1 December 2010

6 minute read

North America

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) finished up on Monday. The NOV’10DA contract finished at $15.43/cwt; up $0.01. DEC’10DA futures were up $0.11/cwt at $13.81/cwt. The MAR’11DA contract finished at $14.00/cwt; up $0.01. Low interest in butter and weaker fundamentals continue to pressure prices. No sales in butter were noted. Spot cheese prices moved higher on trades in both blocks and barrels. Cheese gains were supportive and helped reverse recent declines in milk futures. According to USDA’s report released last Friday October Dairy cow slaughter was up 2.1 per cent from a year ago at 231,500 and as of the first two weeks of November 118,200 dairy cows have been processed; up 10.1 per cent from a year ago. Last week, CWT announced it had accepted 8 bids to give help on exports of 1.4 mi lbs of cheese for delivery through next May. The CWT will focus on export assistance rather than herd reduction. According to USDA next year’s All-Milk price is expected to average $16.50/cwt while Class III price is expected to average just under $15.00/cwt. September milk production was up 3.3 per cent over 2009. Cow numbers were nearly unchanged at 9.116 mi hd; up 34,000 hd, while milk/cow increased 3.3 per cent. California produced 7.3 per cent more milk in September over a year ago while milk/cow was up 8.6 per cent. Wisconsin milk was up 0.5 per cent, with 6,000 more cows. Idaho is on the verge of replacing New York as the #3 dairy state. Overall milk use in the US was up 3.2 per cent through August. In Toronto on Monday the Canadian Dairy Commission (CDC) issued a price increase of 1.5 per cent on milk used for cheese, yogurt, and ice cream, effective February 1, 2011. Restaunteurs there are not pleased noting record high dairy prices and lower disposable incomes driving consumers to choose other menu items. Since 1994, the Canadian price for industrial milk rose 59 per cent compared to an increase in the consumer price index of 34 per cent and milk production cost increases of 6 per cent.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday. The DEC’10LC contract closed down $0.200/cwt at $102.025/cwt. The APR’11LC contract closed at $108.8225/cwt, off $0.325/cwt. Short-covering (profit taking) by producers, long liquidation by funds as they sold lots, and a stronger US dollar pressured prices. A strong cash market and rising beef prices were supportive but profit takers abounded. USDA on Monday put the boxed beef price at $162.39/cwt; up $0.54/cwt. Cash markets traded $3-$3.50 higher last week. USDA put the 5-area average price for live cattle at $100.97/cwt. US and South Korean trade officials will meet in Maryland on Tuesday and Wednesday to try to resolve differences blocking US exports. Floor sources also said that a weaker US stock market placed reservations on the economy’s recovery from recession, which in turn raises concerns about consumer demand. According to HedgersEdge.com, the average packer margin rose $8.30/head to a positive $4.75/head based on the average buy of $100.71/cwt vs. the average breakeven of $100.99/cwt. It might be a good idea to buy some short-term feed needs at this time.

FEEDER CATTLE at the CME finished down on Monday. The NOV’10FC contract finished at $118.400/cwt; down $0.350/cwt. APR’11FC futures finished at $119.300/cwt; down $0.400/cwt. Stronger cash markets, higher corn prices, and profit taking pressured prices. Feeders in Oklahoma City were steady-to-firm; up $1-2/cwt on Monday. Estimated receipts were placed at 8,500 head vs. 6,781 head last week and 9,578 head a year ago. Steers brought more than heifers by about a $1/cwt. The CME feeder cattle index was placed at 114.42¢/lb; up 0.14¢ /lb.

