Friday 27th January 2012

Got milk….in your investment portfolio?

Jerry Dryer, chief economist with Rice Dairy says dairy has been the best-performing commodity this year. Milk futures averaged $18.60 a hundredweight this year, up 41 percent from a year ago outperforming even gold.

Dryer tells Bloomberg export demand is the driving force with emerging dairy markets in Mexico, China and the Philippines. The Chinese melamine scandal didn’t hurt either as American milk enjoys an excellent reputation. Memories of that scandal popped up again this week when some Chinese dairy products were recalled because of high aflatoxin levels.

High cattle prices have also contributed to the mix as dairy producers are quick to send underperforming cows to slaughter and keep the U.S. dairy herd in check.

While dairy futures for 2012 are currently averaging about $17.17, down $1.40 from the 2011 average, as with any commodity, things can change quickly.

Dairy consumption at the holidays

Getting the recommended servings of dairy in this holiday season and into the new year shouldn’t be difficult.  The USDA recommends adults get 3 cups of dairy products every day. Dairy provides 9 essential nutrients. Some of them are calcium, potassium, vitamin D, and protein. These elements are supportive of bone health and heart health, and can help to prevent some illnesses, such as diabetes. This time of year, dairy products are often a go to base for holiday snacks.

HEALTHY LIVING PROGRAM – Dairy at the Holidays (1:30 mp3)

Another higher finish for corn, wheat

Soybeans were modestly lower on profit taking and technical selling, along with spillover from the outside markets. The dollar was higher with the Dow, gold, and crude oil sharply lower. The trade’s keeping an eye on weather in South America but that’s more of a concern for corn than beans right now. Soybean meal was up and bean oil was down on product spread trade. USDA late Tuesday confirmed the sale of 60,000 tons of optional origin beans and 55,000 tons of U.S. beans to China. Dow Jones Newswires reports Taiwan’s Breakfast Soybean Procurement Association passed on a 60,000 ton soybean tender due to high prices with the lowest bid more than $2 above the March CBOT contract.

Corn was higher on speculative and technical buying. Corn is watching weather in Argentina and Brazil with hot, dry conditions in the near term forecast. That said – trade volume was light with commodity markets closed this coming Monday. Ethanol futures were modestly higher. Russia’s Ag Ministry reports 2011 corn production totaled 6 million tons. The Xinhua News Agency, via Dow Jones Newswires, quotes China’s Ministry of Agriculture stating 2012 grain production should top 525 million tons.

The wheat complex was higher on short covering and technical buying. There was also some spillover from corn, given the feed connection, and Ukraine’s winter crops are currently in generally poor condition. However, gains were limited by the bearish fundamentals and the outside markets. European wheat was higher on fund buying and concerns about South American weather. DTN reports Algeria bought 250,000 tons of wheat from either the European Union or South America. According to Russia’s Ag Ministry, 2011’s grain harvest totaled 93.8 million tons in clean weight, enough for domestic needs and for 25 million tons of exports.

It was a big year for ethanol exports

U.S. exports of ethanol hit record high levels in 2011.

Renewable Fuels Association president and CEO Bob Dinneen says that export growth is happening because the U.S. ethanol industry is now the lowest-cost renewable energy industry in the world.

“In fact, it’s the lowest-cost transportation fuel in the world because we are now less expensive than gasoline,” says Dinneen. “As a consequence of that, we have been meeting the demand created for renewable fuels in Europe, in southeast Asia, in Canada, in Mexico—and even in Brazil.”

While a lot of people think that Brazil—with all of its sugar resources—is the low-cost producer of ethanol, Dinneen says that’s not the case.

“That’s not the case today—and it hasn’t been the case for almost two years now,” he says. “The U.S. is capturing markets all across the globe—and I think that is going to be a reality for the future as well.

“Our production is just becoming more and more efficient—and I think we’re going to be the low-cost producer from now on.”

The U.S. exported an estimated one billion gallons of denatured and undenatured ethanol in 2011.

Undenatured ethanol is ethanol that was never blended with gasoline or eligible for the ethanol tax incentive.

The cash hog market was active with light demand

With the exception of a few starter bids in parts of Kansas at 119.00, the cash cattle trade was at a complete standstill on Wednesday. Some packers claim to have all the remaining 2011 slaughter needs covered. That is quite possible, but last week’s short buy in Kansas and Texas suggests a few plants could experience late year hunger. Preliminary asking prices are around 125.00 plus live and 205.00 plus dressed. The kill totaled 128,000 head, 15,000 more than last week, and 2,000 smaller than 2010.

