Recovery sluggish, but beneficial to farm economy

An official with the Federal Reserve Bank of Kansas City calls recovery from the recession sluggish, but he says it should still benefit the farm economy. Omaha Branch Executive Jason Henderson says the general economy is expected to grow only three percent this year, but he says even that will allow consumers to help the farm economy.

“As they purchase more food and buy more high-end foods, it’ll help domestically, but a global economic recovery should also strengthen U.S. exports,” Henderson told Brownfield following a presentation at the FAPRI Outlook Conference. “The combination of rising consumer demand and rising global demand should help farm prices and farm incomes.”

AUDIO: Jason Henderson (5 min. MP3) 

Better commodity prices have resulted in rebounding farmland values. Henderson says farmland is high and it’s going up.

“One of the questions going forward [is] will [land prices] sustain themselves at these levels, or what’s their future path; could they even go higher?” asks Henderson. “I think a lot of depends upon the profitability of the sector and what demand does globally.”

One of the biggest risks to the farm economy, according to Henderson, is that farmers are tempted to pile on too much debt at current low interest rates. Where possible, Henderson advises producers to lock in interest rates on loans.

USMEF says January 2010 beef, pork exports up from January 2009

U.S. Meat Export Federation reports beef and pork exports during January 2010 were up on the year.

USMEF says beef exports were up 9% in volume and 6% in value from January 2009, but were down 6% in volume and 5% in value from December and volume was 3% below the monthly average for 2009. Mexico and Canada were the two biggest customers of U.S. beef, purchasing 44% of the total volume shipped.

Pork exports were up 8% for both volume and value with sales to Mexico stronger now than before last year’s H1N1 problems. Pork sales to Japan were down 34% in volume and 27% in value on an increase in domestic production.

During 2009, USMEF says around 22% of pork and pork variety meats and 10% of beef and beef variety meats produced were exported. For pork, USMEF states export value works out to $37.37 per head, and for beef, it comes to $119 per head.

Corn, wheat lower on supply, outside markets

Soybeans were mostly steady to higher on technical buying and short covering. Outside markets were bearish, but weekly export inspections were good and February’s crush numbers were strong than expected. Also, there are reports of harvest and shipping delays out of Brazil. In any event, it was an up and down day with good near term supply and demand expectations at last partially offset by increasingly bearish long term supply and demand outlooks. The National Oilseed Processors Association reports member firms during February crushed 148.351 million bushels, compared to the average pre-report estimate of 144.5 million and the January total of 162.397 million. Soybean oil stocks came out at 2.852 billion pounds, compared to 2.695 billion in January and 2.501 billion in February 2009. Soybean oil was lower on profit taking and product spread trade while meal was up on that spread activity. Paraguay’s grain export body, via Dow Jones Newswires, reports 75% of that nation’s soybean crop has been harvested with the expected total at a record 7.2 million tons, up sharply from last year on improved weather and larger planted area.

Corn was modestly lower on fund and technical selling, along with spillover from the outside markets. The dollar was up while the Dow was down and crude oil was sharply lower, and fundamentals are negative, especially on the supply side. Losses were limited by continued concerns over spring planting delays as traders continue to get ready for USDA’s March 31 prospective planting report. South Korea had a flurry of activity in the export market: purchasing outright 275,000 tons of U.S. corn, buying 275,000 tons of U.S. corn from a foreign seller and switching 176,000 tons from unknown destinations to South Korea. The total, 726,000 tons, is slated for delivery during the current marketing year which ends August 31. Ethanol futures were lower.

The wheat complex was lower on fund and technical selling, in addition to the higher dollar. When the dollar goes up it raises the price of U.S. goods on the export market. Fundamentals are very negative – U.S. wheat is already at a significant premium to competing exporters and the world supply is very large with no major crop weather problems currently; those world stocks include a more than two decade high for domestic ending stocks. Losses in Minneapolis were lessened by concerns over hard red spring planting delays. European wheat was steady to firm with support from the Pound and Euro losing ground against the dollar; May Paris was flat and May London was up .2%. Iraq’s Grain Board issued a tender for at least 100,000 tons of hard wheat from any origin.

