Grains and oilseeds higher ahead of USDA numbers: February 8, 2010

Soybeans hit one and a half week highs on technical and speculative buying, along with short covering and some outside market direction. The Dow was down for most of the trading day but the dollar was lower and gold and crude oil were higher. Analysts expect USDA’s monthly supply and demand update to show ending stocks down from January with the average estimate at 219 million bushels, compared o 245 million a month ago. USDA will also be reporting updated international ending stocks and production projections with the report due out at 7:30 AM Central. Bean oil hit three week highs and meal was up on spillover from beans and position squaring ahead of the USDA numbers.

Corn was higher on fund and technical buying, in addition to short covering and spillover from beans. Demand has increased after the recent losses, especially on the end user side and there is some talk that March has bottomed out at $3.50. Even with a probable reduction from the Ag Department, the trade expects fairly large ending stocks in the USDA update. The average pre-report estimate is 1.748 billion bushels, compared to January’s figure of 1.764 billion. Ethanol futures were higher.

The wheat complex was higher on technical buying, short covering and the lower dollar index. Analysts see U.S. ending stocks steady to a little smaller than the previous month’s report. Ahead of the report, the average projection is 973 million bushels, compared to 976 million in January’s update. Those fundamentals remain very negative with a large supply and weak demand, which should be reflected in the new supply and demand estimates. Snowfall’s a negative, giving cover to the dormant hard and soft red winter crops. Iraq bought 400,000 tons of wheat from Canada. FO Licht estimates 2009/10 world wheat production at 675.5 million tons, up 1.5 million from January on a better than expected crop in the Black Sea region. Russia, according to Dow Jones Newswires, will be building a new grain export terminal on their second largest Black Sea port of Tuapse. The terminal’s expected to have an annual capacity of 2.4 million tons.

Lean hogs settle sharply higher on outside markets

Cattle country was typically quiet on Monday with significant trade volume not likely until mid-week or later. The new show lists appear to be generally smaller than last week with only Texas showing more offerings. Negotiated sales last week were confirmed at 158,130 head. Live cattle in the South last week sold 1.00 to 2.00 higher from 86.00 to 87.00. In the North dressed sales were 1.00 to 2.00 higher from 137.00 to 138.00. The early asking prices on this week’s cattle are 89.00 plus in the South, and 140.00 plus in the North. Monday’s slaughter was estimated at 11 7,000 head, 8,000 less than last week and 10,000 below last year. Boxed beef cutout values closed firm on light demand and light to moderate offerings. Choice beef was up .75 at 138.65, and select was .98 higher at 136.48.

Chicago Mercantile Exchange live cattle contracts settled 17 to 45 points higher supported by the higher cash trade last week. A lower U.S. dollar was seen as supportive to futures as it may prompt importers to buy more beef. Higher boxed beef values at midday leant additional support to futures. February was 25 points higher at 87.67, and April was up 40 at 90.80.

Feeder cattle ended the session 20 to 90 points higher with support coming from the outside markets and the live pit. March was 90 points higher and settled at 99.22, April ended at 100.02 up 35.

Feeder cattle receipts at the Oklahoma National Stockyards on Monday totaled 6800 head. Compared to the last test two weeks ago, feeder cattle were steady to 1.00 higher and calves were steady. Demand was good. Snow was falling again in the state; however, this one is not as strong as the previous two storms.  Feeder steers medium and large 1 weighing 500 to 600 pounds traded at 103.50 to 113.00. 5 to 6 weight heifers brought 94.00 to 100.75.

Iowa/Minnesota barrows and gilts closed .72 higher at 64.46 on a carcass basis, the West was up .82 at 64.90, and the East was 1.78 higher at 63.56.Missouri direct base carcass meat price closed 3.00 to 4.00 higher from 58.00 to 62.00.  Hog slaughter was estimated at 422,000 head, 10,000 more than last week, but 1,000 less than last year. Mid-winter numbers are about as tight as they are going to get with the country offerings set to increase in the March/April time frame. Snow and cold temperatures could curtail weight gains and livestock movement in the Midwest through the middle of the week.

Lean hogs settled 80 to 222 points higher with the most significant strength in the April through August contracts. Support came from outside markets bouncing higher after heavy selling late last week. Midwest storms once again are bringing snow and strong winds to be followed by very cold temperatures and that helped to support the cash market. February hogs settled 80 points higher at 67.57, and April was up 205 at 69.77. Pork carcass cutout value was .30 lower at 68.82. Pork trading was slow with light to moderate demand and offerings.

Pork bellies settled 95 to 200 points higher on the gains in the lean contracts as well as upward momentum in the outside markets. February settled 100 points higher at 81.00, and March was up 200 at 82.00.

