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Weekly Roberts Market Report

19 November 2012

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

US - CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The DEC’12 contract closed at $7.180/bu; down 20.75 ¢ /bu and 36.0 ¢ /bu lower than last week at this time. MAR’13 corn futures closed at $7.222/bu; down 19.75 ¢ /bu and 15.75 ¢ /bu lower than a week ago. The DEC’13 contract closed at $7.102/bu; down 18.75 ¢ /bu but 76.0 ¢ /bu higher than a week ago, writes Michael T. Roberts.

Spillover pressure from soybeans and technical weakness weighed on prices. Pit sources also pointed to favorable grain production weather patterns emerging in South America as further pressure to price. Funds continued to liquidate bull positions on profit-taking/loss-curbing. Cash prices were sharply lower on Monday amid brisk farmer selling. Cash prices for corn remain firm on strong domestic demand. The national average basis is - 9.0 ¢ /bu under CBOT December futures. It is still a good idea to think about pricing up to 10% of 2013 production. Remember also to lock in the corresponding input side as well.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. NOV’12 futures closed at $14.110/bu; down 41.0 ¢ /bu and 93.25 ¢ /bu lower than last report. The MAR’13 contract closed at $13.880/bu; down 48.5 ¢ /bu and 94.5 ¢ /bu lower than a week ago. NOV’13 futures closed at $12.856/bu; off 34.0 ¢ /bu and 48.75 ¢ /bu higher than last Monday. Soybeans were pressured heavily by news from South America that growing conditions were much improved. Selling drove the January contract through all technical support despite soybeans being oversold. Basis strengthened somewhat with the latest national average soybean basis being placed at -35.0 ¢ /bu under the Chicago November futures contract. It might be a better idea to hold off pricing any more of the 2013 crop at this time.

WHEAT futures in Chicago (CBOT) closed down on Monday. DEC’12 wheat futures finished at $8.576/bu; down 28.75 ¢ /bu and 8.5 ¢ /bu lower than a week ago. The JULY’13 contract closed at $8.604/bu; down 28.0 ¢ /bu and 13.75 ¢ /bu lower than last report. Recent strength fizzled on Monday. Contracts on all three wheat exchanges were lower. Chart support was noted. Wheat’s national average basis was placed at -31.0 ¢ /bu under CBOT December futures. Hard Red Winter Wheat was placed at - 48.0 ¢ /bu under Kansas City December futures. Hard Red Spring Wheat national average basis was placed at -59.0 ¢ /bu under the Minneapolis December futures contract. Still might be a good idea to price up to 10% of the 2013 crop.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday. The NOV’12DA contract closed at $20.80/cwt; up $0.02/cwt but $0.39/cwt lower than a week ago. DEC’12DA futures closed at $19.20/cwt; off $0.29/cwt and $1.22/cwt higher than a week ago. The MAR’13DA contract closed at $18.65/cwt; down $0.21/cwt and $0.130/cwt lower than last report. Even though current prices are historically good it is hard to make a profit with high feed prices. Demand is seasonally weakening but has picked back up somewhat in the Northeast as power comes back on. Buyers are still on the side lines and herd expansion remains static. Cheese volume has slowed as well but buyers may step in if prices continue to weaken. Butter price is now higher than cheese and seems to have stabilized on the supply/demand curve. There are indications that higher inventory may continue to pressure butter prices. Class III futures were: 3 months out = $19.58/cwt ($0.77/cwt lower than last report); 6 months out = $19.10/cwt ($0.58/cwt lower than a week ago); 9 months out = $18.90/cwt ($0.44/cwt lower than last Monday); and 12 months out = $18.78/cwt ($0.32/cwt under last report). This week variable cost of production for the average North Carolina conventional 200 cow dairy with a 23,000 lb average is $21.59/cwt; $0.95/cwt lower than last Monday. The price sensitivity table below illustrates different returns/cow relative to varying increases and decreases to both milk prices and inputs costs over total Variable Costs for the same NC farm.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday. DEC’12LC futures closed at $125.350/cwt; down $0.400/cwt but $0.075/cwt higher than last report. APR’13LC futures closed at $133.150/cwt; down $0.125/cwt but $0.075/cwt above this time last week. The AUG’13LC contract closed at $129.300/cwt; down $0.30/cwt but $0.30/cwt higher than a week ago. Activity in live cattle was directly proportional to new showlists. Pit sources said there was nervousness on the trading floor relative to pre-holiday demand and feedlot cash flow. Beef cutouts were up amid moderate demand. Seasonal demand is expected to stay sluggish through Thanksgiving. A favorable monthly USDA export report should help long-term demand while production remains low reflecting reductions in the number of young beef cattle entering feedlots in the second half of 2012. The supplyglut prompted by this year’s severe drought is working its way through the market. Cash markets were relatively quiet with USDA putting the 5-area average at $125.06/cwt $0.39/cwt over lower than last week at this time. Please see graph:

Late Monday USDA put wholesale boxed beef at $193.30; up $1.15/cwt and $0.28/cwt higher than a week ago. According to HedgersEdge.com, the average packer margin was raised $10.85/hd from this time last week to a negative $76.35/head based on the average buy of $125.43/cwt vs. the breakeven of $119.60/cwt.

FEEDER CATTLE at the CME finished up on Monday with the exception of the November 2012 contract. NOV’12FC futures closed at $144.000/cwt; off $0.20 and $0.900/cwt lower than last report. APR’13FC futures closed at $150.300/cwt; up $0.50/cwt but $0.275/cwt lower than a week ago. Feeders found support on faltering corn prices and expectations that supply will be tight for some time. For Monday 11.12.12 estimated receipts at the closely watched Oklahoma City market were put at 7,850 head vs. last week’s 10,846 head and 8,869 head this time last year. Compared to last week feeder steers and heifers were steady-to-$2.00/cwt lower. Calves were steady-to-$3.00 lower. Demand was moderate with fleshy calves least popular. Quality was mostly plain-to-average with buyers very selective for longer aged cattle or true yearlings.

The CME feeder cattle livestock index was placed at 144.16 down 0.01 but 0.15 over last report. Please see chart:

LEAN HOGS on the CME finished down on Monday. The DEC’12LH contract closed at $80.325/cwt; off $0.425/cwt but $3.400/cwt higher than last report. APR’13LH futures closed at $90.950/cwt; down $0.050/cwt but $2.975/cwt higher than this time last week. The JUN’13LH contract closed at $99.700/cwt; down $0.325/cwt but $1.575/cwt over a week ago. Live hogs were coming off a fairly bullish week last week. Profit taking, short-covering, and technical signals took some profits from the market. Pit sources said today that weaker grain prices could cause the hog supply side to react in a growth spurt. Hog supply is very sensitive and can increase quicker than the beef supply chain. Traders tend to get leery of anything that might cause supply to grow. Some reports indicated that hog producers weren’t culling as aggressively as they were. USDA’s recent report indicated overall pork production should decline next year amid increased projected U.S. pork exports for 2013. Cash hog prices weakened $1.00-$1.50/cwt on Monday with processors showing ample supplies this week ahead of the holidays. USDA put the lean pork cutout at $85.73/cwt late Monday, down $0.90/cwt and $0.75/cwt under last report. The only unanswered question for this week is whether more plants will work on Saturday to make up for Monday’s holiday. According to HedgersEdge.com, the average packer margin was raised $5.00/hd to a positive $8.80/head based on the average buy of $58.99/cwt vs. the breakeven off $62.23/cwt. The latest CME Lean Hog index was estimated at 82.02; down 0.22 and 0.80 lower than last report.

Further Reading

You can view the full report by clicking here.

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