Feeder cattle trade higher at the Monday auctions

Cattle trade volume last week was larger in all major feeding states especially in Texas. This week’s ready show list numbers are mixed, larger in Texas and smaller in Colorado, Nebraska and Kansas. Early asking prices are around 96.00 to 97.00 in the South and 152.00 plus in the North. Monday’s cattle slaughter is estimated at 125,000 head, 5,000 more than last week and 3,000 greater than a year ago. Boxed beef cutout values closed firm to higher on light to moderate demand and offerings. Choice beef was up 1.19 at 150.83 and select was .44 higher at 148.94.

Chicago Mercantile Exchange live cattle contracts settled 25 to 80 points higher on last week’s higher cash cattle prices, fund buying and higher beef quotes at midday. April and June hit new contract highs. April finished .55 higher at 95.65, and June was up .80 at 93.60.

Feeder cattle finished the session narrowly mixed mainly on building pressure in the outside markets. The soon to expire March was down .10 at 102.90, and April was .05 lower at 106.25.

Feeder cattle receipts at the Oklahoma National Stockyards on Monday totaled 12,600 head. Feeder steers at midsession were steady to 2.00 higher. Stocker steers and steer calves were 2.00 to 3.00 higher. Feeder and stocker heifers and heifer calves were steady to 1.00 higher with feeder heifers just lightly tested. Demand was good for all classes. Quality was plain to average. Feeder steers medium and large 1; 500 to 600 pounds traded from 116.00 to 124.50, 7 to 8 weights from 100.25 to 106.25. Feeder heifers weighing 500 to 600 pounds brought 106.00 to 114.50 and 700 to 750 pounds from 94.00 to 97.50.

Barrows and gilts in the Iowa/Minnesota direct trade closed 1.41 lower at 69.12 on a carcass basis, the West is 1.33 lower at 69.28, and the East is down 1.30 at 69.36. Missouri direct base carcass meat price closed steady to 2.00 lower from 64.00 to 65.00. Hog slaughter is estimated at 418,000 head, 9,000 more than a week ago, but 3,000 less than last year.  DTN predicts slaughter plans should be more aggressive this week with Tyson’s plant at Logansport back on line. Yet processing margins do not look encouraging due to rather lackluster wholesale pork demand.

Lean hogs settled 17 to 85 lower on lower prices in the cash market, profit taking and fundamentals. There was some spreading as traders sold April and bought June and July contracts. April was down .85 at 71.80, and June was 22 points lower at 80.57. Pork trading was slow, with light to moderate demand and offerings. Pork carcass cutout was up .22 at 74.05.

Pork bellies ended the session on spillover pressure from the lean pit and a general lack of buying interest. Only May was quoted and it was 1.00 lower at 91.05.

Closing Grain and Livestock Futures: March 15, 2010

May corn closed at $3.63 and 1/4, down 1 cent
May soybeans closed at $9.30, up 4 and 1/2 cents
May soybean meal closed at $257.60, up $6.30
May soybean oil closed at 38.75, down 80 points
May wheat closed at $4.79 and 1/4, down 6 cents
April live cattle closed at $95.65, up 55 cents
April lean hogs closed at $71.80, down 85 cents
April crude oil closed at $79.80, down $1.44
May cotton closed at 80.76, up 29 points
March Class III milk closed at $12.83, down 1 cent
Dow Jones Industrial Average: 10,642.15, up 17.86 points

Midday cash livestock markets

Barrows and gilts in the Iowa/Minnesota direct trade are 1.50 lower at 69.03 on a carcass basis, the West is 1.62 lower at 68.99, and the East is down 1.16 at 69.50. Missouri direct base carcass meat price opened steady to 2.00 lower from 64.00 to 65.00. DTN predicts slaughter plans should be more aggressive this week with Tyson’s plant at Logansport back on line. Yet processing margins do not look encouraging due to rather lackluster wholesale pork demand.