CORN futures on the Chicago Board of Trade (CBOT) were up slightly on Monday. DEC’10 corn futures closed even with Friday’s close at $5.382/bu. The MAR’11 contract closed at $5.532; up0.25¢/bu. The DEC’11 contract closed at $5.100; up 3.0¢/bu. Good demand, and shrinking corn supplies were supportive while a stronger US dollar and lower than-expected exports held gains in check. USDA put corn-inspected-for-export at 23.877 mi bu vs. expectations for 24-27 mi bu. Export customers included Mexico and Russia which announced it was also buying Argentine corn. Even though demand remains strong, gains were limited by a lack of fresh fundamental news. Floor sources said traders were reducing exposure in the market with no new news. They also said that events in North Korea and Ireland, as well as ethanol issues hanging over the market left the pits less willing to take on more risk. US corn supplies as of August 31, 2011 are forecast at a 15-year low of 21 mi tonnes (826.7 mi bu). Funds sold an estimated 1,000 lots. It would be a good idea to price up to 50 per cent of the 2011 crop if you haven’t done so already.

SOYBEAN futures on the Chicago Board of Trade (CBOT) declined on Monday. JAN’11 futures closed at $12.350/bu, off 3.5¢/bu. The MAR’11 contract closed at $12.434/bu; down 3.5¢/bu. NOV’11 soybean futures closed down 0.5¢/bu at $11.580/bu. A firm US dollar and good crop weather in Brazil weighed on prices. Some technical selling and long liquidation was noted. The same world turmoil affecting corn was a factor in soybean prices on Monday. A higher US dollar pressures commodity prices as most raw materials are dollar-denominated, making it more expensive for foreign buyers to import from the US Chinese buying backed off previous expectations after driving soybean futures to 26-month highs earlier this month. USDA reported soybeans-inspected-for-export at 48.948 mi bu vs. expectations for 45-50 mi bu. Basis was steady-to-firm amid slow farmer selling. Basis refers to the relationship between cash prices in a local market and the trading level of national futures for that commodity. Basis reflects local market supply/demand factors: the availability of storage, production levels, consumption patterns, or transportation costs. Local buyers send their willingness/reluctance to buy cash commodities by strengthening/weakening the basis they offer, thereby regulating the flow of commodity from sellers. A weaker basis is one in which futures are gaining on cash markets while a stronger basis signals the cash market is gaining on futures prices. Funds sold an estimated 3,000 lots. It would be a good idea to get to 50 per cent priced in the 2011 crop and to have sold all 2010 soybeans.

WHEAT futures in Chicago (CBOT) finished up on Monday. The DEC’10 wheat contract closed at $6.502/bu; up 2.0¢/bu. JULY’11 futures finished up 3.75¢ /bu at $7.282/bu. Wheat was the strongest commodity on Monday. Exports and dry weather were supportive. USDA put wheat-inspected-for-export at 20.818 mi bu vs. 14-18 mi bu. Jordan tendered an offer for 100,000 tonnes (3.674 mi bu). Dry weather in the US Plains and heavy rains in southeast Australia were seen as slowing wheat supplies. Wheat cash prices were steady-to-firm as export basis bids for soft-red-winter-wheat gained as much as 5.0 ¢ /bu at the US Gulf market Monday. Funds bought an estimated 3,000 lots. It would be a good idea to price up to 65 per cent of the 2011 wheat crop.

LEAN HOGS on the CME were off on Monday. DEC’10LH futures finished at $70.025/cwt; down $0.325cwt. The FEB’11LH contract closed down $0.925/cwt at $76.225/cwt. The APR’11LH contract closed at $80.800/cwt; off $0.575/cwt. The large premium to cash and a stronger US dollar seen as slowing exports weighed on prices. Packers were slow to buy on Monday due to stronger cash prices as a result of last week’s buying binge for the holidays. Spreaders sold February and bought December and April. USDA put the average cash pork price at $79.33/cwt; down $0.09/cwt. According to HedgersEdge.com, the average packer margin was raised $4.45/hd to a positive $25.50/hd based on the average buy of $47.55/cwt vs. the average breakeven of $56.83/cwt. The CME lean hog index was placed at 64.17 ¢ /lb; up 0.67 ¢ /lb.