Closing Grain and Livestock Futures: February 8, 2010

March corn closed at $3.56, up 4 and 1/2 cents
March soybeans closed at $9.29 and 1/2, up 16 cents
March soybean meal closed at $274.40, up $3.40
March soybean oil closed at 37.95, up 95 points
March wheat closed at $4.84, up 10 and 3/4 cents
February live cattle closed at $87.67, up 25 cents
February lean hogs closed at $67.57, up 87 cents
March crude oil closed at $71.89, up 70 cents
March cotton closed at 69.16, up 254 points
February Class III milk closed at $14.14, up 4 cents
Dow Jones Industrial Average: 9,908.39, down 103.84 points

Soybean, wheat export inspections solid

It was a mixed week for grain and oilseed export inspections. USDA reports wheat inspections for the week ending February 4 were bigger than expected, while soybeans were within projections and corn was below all estimates. Inspections of soybeans and wheat were larger than what’s needed weekly to meet USDA projections for the 2009/10 marketing year but corn fell short.

Wheat came out at 16.942 million bushels, down 993,000 from the week ending January 28 and 2.339 million lower than the week ending February 5, 2009. At this point in the 2009/10 marketing year, wheat inspections are 564.507 million bushels, compared to 745.522 million in 2008/09.

Corn was reported at 27.102 million bushels, 12.345 million below the previous week and 3.414 million under a year ago. So far this marketing year, corn inspections are 693.550 million bushels, compared to 680.062 million this time last year.

Soybeans were pegged at 39.568 million bushels, 4.002 million less than the prior week and a decrease of 8.909 million from last year. For the marketing year to date, soybean inspections are 978.325 million bushels, compared to 715.899 million a year ago.

Sorghum inspections totaled 1.637 million bushels. That’s 1.838 million bushels lower than the week before and down 554,000 from a year ago. 2009/10 sorghum inspections are 73.208 million bushels, compared to 67.785 million in 2008/09.

Midday cash livestock markets

Barrows and gilts in the Iowa/Minnesota direct trade opened .54 lower at 63.30 on a carcass basis, the West was /88 lower also 63.20, the East was down .53 at 61.25. Missouri direct base carcass meat price is 3.00 to 4.00 higher from 58.00 to 62.00. The cash hog trade was predicted to open firmer due to relatively short bought packers and ideas of stabilizing pork carcass value. Last week’s product trade was extremely volatile, and it will be very critical to see who wins the tug of war, according to DTN’s John Harrington. Mid-winter numbers are about as tight as they are going to get with the country offerings set to increase in the March/April time frame.

Inspired by greater country spending last week, cattle feedlot managers will start out pricing new show lists several dollars higher. Processing margins are on the defensive and cattle buyers will be very reluctant to chase the cash trade higher unless they can get substantial help from the wholesale market. Boxed beef cutout values are higher at midday, choice beef is up .58 at 138.48, and select is up .91 at 136.37.

Feeder cattle receipts at the Ericson/Spalding Livestock Auction, Ericson, NE totaled 4850 head. Compared to last week steers trended steady, and heifers were steady to 3.00 lower to as much as 6.00 lower for 660 to 680 pound offerings. Demand was good and trade was active despite icy and cold weather conditions. Feeder steers medium and large 1 weighing 726 pounds averaged 101.88, 617 pound heifers brought 98.77 per hundredweight.

Soybean outlook largely dependent on Chinese demand

One of the overriding themes for soybean futures during the first portion of 2010 has been the expected record South American soybean crop and the potential impact on demand for U.S. beans.

Michael Cordonnier, President of Corn and Soybean Advisor Inc., tells Brownfield that market watchers should keep an eye on China, “China, of course, has been buying very heavily. If they continue to buy heavily, well then maybe we need all these soybeans and the prices wouldn’t ease too much more, but if China shows any sign of letting up on its’ purchases, then we’ve got a lot of soybeans.”

Cordonnier adds “I think the bottom line for this spring is we’ve got new acres coming in from [a] lack of soft red winter wheat and hard red winter wheat [planting] and also some CRP acres coming in. I don’t see a need to bid up acres for either corn or soybeans, so I think the path of least resistance is downward on the prices.”

Cordonnier will be in South America for most of February, returning to the U.S. in early March.

Michael Cordonnier talks about South American crops and potential impact on U.S. prices (4 minutes MP3)

Cattle trade at higher prices than last week

Cattle trading was light with good demand in Nebraska on Friday. Compared to last week live sales are 1.00 higher from 84.00 to 85.00. Compared to Thursday, dressed sales were 1.00 higher at 138.00. Some producers passed all bids due to the strength of the February live cattle contract. Trading was light to moderate in Colorado with good demand. Compared to last week, live sales sold 1.00 higher at 85.50. Trading had not developed in the South by late afternoon. The weekly cattle slaughter was estimated at 642,000 head, 13,000 more than last week, and 17,000 above last year. Boxed beef cutout values were weak on light to moderate demand and offerings. Choice beef was down .81 at 137.90, and select was .64 lower at 135.46.