The major item of business in cattle country has buyers and sellers busy taking inventory. Show lists are expected to be about steady with last week. Early asking prices are expected to start out around 98.00 in the South and 152.00 to 154.00 in the North. While feedlot operators continue to be bullish, packer attitudes are considerably less buoyant given their inability to force the beef trade higher and maintain adequate margins. Choice boxed beef started the week higher, up 1.15 at 150.79, and select is up .33 at 148.83.

Feeder cattle receipts at the Joplin Regional Stockyards total 6000 head. Compared with last week, steer and heifer calves opened steady to 2.00 higher. Yearlings were not well tested in the early go. Demand and supply was moderate. Feeder steers medium and large 1 weighing 500 to 600 pounds brought 115.00 to 123.00 per hundredweight, 5 to 6 weight heifers traded at 102.00 to 104.50.

Another good week for soybean export inspections

It was a mixed week for grain and oilseed export inspections. USDA reports soybean and wheat inspections for the week ending March 11 were below pre-report estimates while corn was above expectations. Soybeans were above what’s needed weekly to meet USDA projections for the 2009/10 marketing year but corn and wheat fell short of their respective marks.

Wheat came out at 9.167 million bushels, down 11.924 million from the week ending March 4 and 3.693 million lower than the week ending March 12, 2009. For the 2009/10 marketing year to date, wheat inspections are 651.523 million bushels, compared to 804.960 million in 2008/09.

Corn was reported at 36.522 million bushels, 1.336 million less than the previous week but 1.271 million more than a year ago. So far this marketing year, corn inspections are 882.051 million bushels, compared to 857.077 million this time last year.

Soybeans were pegged at 31.495 million bushels, 2.426 million below the prior week but 7.602 million above last year. At this point in the marketing year, soybean inspections are 1.174 billion bushels, compared to 878.409 million a year ago.

Sorghum inspections totaled 2.203 million bushels. That’s an increase of 673,000 bushels from the week before but a decrease of 304,000 from a year ago. 2009/10 sorghum inspections are 90.562 million bushels, compared to 80.561 million in 2008/09.

Feds shine spotlight on ag competition issues

In Ankeny, Iowa Friday, the Department of Justice (DOJ) and U.S. Department of Agriculture (USDA) held the first-ever joint public workshop on competition and regulatory issues in the agriculture industry. 

The workshop, led by U.S. Agriculture Secretary Tom Vilsack and U.S. Attorney General Eric Holder, featured panel discussions on a variety of topics, including competitive dynamics in the seed industry, trends in contracting, transparency and buyer power, and concluded with public testimony. 

“Today’s workshop provided the Department with an important opportunity to hear from a variety of perspectives and individuals about competition in the agriculture sector,” said Attorney General Eric Holder.  “We appreciate the importance of this industry to our economy and are committed to enforcing the antitrust laws effectively to ensure fair and open competition that protects both consumers and farmers.”

“In my travels across the country, I hear a consistent theme: producers are worried whether there is a future for them or their children in agriculture, and a viable market is an important factor in what that future looks like,” said Vilsack. “These issues are difficult and complex, which is why this workshop today is so important and long overdue.”

Friday’s meeting was the first in a series of workshops that will be held over the next several months. 

Holder, Varney serve notice to large agribusiness companies

The nation’s largest agribusiness firms received a stern warning from the Obama administration during Friday’s ag competition workshop in Ankeny, Iowa:  There’s a new sheriff in town and anti-competitive practices won’t be tolerated.

Attorney general Eric Holder set the tone for the session. “We know that a growing number of American farmers find it increasingly difficult to survive by doing what they have been doing for decades,” Holder said, “and we’ve learned that some them believe that the competitive environment may be, at least in part, to blame.”

