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Weekly Roberts Market Report : No Threat to Corn

21 March 2012

Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University

US - The threat of cold weather harming the US corn crop is now considered nil by many meteorologists, writes Michael T. Roberts.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) finished mixed on Monday. MAR’12DA futures closed at $15.63/cwt; up $0.02/cwt. The MAY’12DA contract closed at $15.30/cwt; off $0.20/cwt. JULY’12DA futures closed at $16.28/cwt; down $0.18/cwt. February milk production was up 4.3 per cent over this time last year as reported in the USDA release of the February “Milk Production” report. The report showed a 50-state milk production of 16.28 bi lbs; milk-cow numbers up 9,000 head from last month to 9.25 mi head and almost 1.0 per cent vs. last year; and production per cow at 60.70 lbs per day in February, up 1.9 lbs or 4.4 per cent greater than last year. Mild weather conditions across most of the US aided the year-over-year production gains. Cow numbers increased every month last year and continued with increases in January and February. Dairy exports set a record in 2011 totaling 13.3 per cent on a total solids basis of US milk production. USDA projects exports for this year to be down about 9.4 per cent on a fat basis and 5.3 per cent on a skim-solids basis. World milk supply is higher and world dairy product prices are lower. Futures prices are adjusting to remain in line with milk production and will definitely depend upon the level of milk production. Stronger prices will require a slowdown in the increase in milk production from current levels. Prices for Class III futures were: 3 months out = $15.59/cwt ($0.13/cwt higher than last report); 6 months out = $15.91/cwt ($0.08/cwt over a week ago level); 9 months out = $16.15/cwt ($0.11/cwt more than this time last week); and 12 months out = $16.16/cwt ($0.09/cwt over a week ago).

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday. The APR’12 contract finished at $125.175/cwt; down $0.125/cwt. JUNE’12LC futures closed at $122.150/cwt; off $0.550/cwt. DEC’12LC futures closed at $130.500/cwt; down $0.900/cwt. Concerns over building supplies and persistent signs of soft beef demand pressured prices. However, losses on Monday were limited due to a midday report showing higher wholesale beef prices. Late Monday USDA put the boxed beef price at $191.74/cwt; up $1.83/cwt. The average weight of cattle at slaughter is currently up 2.2 per cent compared to this time last year. Fat cattle are getting heavier quicker due to mild winter weather allowing cattle to gain more quickly and slowing production at processing plants leading to a backlog of inventory at feed lots. According to USDA packers processed 2 per cent fewer head than the previous week and 5 per cent lower than a year ago. According to HedgersEdge.com, the average packer margin was raised $5.70/hd to a negative $52.50/head based on the average buy of $126.48/cwt vs. the breakeven of $121.11/cwt. Late Monday, March 19, USDA put the 5-area average price at $126.40/cwt.

FEEDER CATTLE at the CME finished lower on Monday. APR’12FC futures finished at $153.350/cwt; down $0.950/cwt. The AUG’12FC contract closed $1.150/cwt lower at $156.575/cwt. The Oklahoma National Stockyard feeder cattle auction estimated receipts for Monday, 3/19/12 at 8,400 head compared to 5,672 last week and 5,884 a year ago. Compared to last week feeder steers were steady; stocker steers and steer calves were steady to $2 higher. Feeder heifers were steady to $2 lower while heifer claves were steady. Demand was moderate to good. The CME feeder cattle livestock index was placed at 154.48; off 1.23.

CORN futures on the Chicago Board fo Trade (CBOT) closed down on Monday. The JULY’12 contract closed at $6.634/bu; down 9.5¢/bu. The DEC’12 contract closed at $5.702/bu; off 4.0¢/bu. Futures were pressured by profit-taking and prospects for an early start to US corn plantings. The potential for a record large crop may be in the making. The threat of cold weather harming the US corn crop now is considered nill by many meteorologists. Exports were weak and considered bearish for market news. USDA put corn-inspected-for-export at 23.195 mi bu vs. trade estimates for 30-35 mi bu. Backing off bullish buying last week funds sold an estimated 10,000 lots on Monday. Hopefully some of the 2012 and 2013 crop have been sold at these prices. Corn prices will most likely be pressured lower unless drought of other natural disasters set up a lower supply situation.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The MAY’12 contract closed at $13.664¢/bu; off 7.5¢/bu. NOV’12 futures closed at $13.254/bu; down 2.75¢/bu. Soybeans reversed to close lower on profit-taking. Concerns about a crop shortfall in South America started the market out well on the opening bell. In Argentina grain truckers called an indefinite strike on Monday to demand higher pay rates on soybean hauling. This kept South America beans off the world market. However, US exports were considered weak as USDA put soybeans-inspected-for-export at 23.732 mi bu vs. trade estimates for 30-35 mi bu. Soybeans are over bought at this time with the November 2012 contract posting a 75.62 Relative Strength Index (RSI). A contract is considered over-bought with an RSI greater than 70 and over-sold with and RSI lower than 35. Over-bought contracts indicate mounting pressure to sell. Unseasonably warm weather seen as boosting the US crop prospects also weighed on the market. Funds sold an estimated 3,000 contracts which was more than offset by large speculators buying over 17,000 lots. Now would be a very, very good time to get up to 40 per cent of the 2012 crop priced.

WHEAT futures in Chicago (CBOT) closed lower on Monday. The MAY’2012 contract closed at $6.552/bu; down 29.75¢/bu. JULY’12 wheat futures finished at $6.610/bu; down 16.25¢/bu. Wheat futures were pressured by profit taking and outlook for good crop weather in the US winter wheat growing areas. Pakistan will export a million tonnes of wheat to Iran in a barter deal. Western sanctions over Tehran’s nuclear program squeeze its ability to pay for food imports. Still, US exports are not expected to gain much of the global market share as Russia announced Monday it would not limit exports again this year. USDA put wheat-inspected-for-export at 20.982 mi bu vs. trade estimates for 25-30 mi bu. After increasing net-short positions in CBOT week last week funds sold an estimated 3,000 lots on Monday. It would be worth considering pricing more of the 2012 wheat crop at this time.

 

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