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Weekly Roberts Market Report

14 March 2012

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

US - Cash hogs were mostly steady for delivery late in the week, writes Michael T. Roberts.

LEAN HOGS on the CME finished down on Monday. The APR’12LH contract closed at $87.30/cwt; down $0.525/cwt and $2.125/cwt lower than last report. MAY’12LH futures closed at $95.000/cwt; down $0.700/cwt and $2.875/cwt under last Monday. AUG’12LH futures finished $0.675/cwt lower at $95.800/cwt and $3.525/cwt lower than a week ago. Weak demand and higher corn futures weighed on prices. Lower pork prices are hanging over the market. Good growing weather is showing up in higher live weights. Fund liquidation was also holding down gains. Some floor sources said they expected really high beef prices and high gas prices eating into the homeowner’s bottom line to encourage retail buyers to leave beef for pork. Cash hogs were mostly steady for delivery late in the week. Negative packer margins continue to force processors to buy just enough for the lines. On Monday USDA put the pork carcass value at $84.11; up $0.58/cwt but $0.85/cwt lower than a week ago. According to HedgersEdge.com, the average packer margin was lowered $5.00/hd to a negative $10.25/head based on the average buy of $63.65/cwt vs. the breakeven of $59.94/cwt. Late Monday The CME lean hog index was estimated at $87.46; down 0.19; and 0.22 lower than this time last week.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed up on Monday. MAR’12DA futures closed at $15.45/cwt; up $0.03/cwt and $0.26/cwt higher than a week ago. The MAY’12DA contract closed at $15.46/cwt; up $0.25/cwt and $1.26/cwt over last report. JULY’12DA futures closed at $16.28/cwt; up $0.11/cwt and $0.86/cwt higher than this time last Monday. US cheddar’s 5-fold export increases over this time last year were very supportive. Butter bids were up a modest $0.0175/lb. Higher corn futures weighed on milk futures. The rally doesn’t look fundamentally sustainable. Increased demand from domestic use and export markets could change that. Prices for Class III futures were: 3 months out = $15.46/cwt ($0.36/cwt higher than last report); 6 months out = $15.83/cwt ($0.34/cwt over a week ago level); 9 months out = $16.04/cwt ($0.28/cwt more than this time last week); and 12 months out = $16.07/cwt ($0.14/cwt over a week ago).

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday with the exception of some deferreds. The APR’12 contract finished at $126.750/cwt; up $0.725/cwt but $1.650/cwt under last Monday at this time. JUNE’12LC futures closed at $123.900/cwt; up $0.300/cwt but $2.00/cwt lower than last report. DEC’12LC futures closed at $132.650/cwt; up $0.050/cwt but $1.800/cwt lower than a week ago. Fat cattle rebounded from recent losses amid expectations for new cash-market bids. Traders expect that packers will be buying cattle in the cash markets earlier than usual this week after sitting out last week. Packer margins have lost money on margins for several weeks and worry that consumer demand will weaken given beef prices have set historical highs. Cash cattle markets were quite Monday. USDA on Monday put box beef prices at $193.11/cwt; down $2.69/cwt and $4.88/cwt lower than a week ago. According to HedgersEdge.com, the average packer margin was lowered $33.50/cwt to a negative $58.40/head based on the average buy of $128.54/cwt vs. the breakeven of $123.24/cwt. Late Monday, March 5, USDA put the 5-area average price at $126.81/cwt; down $2.63/cwt from last report.

FEEDER CATTLE at the CME finished higher on Monday. APR’12FC futures finished at $156.350/cwt; up $0.500/cwt but $2.600/cwt lower than last report. The AUG’12FC contract closed $0.325/cwt higher at $159.250/cwt but $2.900/cwt lower than a week ago. Feeders followed live cattle but were pressured by higher corn prices and steady-to-lower cash prices. Oklahoma City prices were $1-$2 lower while heifers were steady. The Oklahoma National Stockyard feeder cattle auction estimated receipts for Monday, 3/5/12 at 5,500 head compared to 9,738 last week and 9,660 a year ago. Numbers were reduced somewhat by rains over the weekend. Quality was plain-to-average. The CME feeder cattle livestock index was placed at 155.63; down 0.27 and 0.29 lower than this time last week.

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