20 February 2013

6 minute read

North America

Note: A Farm Business Management colleague and I are developing a web-based risk management tool. Please follow this link and take a brief survey for us. Thanks... Mike

Survey link: https://www.surveymonkey.com/s/7B7HBJK

Upcoming Meetings:

• February 13-14 - NC Dairy / Beef Conference – Hickory Convention Center. Contact Steve Washburn at ((919) 515-7726
• February 26 - Dairy Risk Management meeting - Iredell County Extension Center.
  • Time - 10:00 am – 2:30 pm.
  • $5.00 pre-registration or $10.00 at the door (for lunch planning).
  • Topics include:
    • A) Explaining in laymen’s terms Dairy Livestock Gross Margin Insurance by Dr. David Anderson from Texas A&M University
    • B) the Latest look at the farm bill re: dairy by Dr. Scott Brown from the University of Missouri
    • C) Grain and Dairy Outlook by... well me.
  • Call 704-873-0507 to register or email me for brochure. You must register for lunch.
• April 27 – 2013 High Country Cattle Conference - Upper Mountain Research Station, Cattle and grain outlook. Contact Micah Orfield at (336) 846-5850

Note: If you would like a meeting in your area please contact me to see how we can work that out. As always I am available for risk management consultation as needed. See contact information below.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. MAR’13 corn futures closed at $7.022/bu; off 6.75¢/bu. The DEC’13 contract closed at $5.586/bu; up 4.5¢/bu. Corn futures were near unchanged most of the day on Monday before spillover from bearish wheat and soybeans pulled prices down. Exports were still bearish at 14.5 mb vs. estimates for 15-19 mb. This is still below the 19.6 mb needed this week to stay on the USDA revised demand pace of 900 mb. Continued selling is most likely in the near term. The national average basis for corn was steady-to-firm at +1.0¢/bu over CBOT nearby March futures. For now producers should consider holding off pricing anymore of the 2013 crop. It would be a good idea to hold of pricing any more corn at this time... unless you are a buyer of corn.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The MAR’13 contract closed at $14.314/bu; down 21.0 ¢ /bu. NOV’13 futures closed at $12.684/bu; down 13.5 ¢ /bu. Soybeans have been pressured by profit taking, short covering, and brisk producer selling. Additionally, South American production numbers looking very good pressured prices and funds pulled money out of soybeans in droves. Exports were bullish with USDA putting soybeans-inspected-for-export at 30.2 mb vs. estimates for 23-28 mb. This is well above the 11.3 mb needed to stay on pace with USDA’s demand projections of 1.345 bb. Cash soybean basis was steady with the latest national average soybean basis placed at -19.0 ¢ /bu under the Chicago March 2013 futures contract. Producers should consider selling another 5 per cent of the 2013 crop in case SA production continues to pressure futures.

WHEAT futures in Chicago (CBOT) closed down on Monday. MAR’13 wheat futures finished at $7.414/bu; down 14.75 ¢ /bu. The JULY’13 contract closed at $7.506/bu; off 12.0 ¢ /bu. A higher US dollar and spillover from soybeans weighed on prices. Funds drew money out of grains taking profits and running. Chart selling was noted. Weekly export inspections were bearish with USDA putting wheatinspected- for-export at 22.5 mb. This was behind the 25.0 mb needed to stay on pace with USDA’s demand projection of 1.05 bb. Basis levels for wheat were steady-to-firm. The Soft Red Winter wheat basis index was placed at -19.0 ¢ /bu under CBOT March futures. Hard Red Winter Wheat basis index was placed at -34.0 ¢ /bu under Kansas City March. Hard Red Spring Wheat average basis index was placed at - 41.0 ¢ /bu under the Minneapolis March futures contract. It might be a good idea to consider selling another 5 per cent of the 2013 crop.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed down on Monday. The FEB’13DA futures closed at $17.20/cwt: $0.04/cwt lower than Friday’s close. The MAR’13DA contract closed at $17.20/cwt; off $0.22/cwt. MAY’13DA futures closed at $17.80/cwt; off $0.22/cwt. Milk production remains strong while cheese and butter prices sparked hope that higher prices may be nearterm. Demand needs to improve more than it has in order to tighten supply though. Fluid milk demand remained steady with mostly none moving to manufacturing amid steady bottling demand. December exports of fluid milk and cream picked up a bit with exports up 2.3 per cent over December 2012. The market is unclear whether cheese prices have reached a top for the now. Cheese exports ended the year on a positive note. Butter exports increased 6.2 per cent over last year to 3,503 mt; an increase of 22.8 per cent over November. Class III futures are: 3 months out = $17.79/cwt ($0.61/cwt higher than last week); 6 months out = $17.23/cwt ($0.46/cwt lower than last report); 9 months out = $17.97/cwt ($0.01/cwt under last report); and 12 months out = $18.00/cwt ($0.01 lower than Monday before last Monday).

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday with the exception of the August 2013 contract. FEB’13LC futures closed at $126.875/cwt; up $0.425/cwt. APR’13LC futures closed at $130.350/cwt; up $0.225/cwt. The AUG’13LC contract closed at $126.425/cwt; down $0.050/cwt. Activity was restricted to the distribution of new showlists. Some long liquidation was noted in the August on spread unwinding. Cash prices were steady-to-firm. Late Monday USDA put US choice beef at $182.72/cwt; down $0.02/cwt from the previous report. USDA put the 5- area beef fat-cattle price at $126.54/cwt on Monday. The latest HedgersEdge packer margin was placed at a negative $75.95/head based on a $125.48/cwt buy vs. a breakeven of $119.55/cwt. Grain users should consider forward pricing another 6 weeks’ corn-based feed needs based on near-term fundamentals and chart signals.

FEEDER CATTLE at the CME finished up on Monday with the exception of the nearby contract. MAR’13FC futures closed at $144.800/cwt; down $0.200/cwt. APR’13FC futures closed at $148.625/cwt; up $0.425/cwt. The AUG’13FC contract closed at $157.675/cwt; up $0.975/cwt. Feeders were supported on spillover form higher live cattle and lower grain prices. Relative Strength Indices are running lower near oversold status. For Monday 02/11/13 estimated receipts at the closely watched Oklahoma City market were put at 6,000 head vs. 6,914 head last week and 4,311 head this time last year. Compared to last week feeder steers were $3-$4/cwt lower and heifers were $2-$3/cwt lower. Stockers and calves were steady to $2/cwt lower in light volume. Producers are gearing up for spring pastures and hoping for rain. Demand was considered moderate for feeders and moderate-to-good for lighter weight cattle suitable for grazing. . Quality was average-to-average with hardly any attractive cattle crossing the bidding lane. Feeder cattle were slightly thin to moderate condition. The CME feeder cattle index for Monday 2.11.13 was estimated at 144.82/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 closed mixed on Monday with the exception of deferreds. The FEB’13LH contract closed at $89.900/cwt; up $0.450/cwt. APR’13LH futures closed at $86.375/cwt; up $0.250/cwt. The JUN’13LH contract closed at $94.775/cwt; up $0.275/cwt. Most contracts settled higher due to the large premium of the cash index. Cash hogs were weaker and will most likely continue lower the rest of the week. Some spreading was noted. The latest HedgersEdge packer margin was placed at a negative $13.70/head based on a $63.98/cwt buy vs. a breakeven of $58.98/cwt. Late Monday USDA put the latest pork carcass cutout at $81.71; off 0.032. The latest CME two-day lean hog index was placed at 90.17/lb; down 0.42/lb.

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.