Weekly Roberts Market Report21 May 2013
Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University
US - The general consensus in the pits is that corn acres will decline from original planting intentions, writes Michael T. Roberts.
CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The MAY’13 contract closed at $7.180/bu; up 30.25¢/bu. SEP’13 corn futures closed at $5.684/bu; up 14.0¢/bu. The DEC’13 contract closed at $5.392/bu; up 9.75¢/bu. Fears about planting delays, tight supplies, and bullish fever in the pits drove corn prices higher on Monday. Front months hit a six-week high. Weather forecasts are showing more rain in the US corn belt. Friday’s World Agriculture Supple Demand Estimate (WASDE) report was bullish showing a slowing crop forecast. Front months were higher and more active on short supplies amid ramped up demand by end users. The general consensus in the pits is that corn acres will decline from original planting intentions. Producers like to have their corn crops in the ground by the middle of May, so crops can reach key reproductive stages of development before stressful heat emerges in the summer. Some short-covering was noted lifting prices. The US corn crop was reported by USDA on Monday to be 28 per cent planted vs. 12 per cent last week and 85 per cent this time last year. Since 1985 there have been 4 years when corn plantings this time of year were below 35 per cent and in all of those years corn yields were well below the trend lines. Exports should be considered somewhat bearish with USDA putting corn-inspected-for-export at 12.695 mb vs. estimates for 6-12 mb. This was below the 15.4 mb needed this week to keep pace with the USDA demand projection of 750 mb. Please see chart:
The national average basis for corn firmed to +30.0¢/bu over CBOT July futures. This may be a bit early to say this but I do think this is now a weather market.
SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The MAY’13 contract closed at $15.210/bu; up 32.75¢/bu. NOV’13 futures closed at $12.096/bu; up 4.25¢/bu. Soybean growers also are behind planting schedule, having planted 6 per cent of the crop as of Sunday, up from 2 per cent a week ago and below the five-year average of 24 per cent, according to USDA. This time last year the US soybean crop was 43 per cent planted. Tight old crop stocks are proving supportive as long as the weather holds up planting and South Amercian soybean producers continue to report good growing conditions. Merchandisers are stepping up buying activity thinking that higher prices could be around the corner. However, supply can be a fickle thing so producers should strongly consider taking advantage of these upticks in price. Exports should be viewed as bearish. South American soybeans are on the world market, the US dollar is stronger, and China has cut back on imports due to Bird Flu and livestock destruction. USDA put soybeans-inspected-for-export at 3.351 mb vs. estimates for 3-7 mb. This was below the 6.4 mb needed to stay on pace with USDA’s export demand projection of 1.35 bb. Please see chart:
Cash soybean prices were steady-to-firm with the latest national average soybean basis placed at +50.0¢/bu over CBOT July futures.
WHEAT futures in Chicago (CBOT) closed up Monday. MAY’13 wheat futures finished at $7.014/bu; up 4.75¢/bu. The JULY’13 contract closed at $7.096/bu; up 5.5¢/bu. The winter wheat crop was 29 per cent headed as of Sunday vs. 73 per cent a year ago. USDA said that 32 per cent of the winter wheat crop was in good-to-excellent condition, unchanged from a week ago but well below last year’s rating of 60 per cent. The spring wheat crop, which is grown mostly in the northern Plains, was 43 per cent completed, the USDA said, up from 23 per cent the prior week, but below the five-year average of 63 per cent. A year ago, 92 per cent of the crop had been planated. The spring wheat crop was 10 per cent emerged, up from 5 per cent the prior week. Wheat fields in North Dakota and northern Minnesota are either too wet or too cold to plant. Wheat fiels in western South Dakota are dry with more dry weather on the way. I will get to look first hand at some major crop conditions on my upcoming tour beginning Thursday through June 6. Exports were bullish with USDA putting wheat-inspected-for-export at 41.070 mb vs. estimates of 15-21 mb. Wheat basis was weaker with the Soft Red Winter wheat basis index placed at -25.0¢/bu under CBOT July futures; Hard Red Winter Wheat basis index at -25.0¢/bu under Kansas City July futures. Hard Red Spring Wheat weakened 6.0¢/bu to -28.0¢/bu under the Minneapolis July futures.
DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed down on Monday. MAY’13DA futures closed at $18.51/cwt; off $0.04/cwt. The JULY’13DA contract closed at $18.39/cwt; off $0.35/cwt. NOV’13 futures closed at $18.35/cwt; down $0.05/cwt. Weakness in the cash and futures market is growing as the days go by. More corn and soybean crops are being delayed from planting and this is building support for grain prices. On the other hand slow corn exports are causing concerns for grain use and helping to keep a lid on soaring grain prices. In the last WASDE report USDA put the corn ending stocks projection at 2.0 bb based on planting intentions. However, if crop progress continues to remain sluggish this will likely support grain prices. Cheese prices are in a sideways trend amid current weakness. Butter prices are following cheese. Increasing stocks and weaker buying interest continue to pressure prices lower. Class III futures are: 3 months out = $18.22/cwt ($0.70/cwt lower than last report); 6 months out = $18.54/cwt ($0.47/cwt lower than last report); 9 months out = $18.34/cwt ($0.1539/cwt under last report); and 12 months out = $18.07/cwt ($0.34 lower than last report). This week the variable cost of production for the average North Carolina conventional 200 cow dairy with a 23,350 lb average remains at $18. 50/cwt, however, milk prices are lower. The price sensitivity table below reflects the variable cost differences if inputs or gross receipts changed by per centage noted.
The variable cost calculations for a hybrid grazing/conventional herd of 200 cows in NC with a 16,007 lb average. That VC as of Monday, April 29, 2013 remains at 18.28/cwt but net profit has declined slightly due to lower milk prices.
LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up mostly on Monday. JUN’13LC futures closed at $120.575/cwt; down $0.125/cwt. The AUG’13LC contract closed at $120.875/cwt; up $0.100/cwt. The FEB’14LC contract closed at $126.875/cwt; up $0.025/cwt. Future’s heavy discount to cash prices were supportive. Bull funds continue to run. Last week’s record for US wholesale choice beef prices are signaling the buyers they may be able to raise cash prices even more. Demand is picking up for the Memorial Day Holiday. USDA put the 5-area average price on Monday at $126.24/cwt. Please see chart:
USDA put boxed beef prices at $205.13/cwt; up $0.15/cwt from Friday. Cash cattle were steady-to-firm up $1.50-$2.00/cwt in very late trading. The latest HedgersEdge packer margin was raised $38.10/hd from the last report to a positive $42.00/head based on a $127.27/cwt buy vs. a breakeven of $130.06/cwt.
FEEDER CATTLE at the CME finished down on Monday. MAY’13FC futures closed at $134.850/cwt; down $0.525/cwt. The AUG’13FC contract closed at $146.200/cwt; off $0.425/cwt. NOV’13FC futures closed at $151.750/cwt; off $0.175/cwt. Feeders were pressured by rallying grain prices. A couple of feedlot buyers told me today they expected prices for young cattle to slide lower if feed costs remain high. For Monday 05/13/13 estimated receipts at the closely watched Oklahoma City market were put at 8,700 head vs. 9,549 head last week and 7,488 head this time last year. Cash prices were $2/cwt lower for feeder steers with steady prices for weigh-ups less than 800lbs. Feeder heifers were $2/cwt higher. Demand was moderate-to-good for feeders with demand best for heavier cattle. Quality was average to attractive. The CME index for Monday 5.13.13 was estimated at 134.34 lb; down 0.01/lb. Please 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. Producers should remain aware that calculations are based on averages. Courtesy DTN.
LEAN HOGS on the CME closed up on Monday. MAY’13LH futures closed at $91.925/cwt; down $0.075/cwt. The JUL’13LH contract closed at $91.025/cwt; down $0.125/cwt. OCT’13LH futures closed at $80.950/cwt; up $0.350/cwt. Lean hog futures moved mostly higher supported by news of tighter hog supplies in the coming weeks. Trading volume was light. Support was in line with seasonal trends. Some traders said they were worried ovr softening retail meat demand while they also suspect the US hog herd is building. Cash hogs were mostly flat with some mixed quites reported. USDA reported wholesale pork prices at 90.70/cwt late Monday; up $0.47/cwt. The latest HedgersEdge packer margin was raised $1.55/hd from last report to a negative $6.25/head based on a $66.50/cwt buy vs. a breakeven of $64.24/cwt. The latest CME two-day lean hog index was placed at 91.73/lb; up 0.42/lb.
This table shows the maximum price a producer could pay for feeder pigs and still break even, assuming the costs and conversion/performance factors listed above. Producers should remain aware that calculations are based on averages. Courtesy DTN.