Boxed beef cutout values were higher on moderate demand and light to moderate offerings. Choice was up 1.23 at 193.48, and select was 1.52 higher at 179.26.

Chicago Mercantile Exchange live cattle contracts settled mixed. The nearby contracts ended moderately lower pressured by spillover selling and cash uncertainty. But the deferred issues were moderately higher thanks to bear spreading interest and the production limiting implications of higher corn prices. Additional support came from sharply higher beef cutout values in the morning report. December settled .15 lower at 123.10, and February was down .05 at 123.15.

Feeder cattle receipts at the St. Joseph, MO Stockyards on Wednesday totaled 2,000 head. Compared to two weeks ago, steer and heifer calves opened fully 3.00 to 5.00 higher with instances as much as 10.00 higher especially on heifer calves weighing less than 550 lbs. A light test of yearling feeders traded mostly steady. Buyers returned from the Christmas Holiday aggressive with fair weather forecast for the near term.  Feeder steers medium and large 1 weighing 500 to 600 lbs traded from 164.00 to 174.50. 550 to 600 pound heifers brought 129.00 to 143.50.

Feeder cattle ended the session unchanged to .42 higher. Feeders opened lower but bounced higher in very light volume, despite the further strength in the corn trade and defensive outside markets. January was up .05 and settled at 147.20, March finished .07 higher at 150.35.

[Read more...]

Flooding tops list of Nebraska’s 2011 ag stories

Flooding along the Missouri and Platte Rivers tops Nebraska Farm Bureau’s list of top agricultural news stories of 2011.

Also high on the list is the strong response from Nebraska agriculture, as well as local chambers of commerce and city councils, to outside attacks on agriculture—especially food animal production. 

Nebraska Farm Bureau president Steve Nelson says it was gratifying to see nearly all of the state’s ag groups come together in 2011 to defend Nebraska agriculture.

“Many times in the past there’s been concern by some that the ag groups haven’t been able to work together,” says Nelson. “But this is an issue where the vast majority of people—and certainly the major farm groups—all agree that we have an issue there that we need to work together on.”

Looking ahead to what could be the top stories of 2012, Nelson says the farm bill debate will likely be near the top of the list.  He says maintaining a strong safety net for farmers is important.

“At the same time, our members feel very strongly about trying to get the nation’s fiscal house in order,” he says, “and so there’s a realization that we’re not going to be able to get the fiscal house in order and have a lot of money going towards ag programs—so we’re looking for a balance in that.”

Nelson predicts tax issues will also make headlines in 2012. Several major tax provisions expire in the coming year, including the rules for federal estate taxes, capital gains and depreciation. 

Property taxes will also be a hot topic, he says.

Nelson says how those tax issues are handled will have a tremendous impact on farmers’ and ranchers’ day-to-day operations and estate planning.

AUDIO: Steve Nelson (9:25 MP3)

 

Closing Grain and Livestock Futures: December 28, 2011

Mar. corn closed at $6.42 and 1/2, up 9 and 1/4 cents
Jan. soybeans closed at $11.98 and 1/4, down 1 and 1/2 cents
Jan. soybean meal closed at $310.10, up $2.40
Jan. soybean oil closed at 51.78, down 6 points
Mar. wheat closed at $6.51 and 1/4, up 6 and 1/2 cents
Dec. live cattle closed at $123.10, down 15 cents
Feb. lean hogs closed at $85.55, down 20 cents
Feb. crude oil closed at $99.36, down $1.98
Mar. cotton closed at 90.68, up 277 points
Jan. Class III milk closed at $17.14, up 9 cents
Dow Jones Industrial Average: 12,151.41, down 139.94 points

A farmer’s daughter

In 1980, in her first year of high school, a farmer’s daughter from a rural Midwestern community signed up for an agriculture education class and joined the FFA. Instead of following in her brother’s footsteps and raising hogs, this young lady chose to raise dogs for her supervised occupational education project.