Both Holder and Christine Varney, the assistant attorney general for antitrust, said that while big isn’t necessarily bad, it can be bad if the power that comes with being big is misused.  “With big comes an awful lot of responsibility,” said Varney.  “When you have a tremendous amount of market share, you have the responsibility to behave in ways that keep the competitive playing field open.  You cannot engage in acts that are designed to protect or extend your monopoly.”

Varney said her office will vigorously enforce antitrust law.  When pressed on what actions might be forthcoming, and when, Varney responded that it’s already happening.  She pointed to last year’s blockage of JBS SA’s attempt to purchase National Beef and a recent Justice Department lawsuit seeking to block milk processor Dean Foods’ acquisition of a competitor.   Her message was that future acquisitions and mergers will be getting much more scrutiny than they have in the past.

The following audio clips feature some of the opening comments made at the workshop.

AUDIO: Secretary of Agriculture Tom Vilsack (2 min MP3)

AUDIO: Attorney General Eric Holder (3 min MP3)

AUDIO: Christine Varney, head of DOJ Antitrust Division (3 min MP3)

AUDIO: Iowa Senator Chuck Grassley (3 min MP3)

 

Farmers have their say

The workshop agenda included a panel of six farmers conveying their thoughts on competition issues in agriculture.  Eric Nelson, a grain and cattle farmer from Moville, Iowa argued that the government needs to do a better job of enforcing the anti-competition and antitrust laws already in place.   Pam Johnson, a farmer from Floyd, Iowa, talked about the innovations that have made American agriculture the envy of the world.

AUDIO: Eric Nelson (7 min MP3)

AUDIO: Pam Johnson (6 min MP3)

 

Competitive Dynamics of the Seed Industry

Much of the focus of Friday’s workshop was the competitive dynamics of the seed industry–specifically Monsanto’s dominance in seed traits and whether the company is using that dominance unfairly.  At the heart of the discussion is the battle between rivals Monsanto and Dupont, which owns Pioneer Hi-Bred. 

One of the more interesting exchanges took place between Diana Moss with the American Antitrust Institute and Jim Tobin of Monsanto, both part of a panel discussing seed price, choice and innovation.   Dermot Hayes, Iowa State University professor of economics and finance, also weighed in.

AUDIO: Diana Moss (2 min MP3)

AUDIO: Jim Tobin (2 min MP3)

AUDIO: Dermot Hayes (2 min MP3)

 

Reaction from agribusiness and ag organizations

How do some of the nation’s largest agribusiness and ag organization’s view the tough talk from the Department of Justice in regards to competition in the ag industry?  Brownfield put that question to Sam Carney, president of the National Pork Producers Council; Jay Vroom, president of CropLife America, the trade association representing the nation’s chemical companies; and, Colin Woodall, vice-president of government affairs for the National Cattlemen’s Beef Association.

AUDIO: Sam Carney (4 min MP3)

AUDIO: Jay Vroom (3 min MP3)

AUDIO: Colin Woodall (2 min MP3)

Wheat higher on short covering, lower dollar

Soybeans were mostly lower on speculative and technical selling, along with the lower crude oil. Contracts started firm, but just couldn’t follow through due to the increasingly bearish supply and demand outlook; the now expired March was the only contract closing with gains. The trade continues to keep close watch on the expected record South American crop with weather looking favorable for late crop development. Brazil’s Vegetable Oils Industry Association (ABIOVE) pegs that nation’s new soybean crop at 67.6 million tons, up 2.4 million from its early February guess, with exports at 28.8 million tons and the crush at 32.9 million. China bought 220,000 tons of U.S. beans ahead of the open, initially announced as for 2009/10 delivery but later switched to 2010/11. Soybean oil hit two week lows on profit taking and spillover from crude oil. Meal was mostly lower following the lead of beans with losses limited by product spread adjustments. The National Oilseed Processors Association’s monthly crush report is out Monday at 7:30 AM Central. The crush is pegged at 144.5 million bushels with bean oil stocks placed at 2.786 billion pounds. The crush would be down from January while stocks would be up on the month.

