11 July 2013

7 minute read

North America

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’13 contract closed at $6.916/bu; up 7.0¢/bu and 36.25¢/bu over last report. SEP’13 corn futures closed at $5.332/bu; up 7.5¢/bu and 1.75¢/bu higher than last Monday. The DEC’13 contract closed at $5.004/bu; up 9.25¢/bu but 0.75¢/bu lower than a week ago. Fresh news from USDA that Mexico bought 120,000 metric tons (4.724 mb) of US corn for 2013-14. Commercial buying interest on old crop corn, a lower US dollar, and down-tick buyers were supportive. Fundamental outlook for 2014 is bearish as of the last USDA acreage report and an uptick in the ending stocks estimates for the 2014 US corn crop is expected in the next World Agriculture Supply Demand Estimate (WASDE) report due out Thursday. Rain was forecast for much of the US corn-belt improving crop development and this too is weighing on prices. USDA put corn-inspected-for-export at 8.205 mb vs. estimates for 9-15 mb. This was well below the 13.2 mb needed to stay on pace with USDA’s demand projection of 700 mb. Please see chart:

The national average basis for corn firmed 6.0¢/bu over last week to +$1.21/bu over CBOT September futures. It would be a idea to consider pricing up to 30 per cent of the 2013 corn crop at this time.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’13 contract closed at $16.092/bu; up 21.25¢/bu and 38.75¢/bu higher than a week ago. NOV’13 futures closed at $12.522/bu; up 24.0¢/bu and 9.0¢/bu over last report. News that China and others were making deals for US soybeans, a lower US dollar, and commercial buying interest were supportive. USDA announced Monday that China bought 120,000 metric tons (4.724 mb) of new-crop soybeans and 135,000 metric tons (4.960 mb) to unknown destinations (probably China as well). On the other hand, according to CBOT soybean pit sources a Chinese agricultural official’s unsupported claims that soybean oil made from GMO soybeans causes people to be more vulnerable to tumors and sterility rekindled a hot debate and served to heat up both buying and selling. Chart signals indicate short-term bearishness. Strikes in Argentina were supportive. USDA put soybeans-inspected-for-export at 2.465 mb vs. estimates of 2-6 mb. This is below the 4.9 mb needed this week to stay on pace with USDA’s demand projection of 1.330 bb. Please see chart:

Cash soybeans firmed 5.0¢/bu over last report to +95.0¢/bu over CBOT August futures. It would be a good idea to price the crop to cover cost of production at this time.

WHEAT futures in Chicago (CBOT) closed up on Monday. The JULY’13 contract closed at $6.456 … 600/bu; up 4.0¢/bu and 14.5¢/bu over last report. DEC’13 wheat futures closed at $6.746 /bu; up 4.25¢/bu and 5.5¢/bu higher than a week ago. The JULY’14 contract closed at $6.924/bu; up 1.0¢/bu but 7.0¢/bu. lower than last week. Spillover strength from corn and soybeans, a lower US dollar, news that some global wheat crops are suffering was supportive. Chart signals and developing fundamentals such as a severely damaged Chinese wheat crop and the approaching end to the winter wheat harvest should support prices near these levels for a while. Traders told me today they were waiting on the USDA WASDE report with interest. Exports were supportive with USDA putting wheat-inspected-for-export at 25.589 mb vs. estimates for 17-25 mb. Wheat basis for Soft Red Winter wheat firmed 2.0¢/bu to -35.0¢/bu under CBOT September futures. Hard Red Winter Wheat basis firmed 2.0¢/bu to -21.0¢/bu under Kansas City September futures. Hard Red Spring Wheat was steady at -29.0¢/bu under Minneapolis September futures.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday. The JULY’13DA contract closed at $17.27/cwt; up $0.03/cwt but $0.10/cwt under last report. NOV’13 futures closed at $18.19/cwt; up $0.04/cwt but $0.21/cwt lower than this time last week. Declining milk receipts amid continued hot weather was supportive while commercial disappearance of fluid milk slowed over the first four months to 2 per cent below year-ago levels. Cheese prices seem to have stalled with buyer’s needs pretty much satisfied. Cheese stocks left over from the recent holidays need moving. Retail demand the first four months of 2013 increased 1.2 per cent over a year ago. Butter and ice cream manufacturing remain strong utilizing quantities of cream. Butter exports remain active with steady-to-higher demand. Demand for retail butter over the recent four months are 2 per cent over year-ago levels. Class III futures are: 3 months out = $17.80/cwt ($0.11/cwt lower than last report); 6 months out = $17.97/cwt ($0.26/cwt under a week ago); 9 months out = $17.70/cwt ($0.31/cwt lower than this time last week); and 12 months out = $17.57/cwt ($0.23/cwt under last report).

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday except for the October 2013 contract due to spreading. The AUG’13LC contract closed at $122.075/cwt; up $0.125/cwt but $0.100/cwt under last report. The FEB’14LC contract closed at $129.550/cwt; up $0.600/cwt and $0.350/cwt higher than this time last week. Pit sources said they expect more beef “lbs” to come to market in October with cattle gaining weight on good weather and good corn prices. Cash cattle continued to decline late last week on uncertain corn prices. Wholesale beef prices continued to weaken. Late Monday USDA placed boxed beef prices at $194.85/cwt; down $1.490/cwt and $1.79/cwt lower than last report. USDA put the 5-area average price on Monday at $119.96/cwt; $0.61/cwt under last report. Please see chart:

The latest HedgersEdge packer margin was lowered $6.95/head from last report to a positive $63.60/head based on a $120.39/cwt buy vs. a breakeven of $124.82/cwt.

FEEDER CATTLE at the CME finished mixed on Monday with nearbys down and deferreds up. The AUG’13FC contract closed at $151.600/cwt; off $0.200/cwt but $0.375/cwt over last report. NOV’13FC futures closed at $156.775/cwt; even with Friday’s close but $0.750/cwt over this time last week. The MAR’14FC contract closed at $158.400/cwt; up $0.500/cwt. Profit taking and short-covering were noted. Grains caused mixed reactions in feeder futures. For Monday 07/08/13 estimated receipts at the Oklahoma City market were put at 7,000 head vs. 6,900 head last week and 6,658 head this time last year. Feeder steers were $3-$5/cwt higher while feeder heifers were steady-$2/cwt higher. Demand was very good for feeder cattle. Quality was plain-to-average. The latest CME index was estimated at 142.28 lb; up 1.670/lb and 3.06/lb over last report. 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 down on Monday. The JUL’13LH contract closed at $101.125/cwt; down $1.225/cwt but $0.500/cwt over last report. OCT’13LH futures closed at $83.525/cwt; off $1.525/cwt and $2.275/cwt lower than this time last week. Follow-through selling, declining cash and wholesale values, and grain price uncertainty pressured lean hogs lower. Processors bid prices lower buying mainly for arrival during the second half of the week. Hotter weather slowing weight gains may slow hog movement from the country. Demand-slump concerns post July 4th grilling pressured prices. Traders said today that they were also concerned for the large net-long fund positions in lean-hog futures worrying that fund managers may be forced to exit a high portion of long positions. Two told me they think that the large fund presence has pushed futures unnaturally above supply/demand fundamentals. Chart signals show the market may be topping. News that a virus was contributing to higher-than-average mortality rates in young pigs was supportive as this could tighten supply later on. The latest CME two-day lean hog index was placed at 103.46; up 0.05 and 0.08 higher than this time last week. The latest HedgersEdge packer margin was lowered $11.25/head to a positive $2.65/head based on a $74.51/cwt buy vs. a breakeven of $75.48/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.