Chicago Mercantile Exchange live cattle contracts settled 10 to 87 points higher. The upward surge in prices was attributed to stronger cash cattle prices in the direct trade. Weather is causing muddy conditions in feedlots, reducing the number of cattle available for market and stressing animals. The strength of the dollar, which may slow exports, was a pressuring factor for futures. February settled 87 points higher at 87.42, and April was up 32 at 90.40.

Feeder cattle ended the session 10 to 107 points higher on the strong gains in the live pit and lackluster trade in the grains. March settled 107 points higher at 98.32, and April was up 70 at 99.67.

Receipts of feeder cattle at Missouri auctions this week totaled 29,551 head. Compared to last week, feeder steers trended steady to 4.00 higher, heifers were steady to 3.00 higher. Feeder steers medium and large 1 and 1-2 weighing 500 to 600 pounds traded from 93.50 to 124.00, 6 to 7 weights brought 84.50 to 104.50. 500 to 600 pound heifers traded from 80.00 to 106.50 and 7 to 8 weight heifers at 81.75 to 93.75 per hundredweight.

Barrows and gilts in the Iowa/Minnesota direct trade closed .71 higher at 63.59 on a carcass basis, the West was up .14 at 63.93, and the East was up .37 at 61.82. Missouri direct base carcass meat price closed steady from 54.00 to 59.00.  The weekly hog slaughter is estimated at 2,149,000 head, 7,000 more than last week, and 67,000 less than 2009.Country receipts remained limited on Thursday, leaving several plants needing live inventory for Friday and Saturday, as well as starters for next week. The Saturday kill is estimated to be 51,000 head.

Lean hogs settled 55 points higher to 22 lower. The spot February was supported by the live cattle contracts. The strength in the dollar weighed on the deferred issues. Concern continues over the Russian ban on U.S. poultry and that also pressured the deferreds. February settled 55 points higher at 66.70, and April was down 20 at 66.12.  Pork trading was slow with light demand and mostly moderate offerings. Pork carcass cutout value was down .03 at 69.12.

Pork bellies ended 75 to 175 points lower in a very light trade. The contradicting moves in the livestock market and outside markets kept belly traders at odds when looking at nearby and deferred contract months. February was 175 points lower at 80.00; March was also at 80.00 down 75.

Tyson profits are up

Tyson stock jumped 6 percent on higher-than-expected first-quarter profits. A report from Reuters says Tyson’s chicken business earned $78 million on the highest first-quarter profit margin since early 2007. The company’s beef and pork profits improved because of cost-cutting and stronger exports.

All told, the Springdale, Arkansas-based company earned $160 million first quarter profit, compared with a year-earlier loss of $102 million.

First quarter revenue increased to $6.64 billion and the company estimates they could take in $27.5 billion to $28 billion for the entire year.

Outside markets push corn and soybeans modestly lower: February 5, 2010

Soybeans were lower on fund and technical selling, along with outside market direction. The trade’s keeping an eye on the expected record South American crop and waiting for China to cancel export purchases. Over the near term, the supply and demand fundamentals continue to look supportive, limiting losses. It was an up and down day with no real fresh news one way or the other. Soybean oil was lower on product spread trade and spillover from beans and crude oil. Soybean meal was mixed with support from product spreading and good nearby demand against pressure from beans and the supply impact of a record South American crop. According to Argentina’s Ag Ministry, improved rainfall has aided that nation’s soybean crop.

Corn made new four month lows on fund and technical selling, along with spillover from the outside markets. The dollar was higher and the Dow and crude oil both broke what had been support during the session; the Dow eventually finished in positive territory and while March crude oil was nearly $2 lower, that was well above the session lows. Corn’s fundamentals look negative with the large supply mostly cancelling out the recent increase in demand. Ethanol futures were lower. USDA Brazil attaché has left its 2010 corn production estimate unchanged at 51 million tons.

The wheat complex was mostly lower on technical and fund selling, in addition to the outside markets. When the dollar goes up it raises the price of U.S. goods on the export market. U.S. wheat’s already at a premium to other origins and the available global supply is large. March Minneapolis was firm reasserting its premium over the CBOT and KCBT contracts. European wheat was lower on the outside market bearishness. Stats Canada reports that end of 2009 wheat stocks were near estimates with wheat stocks a little above the average guess and slightly lower than December 31, 2008.

Closing Grain and Livestock Futures: February 5, 2010

March corn closed at $3.51 and 1/2, down 2 and 1/2 cents
March soybeans closed at $9.13 and 1/2, down 1/2 cent
March soybean meal closed at $271.00, down 20 cents
March soybean oil closed at 37.00, down 21 points
March wheat closed at $4.73 and 1/4, down 2 and 1/2 cents
February live cattle closed at $87.42, up 87 cents
February lean hogs closed at $66.70, up 55 cents
March crude oil closed at $71.19, down $1.95
March cotton closed at 66.62, down 237 points
February Class III milk closed at $14.10, up 5 cents
Dow Jones Industrial Average: 10,012.23, up 10.05 points

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