Corn was lower on technical and fund selling, in addition to the lower beans and crude oil. Corn’s fundamentals remain negative with a large supply, some uptick in ethanol use and fairly slack export demand. South Korea bought 116,000 tons of 2009/10 corn which was considered routine. Losses were limited by continued concerns over early planting delays ahead of March 31’s USDA prospective plantings report. Additionally, most contracts have managed to hold above last month’s lows. Ethanol futures were lower. Malaysia bought 60,000 tons of South American corn at $225 per ton.

The wheat complex was higher on short covering, technical buying and the lower dollar. When the dollar goes down, it lowers the price of U.S. goods on the export market. However, U.S. wheat is more expensive than wheat from competing exporters and the available world supply is large. In any event, fundamentals may be negative, but traders continue to hold a very large net short position, potentially setting the stage for more sideways movement. Minneapolis had additional support from concerns over hard red spring planting delays. European wheat was mixed, mostly firm, in consolidation trade; May Paris was up .4% and May London was .8% higher.

Feedlot cattle trend two to four dollars higher than last week

Cattle trading was active in the Southern Plains on Friday on good demand. Compared to last week, live sales in the Texas Panhandle were 2.00 to 3.00 higher at 94.00 to 95.00, and 2.00 higher in Kansas at 94.00. Dressed sales in Kansas are 4.00 higher than last week at 148.00. Trading was moderate on good demand in Nebraska. Compared to last week, live sales were 3.00 higher at 91.00 to 93.00 and dressed sales traded 2.00 to 3.00 higher at 147.00. In Colorado trade was moderate on good demand with lives sales mostly 3.00 higher at 93.00 with instances at 94.00. In the Western Corn belt trade was light on moderate demand. Compared to Thursday the bulk of the dressed sales traded from 1.00 to 3.00 higher at 147.00.The weekly cattle slaughter was estimated at 621,000 head, 4,000 more than last week, but 4,000 less than last year. Boxed beef cutout values were steady to firm on moderate to good demand and moderate to heavy offerings. Choice boxed beef was up .57 at 149.64; select was .13 higher at 148.50.

Chicago Mercantile Exchange live cattle contracts closed 20 to 127 points higher on the stronger cash cattle market. Additional support to the front months came from spreading into April and June out of the back months. April settled 1.27 higher at 95.10, and June was up .85 at 92.80.

Feeder cattle ended the session 70 to 155 points higher on the support from the strong action in the live pit. Additional support came from the lack of direction in the corn futures market. March settled 1.07 higher at 103.00, and April was up .87 at 105.97.

Feeder cattle receipts at Missouri auctions this week totaled 41,441 head. Compared to last week feeder steers and heifers found the majority of the sales steady, with trends at some auctions showing certain weights and cattle of classes several dollars higher to several dollars lower. Demand was good on a moderate supply. Feeder steers medium and large 1; 1385 head averaging 621 pounds traded at 111.95 per hundredweight, 1207 heifers weighing 623 lbs averaged 100.28.

Barrows and gilts in the Iowa/Minnesota direct trade closed 1.23 lower at 70.34 on a carcass basis, the West was down 1.20 at 70.45, and the East was 1.04 higher at 70.74. The Missouri direct base carcass meat price closed steady from 64.00 to 67.00 on the barrows and gilts. The weekly hog slaughter is estimated at 2,132,000 head, 31,000 less than last week and 20,000 less than last year. Saturday kill plans had been forecast to be around 30,000 head, but came in much higher than that at 84,000. Russia made it official on Thursday by relisting eleven U.S. pork plants for exports.

Lean hogs settled 5 to 77 points higher. Fund buying was noted as after April and June moved through ten day moving average resistance levels.  April settled at 72.65 up .77, The June contract hit a high of 81.50 before settling at 60 higher at 80.80. Pork trading was moderate with light to moderate demand and offerings. Pork carcass cutout value was .28 lower at 73.83.

Most pork belly months were unquoted and May ended .45 lower at 92.05.

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