21 September 2011

5 minute read

North America

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed down on Monday. SEP’11DA futures finished at $18.93/cwt; off $0.01/cwt and down $0.01/cwt from last report. The JAN’12DA contract closed at $17.01/cwt; off $0.42/cwt and $0.29/cwt lower than a week ago.

Milk futures sold off on cheese declines while barrels were mostly steady. Blocks lost $0.0375 on several sales. Butter and whey futures went lower as well as producers expanded the herd on rallying prices last quarter.

Cow numbers across the US were placed at 9.217 mi hd; up 2,000 hd from July and the highest in two years. Productivity was up 1.1 per cent over August on increased cow numbers and cooler milking weather generating an extra 18 lbs/cow/day.

Overall result – general US milk production was up 2.1 per cent at 16.43 bi lbs over this time last year. Fluid milk sales remain slow (off 1.4 per cent from last year) putting more milk in the pipeline for cheese and other processed dairy products.

Average prices for Class III milk are: three months out = $18.14/cwt ($0.41/cwt lower than last report); six months out = $17.60/cwt ($0.35/cwt under last Monday); nine months out = $17.29/cwt ($0.33/cwt lower a week ago); and 12 months out = $17.25/cwt ($0.25/cwt under last report).

Dairy producers should seriously consider pricing grain needs for the next three months while pricing milk deliveries with forward contracts or buying Put options.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished lower on Monday. The OCT’11LC contract closed at $117.625/cwt off $0.875/cwt and $1.775/cwt lower than last report.

JUNE’12LC futures closed at $123.650/cwt; down $0.900/cwt and $1.15/cwt lower than last report. Fund liquidations and lower outside commodities influenced the sell down. Pit sources said they expect exports to trim this week on a stronger US dollar which makes US beef more expensive.

The latest USDA five area average cash price (Friday 9/16/11) was placed at $117.63/cwt; up $0.04/cwt over last report. The trend is flattening somewhat; correcting after several weeks of decline (see chart 9/16/11 chart).

Late Monday, 29 August, USDA put the beef cutout value at $181.83 … 185.29/cwt; down $0.29/cwt but $4.06/cwt higher than a week ago. The pits are waiting on USDA’s cattle-on-feed report due out Friday to make any major moves.

Decreased demand from packers and increased prices in feed weakened fundamentals for the cattle complex. Processor margins are lower. According to HedgersEdge.com, the average packer margin was lowered $22.15/head from last report to a negative $8.90/head based on the average buy of $117.64cwt vs. the average breakeven of $116.96/cwt.

It might be a good idea to price more -intermediate feed needs while buying at-the-money Put options.

FEEDER CATTLE at the CME closed down on Monday. The OCT’11FC contract finished at $134.500/cwt, off $0.800/cwt. The NOV’11FC contract settled at $138.550/cwt, down $0.750/cwt; and $2.15/cwt lower than last report. Spring 2012 futures show strong demand even though futures were lower. APR’12FC futures finished at $141.650/cwt; off $0.625/cwt.

Lower corn futures were supportive, however high costs for feed are putting pressure on buyers to bid competitively for heavier feeders. The Oklahoma City National Stockyards estimated Monday receipts at 10,600 head vs. 14,964 last Monday and 7,267 a year ago.

Steers were steady to $2/cwt lower with those lighter than 800 lbs $3/cwt lower. Calves were called $2/cwt lower. Heifers were steady. Calf demand was good despite continuing drought. The latest CME feeder cattle index was placed at $132.39; off $0.09 but $0.29 higher this time last week (see chart).

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday with exception of the December 2011 contract. The DEC’11 contract closed at $6.922/bu; up 0.25 ¢ /bu but 53.25 ¢ /bu lower than a week ago.

End of session buying by funds in position jockeying near the close supported the December contract. MAR’12 futures closed at $7.050/bu; down 0.5 ¢ /bu. The DEC’12 contract closed down 8.25 ¢ /bu at $6.176/bu.

A firm US dollar and economic woes in Europe are weighing on CBOT prices. Exports were bearish with USDA putting corn-inspected for export at 22.394 vs. estimates for 23-32 mi bu. This was well below what was needed to stay on pace with USDA’s demand projection of 1.65 bi bu and in large part is being influenced by higher priced US corn.

Pit sources said China is said to be seeking Argentinean corn because it is cheaper than US corn right now. Meanwhile, already-purchased-corn in the amount of 4.8 mi bu is destined for China while 3.9 mi bu is going to Japan. Basis on the US East coast was positive with cash prices ranging from $6.87-$7.52/bu. Corn producers should probably hold off pricing any more of the 2011/12 crop at this time.

SOYBEAN futures on the Chicago Board of Trade (CBOT) fell on Monday. NOV’11 soybean futures closed 19.5 ¢ /bu lower at $13.360/bu; 36.0 ¢ /bu lower than last report.

The MAR’12 contract closed at $13.540/bu; off 21.25 ¢ /bu and 59.0 ¢ /bu lower than a week ago. Exports were neutral with USDA putting soybeans-inspected-for-export at 10.007 mi bu vs. estimates for nine to 12 mi bu. China bought 6.5 mi bu and Japan bought 1.5 mi bu of US soybeans.

Around 10 mi bu were needed this week to keep on track with USDA’s demand projections of 1.415 bi bu.

Cash basis on the US East coast was negative with prices ranging from $12.92 - $13.55/bu. Soybean producers should consider pricing more of the 2011 crop at this time. Soybean users should consider pricing up to one month’s use at this time. Beans may become cheaper sooner rather than later.

WHEAT futures in Chicago (CBOT) finished down on Monday. MAR’11 futures finished 16.25 ¢ /bu lower at $7.104/bu. The DEC’11 contract closed at $6.730/bu; down 15.25 ¢ /bu and 54.25 ¢ /bu lower than last report. JULY’12 wheat futures finished at $7.392/bu; off 3.0 ¢ /bu and 47.25 ¢ /bu lower this time last week. Wheat futures fell again.

It has done so nine times out of the 10 last sessions. A firm US dollar and ample global stocks have slowed demand. USDA put wheat-inspected-for-export at 33.3 mi bu vs. estimates for 17-27 mi bu.

Nigeria bought 4.8 mi bu while Korea bought 4.5 mi bu. French port data showed exports to Cuba, Yemen, Israel, and Libya. Wheat producers should have considered priced up to 40% of the 2012 crop last week. More downward price pressure may be expected. End users should think about pricing near-to-intermediate needs at this time.