Flash forward 3 decades and we find that young FFA member all grown up with a family of her own, living on a farm in the agricultural community where she was raised. She owns her own business. She pays taxes and spends money in her local community. She bought into that which so many of us who grew up on family farms bought into: there is opportunity if you are willing to work hard, maintain the good ethics with which you were raised, practice animal welfare and contribute to your community. This woman, like many of the rest of us, studied agriculture in high school and thrived in the organization that teaches leadership and citizenship and encourages us to believe in the future of the agriculture industry “with a faith born not of words but of deeds”

What began as a project in FFA became her life’s work. In my universe, we celebrate this woman.

She was a high school student during the farm crisis of the 1980′s, witnessing the exodus of many families from their farms. She watched as fellow FFA members who headed off to college struggled with the decision, but ultimately had to choose a life and career outside of production agriculture because the opportunity dreamed of in the 70′s had shriveled up and died with the farm crisis.

It couldn’t have been easy for her. I don’t have to tell you about the input costs for raising animals – from housing to bedding, and from feed to veterinary services. She had to keep her pencil sharp, her facilities in ship-shape and the health and welfare of the animals she raised is a top concern.

This woman does not operate a “puppy mill,” yet there are those who have 5 pets in a 1 bedroom apartment in the city and those who raise livestock or poultry in confinement buildings who believe otherwise.

There are bad actors raising and selling dogs in less-than-desirable conditions. There are bad actors in every industry, in every community, and in every walk of life. There are laws currently on the books that if enforced, will put bad actors out of business.

I am forever telling those who read this column or listen to my commentary on the radio to work together and arm yourself with knowledge. This woman is one of you. Before you shun her, perhaps you should take some initiative and learn about her business and about other dog breeders’ kennels.

While a Washington, D.C.- based animal rights group infiltrates your rural communities with anti-”puppy mill” messages, you should know two things:

First, if you raise livestock, you are next. Secondly, and most importantly, if we all stand together we will be stronger.

A late La Nina?

The unseasonably warm, wet weather seems to match up with erratic weather patterns that plagued much of the US throughout 2011.  Illinois based Mobile Weather Team’s Chief Meteorologist Mike McClellan says that is in part to an atypical La Nina pattern.  “The latest indications are actually showing that La Nina may continue to strengthen through January, February and maybe all the way into March,” McClellan says.  “That is very unusual.”

McClellan tells Brownfield while La Nina’s generally peak in the winter months, if the current La Nina doesn’t peak until March, weather patterns wouldn’t return to normal until mid-summer.  So what does that mean to farmers in the Cornbelt?   McClellan says, “that quite possibly could mean a significant amount of rainfall, at least above normal snow and rain and lingering cold would mean a late frost and also a tremendous amount of precipitation, especially East of the Mississippi River.” 

A typical La Nina leaves Argentina and Brazil hot and dry.  McClellan says this year is no exception. “This La Nina is what we call an Eastern based La Nina,” he says.  “In this scenario, the high pressure systems that impact Argentina and Southern Brazil really get large.  They intensify.”

McClellan says those high pressure systems block any weather systems from impacting those areas.  He anticipates the hot and dry weather pattern to continue over the next few months and in fact, get worse.

Below you’ll find my complete converstaion with Mike.

AUDIO: Mike McClellan, A look at the La Nina (15:54mp3)

Wednesday midday cash livestock prices

No bids have been reported in cattle country on Wednesday. DTN reports some packers claim to have all remaining 2011 slaughter needs covered. That is quite possible. Still, last week’s short buy in Kansas and Texas suggests a few plants could experience late year hunger. Preliminary asking prices are around $125.00 plus live and 205.00 plus dressed. Significant bids could be delayed until Thursday or Friday.

Boxed beef prices are sharply higher, choice is up 1.08 at 183.33 and selct is 2.07 higher at 179.91.

Barrows and gilts in the Iowa/Minnesota direct trade opened .18 lower at 78.77 weighted average on a carcass basis, the West is down .75 at 78.11, and the East is .04 lower at 77.72.The Missouri direct base carcass meat price is steady from 75.00 to 77.00. Terminal hogs are steady to .50 higher from 53.50 to 60.00 live.

Barrows and gilts in Iowa last week averaged 275.7 pounds, an increase of .5 pounds over the previous week and 1.4 pounds less than 2010.

Pork processors are planning a fairly large Saturday hog kill, possibly 235,000 head or better. Such an aggressive New Year’s Eve will at least take part of the sting away from plants being dark next Monday.