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Weekly Roberts Market Report

18 April 2012

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

US - Compared to last week prices for feeder steers and heifers were higher, writes Michael T. Roberts.

LEAN HOGS on the CME finished down on Monday. The APR’12LH contract closed at $82.300/cwt; down $0.450/cwt and $2.125/cwt lower than last Monday. MAY’12LH futures closed at $88.550/cwt; off $1.575/cwt and $5.45/cwt lower than this time last week. AUG’12LH futures finished $0.850/cwt higher at $90.150/cwt and $4.050/cwt lower than last report. Futures slumped on missing seasonal demand and the low discount-to-cash index. The spot April contract expired today. Cash volume was slow amid light demand and few offerings. Cash hogs were called steady-to-$0.50/cwt lower. Processors continue the dance with pork demand and negative margins. USDA put the pork carcass cutout at $77.84/cwt, up $0.84/cwt but $0.70/cwt lower than a week ago. For Monday, April 16 USDA placed hogs processing at 413,000 head vs. 274,000 last week and 391,000 a year ago. According to HedgersEdge.com, the average packer margin was raised $2.70/hd to a negative $13.30/head based on the average buy of $59.91/cwt vs. the breakeven of $56.11/cwt. The latest CME lean hog index was estimated at 82.64; up 0.14; and 0.02 over last report.



This table shows the maximum price a producer could pay for hogs and still break even, assuming the costs and conversion/performance factors listed above. While these assumptions are continually reviewed and updated producers should remain aware that calculations are based on averages, totals that may or may not reflect the feeding realities of specific operations. In short, this table produces general margin guidelines only that must be fine-tuned according to individual situations. Courtesy DTN.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed down with the exception of the May 2012 contract. APR’12DA futures closed at $15.79/cwt; down $0.01/cwt but $0.17/cwt higher than this time last week. The MAY’12DA contract closed at $15.98/cwt; up $0.01/cwt and $0.67/cwt higher than a week ago. JULY’12DA futures closed at $15.64/cwt; down $0.05/cwt and $0.31/cwt lower than last report. Recent reports show that farms are liquidating because of cash flow and financial difficulty. This is not surprising as milk price and profit margins has been sinking for some time now. On the other hand, many farms are increasing cow numbers on heavier-than-usual culling rates due to good cull-cow prices. Even with the higher culling rates US dairy cow numbers have been increasing as more replacements come online. Fundamentally, milk prices show bearish tendencies on increasing milk-supply. Cheese and butter prices are relatively stable for now. Current price activity indicates a bottom may be approaching. Class III futures were: 3 months out = $15.24/cwt ($0.15/cwt lower than last report); 6 months out = $15.67/cwt ($0.26/cwt under a week ago level); 9 months out = $15.88/cwt ($0.26/cwt less than this time last week); and 12 months out = $15.95/cwt ($0.21/cwt under a week ago). Producers should continue to keep pricing feed hand-to-mouth as feed prices are expected to continue to weaken.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished mixed on Monday with the nearby April and June contracts up and deferreds lower. JUNE’12LC futures closed at $116.150/cwt; up $0.075/cwt and $0.375/cwt higher than last report. The AUG’12LC contract closed at $119.025/cwt; down $0.025/cwt but $0.650/cwt over a week ago. DEC’12LC futures closed at $127.350/cwt; down $0.150/cwt but $1.075/cwt higher than last week at this time. Some light bull-spreading was noted amid a lackluster day, volume speaking. Cash cattle on Monday were steady-$1/cwt higher amid light volume. USDA on Monday put box beef prices at $181.26/cwt; up $2.75/cwt and $3.65/cwt higher than a week ago. Estimated packer margins are projected to remain poor but processors will continue to buy cattle to meet near-term retail demand. According to HedgersEdge.com, the average packer margin was raised $32.30/cwt from last week at this time to a negative $88.90/head based on the average buy of $122.03/cwt vs. the breakeven of $113.68/cwt. On Monday USDA reported 112,000 head processed vs. 97,000 the week before and 120,000 head this time last year. Late Monday, April 16, USDA put the 5-area average price at $122.50/cwt; $0.60/cwt higher than last report. See graph.

FEEDER CATTLE at the CME closed higher on Monday with the exception of the nearby April contract. APR’12FC futures finished at $150.350/cwt; off $0.175/cwt but $2.200/cwt higher than a week ago. The AUG’12FC contract closed $0.250/cwt higher at $155.475/cwt and $4.450/cwt over last report. Short covering and better cost-of-gain margins were supportive. The discount of the cash index held prices back somewhat. Monday’s estimated receipts at the closely watched Oklahoma City market were put at 5,400 head vs. last week’s 3,454 head but nowhere near the 12,762 head sold a year ago. Compared to last week feeder steers and heifers were $3-$5/cwt higher. Steer and heifer calves were steady amid light volume. Demand was moderate-to-good with increased demand for light fleshed cattle bound for grazing in the summer heat. Stocker buyers were aiming to put grass gain on and backed away from buying fleshy calves. Quality was plain-to-average. The CME feeder cattle livestock index was placed at 149.26; up 0.12 but 1.02 lower than this time last week. 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. While these assumptions are continually reviewed and updated producers should remain aware that calculations are based on averages, totals that may or may not reflect the feeding realities of specific operations. In short, this table produces general margin guidelines only that must be fine-tuned according to individual situations. Courtesy DTN.

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