Thursday’s long-anticipated reports from USDA both surprised grain analysts and in some ways met the expectations of others. The surprise came from the mostly bearish grain numbers for both domestic and world supplies of grain. However, traders were expecting fireworks from the markets in the wake of the report’s release and they certainly got plenty of both bright lights and loud noises. The biggest bang came from the domestic Crop Production numbers, particularly corn. The pre-report estimates from analysts were expecting a reduction of about 50 million bushels for production of corn in 2011. What USDA reported was actually an increase of almost 50 million bushels compared to the December report. That carried right through to projected ending stocks, with an increase of nearly 100 million bushels of corn next fall, when compared to last month’s projections.
That meant that when futures opened Thursday after the report was released, Corn futures went down the 40 cent daily limit and stayed there for the rest of the day. For the week ended Tuesday, old-crop Corn futures were down 48-49 cents, with new-crop December down 29 cents. After the first reaction to the unexpected numbers, the market stabilized somewhat as analysts pointed out that ending stocks will still be tight, just not as tight as expected. In addition, the weather in South America continues to point to reduced production from that region, helping to limit further price losses.
Old-crop Soybean futures also lost 48-49 cents for the week, with the new-crop November off more than 33. A slight increase in bean production and a significant increase in projected ending stocks combined with the weakness in corn prices conspired to push soybean prices lower, however the weather situation in Brazil and Argentina continues to worsen and could become a major limiting factor in global production if moisture conditions don’t improve in the very near future.
Wheat values followed in the wake of the other grains, as the March futures contract in Chicago lost 35 cents and May dropped 31. In Kansas City, the old-crop contracts lost 24-25 cents and new-crop July dropped more than 22 cents compared to last Tuesday. USDA also reported an increase in planted acres of winter wheat compared to both last year and pre-report estimates. Projected ending stocks came in higher than pre-report estimates, further pressuring the already bearish wheat market.
The cattle markets responded to the drop in grain prices by adding value to feeder cattle. The January Feeder Cattle futures gained $1.80 compared to last Tuesday, with the March contract up 95 cents and April up $1.27. Cash markets were also mostly higher, with strong demand for replacement quality heifers and stocker-weight cattle. In one of the major Nebraska auction markets last week, several loads of top-quality 500-550 pound steers averaged more than two bucks per pound. The biggest challenge in this kind of market is for feedlots to find a way to pay that much for cattle and still turn a profit on the other end.
That squeeze in margins is also hitting packers hard. Cash fed cattle gained two dollars last week, trading at mostly $123, with expectations of a steady market this week. But prices for boxed-beef plummeted, with the Choice cutout down $7.30 for the week and Select off $5.45. Packer margins are now reaching critical levels and an adjustment somewhere now seems inevitable. The most likely scenario likely involves the closing of one or more major packing plants sometime in the near future as supplies of fed cattle tighten even further.
Live Cattle futures were firmer last week, as the February contract gained $2.32 and April was up $1.35. But the June contract gained only 45 cents and August was up just 27 cents compared to last Tuesday. While short supplies of cattle are supporting prices, lackluster demand for beef, especially domestically, is keeping a lid on fed cattle values.
Lean Hog futures were stronger this week, following cattle values higher. The February contract was up $1.47 for the week, but April was up just a nickel and May gained only 25 cents.
This Friday, USDA releases the Jan. 1 Cattle on Feed report and the following Friday, the 27th, is the semi-annual Cattle Inventory report, which will further detail the ongoing contraction of the U.S. cattle herd.
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Thursday’s long-anticipated reports from USDA both surprised grain analysts and in some ways met the expectations of others. The surprise came from the mostly bearish grain numbers for both domestic and world supplies of grain. However, traders were expecting fireworks from the markets in the wake of the report’s release and they certainly got plenty of both bright lights and loud noises. The biggest bang came from the domestic Crop Production numbers, particularly corn. The pre-report estimates from analysts were expecting a reduction of about 50 million bushels for production of corn in 2011. What USDA reported was actually an increase of almost 50 million bushels compared to the December report. That carried right through to projected ending stocks, with an increase of nearly 100 million bushels of corn next fall, when compared to last month’s projections.
That meant that when futures opened Thursday after the report was released, Corn futures went down the 40 cent daily limit and stayed there for the rest of the day. For the week ended Tuesday, old-crop Corn futures were down 48-49 cents, with new-crop December down 29 cents. After the first reaction to the unexpected numbers, the market stabilized somewhat as analysts pointed out that ending stocks will still be tight, just not as tight as expected. In addition, the weather in South America continues to point to reduced production from that region, helping to limit further price losses.
Old-crop Soybean futures also lost 48-49 cents for the week, with the new-crop November off more than 33. A slight increase in bean production and a significant increase in projected ending stocks combined with the weakness in corn prices conspired to push soybean prices lower, however the weather situation in Brazil and Argentina continues to worsen and could become a major limiting factor in global production if moisture conditions don’t improve in the very near future.
Wheat values followed in the wake of the other grains, as the March futures contract in Chicago lost 35 cents and May dropped 31. In Kansas City, the old-crop contracts lost 24-25 cents and new-crop July dropped more than 22 cents compared to last Tuesday. USDA also reported an increase in planted acres of winter wheat compared to both last year and pre-report estimates. Projected ending stocks came in higher than pre-report estimates, further pressuring the already bearish wheat market.
The cattle markets responded to the drop in grain prices by adding value to feeder cattle. The January Feeder Cattle futures gained $1.80 compared to last Tuesday, with the March contract up 95 cents and April up $1.27. Cash markets were also mostly higher, with strong demand for replacement quality heifers and stocker-weight cattle. In one of the major Nebraska auction markets last week, several loads of top-quality 500-550 pound steers averaged more than two bucks per pound. The biggest challenge in this kind of market is for feedlots to find a way to pay that much for cattle and still turn a profit on the other end.
That squeeze in margins is also hitting packers hard. Cash fed cattle gained two dollars last week, trading at mostly $123, with expectations of a steady market this week. But prices for boxed-beef plummeted, with the Choice cutout down $7.30 for the week and Select off $5.45. Packer margins are now reaching critical levels and an adjustment somewhere now seems inevitable. The most likely scenario likely involves the closing of one or more major packing plants sometime in the near future as supplies of fed cattle tighten even further.
Live Cattle futures were firmer last week, as the February contract gained $2.32 and April was up $1.35. But the June contract gained only 45 cents and August was up just 27 cents compared to last Tuesday. While short supplies of cattle are supporting prices, lackluster demand for beef, especially domestically, is keeping a lid on fed cattle values.
Lean Hog futures were stronger this week, following cattle values higher. The February contract was up $1.47 for the week, but April was up just a nickel and May gained only 25 cents.
This Friday, USDA releases the Jan. 1 Cattle on Feed report and the following Friday, the 27th, is the semi-annual Cattle Inventory report, which will further detail the ongoing contraction of the U.S. cattle herd.
