday. The MAY’12 contract closed at $6.250/bu; up 9.25¢/bu and 8.75¢/bu higher than this time last Monday. JULY’12 wheat futures finished at $6.324/bu; up 9.25¢/bu and 11.25¢/bu higher than a week ago. Exports, risk of frost damage to US crops and increasing Chinese demand for US wheat were supportive. Compared to this time last year US exports to China for the first quarter of 2012 exports increased more than fifty times over. USDA put wheat-inspected-for-export at 24.391 mi bu vs. estimates for 16-22 mi bu. The weekly export pace needed to stay on pace with USDA’s 1.0 bi bu demand projection is 18.5 mi bu.