8 December 2010

6 minute read

North America

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) finished off on Monday. DEC’10DA futures were down $0.02/cwt at $13.88/cwt but $0.07/cwt over last Monday. The MAR’11DA contract finished at $13.70/cwt; down $0.18/cwt and $0.30/cwt lower than last report. Milk futures sold after barrels sank to $1.4025 amid no willing buyers. Milk futures for January through April fell with February and March setting new lows. Fat tests in November were up 3.5 per cent to 3.75 per cent. CWT accepted 13 bids to assist with 2 mi lbs of export cheese. CWT has agreed to help with exports up to 70.2 mi lbs lf cheese. Milk exports on fats basis have shown strength this year; however, continued growth may be limited by tariffs on exports to Mexico. Producers should consider pricing feed in short-term increments as corn will be pressured more with feed grain wheat coming on the market, as well as consider buying an out-of-the money PUT options to establish a price floor on 50 per cent of summer production.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday. The DEC’10LC contract closed up $0.200/cwt at $103.375/cwt and $1.35/cwt over last report. The APR’11LC contract closed at $109.250/cwt, up $0.150/cwt and $1.7775/cwt higher than a week ago. AUG’11LC futures closed at $106.175; off $0.150/cwt. Lower corn prices, higher beef prices, and tight supplies held contracts near two-year highs while short-covering by producers and long liquidation by funds pressured deferreds. Volume in December contracts was strong as more than 4,000 contracts refreshed positions to stall delivery. Cash cattle trade was thin on Monday but live cattle last week sold at $104/cwt in Texas. USDA put the 5-area average price at $102.66/cwt; $1.69/cwt over last report. USDA on Monday put the boxed beef price at $164.97/cwt; up $0.97/cwt and $2.58/cwt over last Monday’s report. Long-term demand looks good while local holiday demand is just about over for beef. Beef processors bought large numbers of cattle last week, some with extra days for delivery, to finish this week’s supply. According to HedgersEdge.com, the average packer margin fell $13.45/head to a negative $8.70/head based on the average buy of $102.40/cwt vs. the average breakeven of $101.73/cwt. It might be a good idea to buy some short-term feed needs at this time. It would be a good idea to hold off on buying long-term feed supplies.

FEEDER CATTLE at the CME finished up on Monday with the exception of the January contract. The JAN’11FC contract finished at $118.500/cwt; down $0.175/cwt. APR’11FC futures finished at $120.475/cwt; up $0.175/cwt and $1.175/cwt over last week at this time. The AUG’11FC contract settled at $121.100/cwt, up $0.175/cwt. Lower corn futures and tight deferred supplies were supportive. Compared to last week, feeders were $1-$2/cwt higher. Estimated receipts in Oklahoma City at the Oklahoma National Stockyards were placed at 14,800 head vs. 8,213 head last week and 14,338 head a year ago. Demand was good to very good amid a quality improvement of calves brought to the market over recent weeks. The CME feeder cattle index was placed at 117.46 ¢ /lb; up 0.91 ¢ /lb and up 3.04 ¢ /lb over last report.

CORN futures on the Chicago Board of Trade (CBOT) finished down on Monday. DEC’10 corn futures closed down 5.25 ¢ /bu at $5.536/bu but 15.5 ¢ /bu over last report. The MAR’11 contract closed at $5.680; off 5.5 ¢ /bu but 14.75 ¢ /bu higher than a week ago. The DEC’11 contract closed at $5.292; down 5.25 ¢ /bu but 19.25 ¢ /bu over last Monday. Sluggish exports amid a firm US dollar and profit taking on short covering and fund long liquidation pressured prices. Additionally, global grain supplies are expected to increase from Australia’s water-damaged wheat crop. USDA put corn-inspected-for-export at 25.233 mi bu vs. expectations for 25-30 mi bu. Ethanol credits are expected to continue to support demand as the US Congress considers tax bill cuts and leaves the subsidy alone. The US ethanol sector are bracing for looming subsidy cuts if the current status quo expires. Traders are adjusting positions ahead of USDA’s World Agriculture Supply Demand Estimate (WASDE) report due out Friday that is expected to reduce export demand for expensive US corn. Cash corn was steady to firm amid good farmer selling in response to higher corn prices. This increase in movement has started to weaken basis in many areas. Funds sold an estimated 8,000 lots. It would be a good idea to price another 10 per cent of the 2011 crop taking you to 60 per cent priced.

SOYBEAN futures on the Chicago Board of Trade (CBOT) finished down on Monday. JAN’11 futures closed at $12.884/bu, off 11.75 ¢ /bu but 53.5 ¢ /bu over last report. The MAR’11 contract closed at $12.952/bu; down 11.75 ¢ /bu but 51.75 ¢ /bu higher than a week ago. NOV’11 soybean futures closed down 9.5 ¢ /bu at $11.986/bu but 40.75 ¢ /bu over last Monday’s close. Poor exports, a higher US dollar, and a sell-off in corn kept the lid on soybean prices. The market was somewhat supported by poor crop weather in Argentina. USDA put soybeans-inspected-for-export at 33.495 mi bu vs. expectations for 49-54 mi bu. China was a big buyer at 171,000 tonnes (6.3 mi bu). Brazil’s agriculture ministry put its estimated soybean output at 68.1 mi tonnes (2.498 bi bu) vs. 69.1 mi tonnes (2.539 bi bu) last year. The USDA attaché lowered its forecast of Brazil’s 2010/11 soybean crop to 66.8 mi tonnes (2.45 bi bu). Additional pressure on prices surfaced late amid reports that US crush demand will slow due to thin processor margins. The dollar climbed on a worsening European credit situation. The US dollar is viewed as a “safe haven” for investors until a credit salvage plan can be agreed on among the European Union members. Funds sold over 5,000 lots. It would be a good idea to hold at 50 per cent priced in the 2011 crop.

WHEAT futures in Chicago (CBOT) finished up on Monday. The DEC’10 wheat contract closed at $7.520/bu; up 14.0 ¢ /bu and $1.0175/bu over last report. JULY’11 futures finished up 21.0 ¢ /bu at $8.076/bu and 79.5 ¢ /bu higher than a week ago. Excessive rains are hurting the Australian wheat harvest. In addition to this, dry weather in parts of the western US Plains and China’s wheat belt are supportive of wheat prices. However support was offset by a firm US dollar. Much of the finer wheat for food produced by Australia is fast becoming feed-grain grade. Some reports show yields of high-quality Australian prime wheat dropping 750,000 tonnes (27.6 mi bu) to 250,000 tonnes (9.2 mi bu). Reports from China indicate production there could be nearly 17 per cent lower than last year due to severe drought. Exports were steady with USDA putting wheat-inspected-for-export at 19.215 mi bu vs. expectations for 18-22 mi bu. USDA confirmed sales of 160,000 tonnes (5.9 mi bu) of US hard red wheat for 2010/11 delivery. Funds sold nearly 6,000 lots. It would be a great idea to price another 10 per cent of the 2011 wheat crop taking it to 75 per cent covered.