Ag News for America
Fed cattle prices are expected to average 126 dollars in 2013, with a range of 114 to 138 dollars.
CattleFax senior analyst Kevin Good made that prediction at the recent Cattle Industry Convention in Tampa, Florida. Today’s Managing for Profit features excerpts from Good’s presentation at the CattleFax Market Outlook session on February 8, 2013.
The cattle marketing and analytics firm CattleFax is predicting that corn prices will average close to six dollars per bushel in 2013, nearly a dollar lower than in 2012.
CattleFax market analyst Chad Spearman says that forecast assumes a bumper corn crop in the range of 13-and-a-half to 14-billion bushels in 2013.
“If we do produce a crop of that size, I think that we’ll be transitioning into substantially lower prices,” Spearman told those attending the recent CattleFax market outlook session in Tampa, Florida.
“Somewhere in there we’re going to transfer that range from $5.80 to 6.80 to potentially into the fourth quarter—if we have a 12 percent stocks-to-use—you’re going to be dipping down to the $4.50 to $5.50 per bushel range.”
But Spearman says corn prices are expected to remain historically high through the first half of 2013.
“We expect spot corn prices to continue to find major resistance around $7.65 to $7.75—and find major support from the $6.85 to $7.00 per bushel area—on into the month of June, when we enter that period where we’re transitioning from the market’s focus on old crop into new crop.”
If that bumper crop develops, Spearman says corn stocks-to-use levels for the 2013-2014 market year have the potential to reach 10 to 12 percent. That compares to an average of 5.8 percent from September 2012 to January 2013—the lowest stocks-to-use average during that period since the data series began in 1973.
AUDIO: Chad Spearman-CattleFax market outlook presentation 2/8/13 (12:57 MP3)
The CME Group recently announced that it will reduce its trading hours, pending approval by the CFTC. The move comes less than a year after the Group expanded the trading day to 21 hours.
“When we expanded our hours this past year, we did so in response to our international and global growth,” says Bryan Durkin, chief operating officer of the CME Group, “and we thought providing hours along a longer spectrum would be a very positive thing for the marketplace in general.”
But Durkin says the feedback they have received is that the hours need to be shortened. “(We’ll) likely bring them back to something closer to where we had them before we expanded,” he says.
Durkin says the CME Group is finalizing its assessment and a decision on exact hours is, in his words, “imminent”.
In the wake of scandals involving MF Global and Perigrine Financial, the CME Group has taken a number of steps to establish greater safeguards in the marketplace.
CME Group COO Bryan Durkin
In an interview with Brownfield at the Cattle Industry Convention in Tampa, the chief operating officer of the CME Group, Bryan Durkin, talked about the company’s efforts to strengthen customer protections and re-instill confidence in the markets.
A bankruptcy court judge has approved a settlement that will help MF Global customers recover over 90 percent of the $1.6 billion that disappeared from the firm after its collapse in 2011. Bloomberg reports New York Bankruptcy Judge Martin Glenn approved the settlement with a UK affiliate.
Glenn says the deal will help boost recoveries for the former brokerage’s customers. “The settlement is beneficial for the estate and fully satisfies the standards for approving settlements,” he says.
In a statement released Friday, Senate Ag Committee Chairwoman Debbie Stabenow says she is pleased with the settlement. “This is an important step, but I will continue to fight for customers to get more money back, as well as holding wrongdoers accountable,” she says. “We need to ensure that customers are protected and that the markets are safe and functioning as intended.”
MF Global’s failures resulted in the loss of customer funds and Stabenow called it a devastating blow to customer confidence in the futures markets.
Negotiations surrounding the looming “fiscal cliff” continued yesterday.
Arlan Suderman, Senior Market Analyst for WaterStreet Solutions said yesterday’s markets were reacting to the talks in Washington, DC. “We’ve started on a weak note with skepticism about getting any real deal done,” he says. “And then word started to emerge mid-morning about a deal – and then we saw broader markets starting to go up. Corn was leading the way higher and it was correlating very closely to gold.”
As the details on a potential deal began to emerge – the markets began to move into positive territory.
But – Suderman tells Brownfield as the President made his remarks yesterday afternoon – some of that momentum was lost. “As he admitted this would not be a broad comprehensive deal with long-term implications and that it wasn’t yet done – we lost some of that momentum,” he says. “But then we regained some as we headed toward the close with some end of the month, end of the fiscal quarter, and end of the fiscal year type positions squaring.”
Overall he said – it was a choppy day trading with most eyes focused on Washington, DC.
AUDIO: Arlan Suderman, Markets and the Fiscal Cliff (5:30mp3)
Mark Gabrick
MachineryLink recently launched FarmLink, which they describe as “an unparalleled information analytics platform which helps growers make better grain marketing decisions”.
At NAFB Trade Talk in Kansas City, we discussed FarmLink’s implication for MachineryLink customers with director of market intelligence Mark Gabrick.
One grain market analyst tells Brownfield that the corn market could be in what he calls “an explosive situation” over the next few weeks, depending on South American crop progress and moisture prospects for the U.S. heartland.
It leads Scott Shelladay of the Trean Group in Chicago to believe that the corn market will make new highs between now and March.
“I don’t have a lot of people in that camp yet,” Shellday says, “but we’ve got such a tight supply right now that I think that arguably, depending on whether or not you believe the USDA—and there’s a lot of chatter about what their numbers are like all the time—but I think we could be in an explosive situation.”
Shellady is not alone in that analysis. The agriculture advisory firm AgResource projects corn prices will hit nine dollars by May.
Shellady says a lot depends on if and when the managed fund accounts reenter the market.
“The folks that have been worried and waiting for this market to back up a little bit before they procure some more product have been getting paid for doing that,” he says, “albeit not that much because we really haven’t backed off a ton—it just more like put a cap on the market—but I think you could see some explosive activity going into the first quarter.”
On the other hand, some analysts believe that favorable conditions in the coming months could take some of the tension out of the market. But according to Reuters report, “even if a supply recovery occurs next year and cools prices, the underlying picture of robust world demand, driven by China, will keep prices historically high and stocks tight.”
There is growing pressure on the CME Group to return to shorter trading hours.
CME Group expanded its trading hours in May to fend off a challenge from rival Intercontinental Exchange (ICE). However, interest in ICE’s grain contracts has been less than expected, which recently prompted more than 600 local traders, brokers and farmers to sign a petition calling for a return to shorter hours on the CME.
In a recent interview with Brownfield, the managing director of agricultural commodities for CME, Tim Andriesen, talked about some of the positives and negatives associated with the longer hours.
Andriesen also talks about the CME’s new weekly agricultural options, which he says provide users with increased flexibility in managing existing option positions, and new opportunities to trade high impact economic events—at a lower cost.
AUDIO: Tim Andriesen (4:05 MP3)
There is growing pressure on the CME Group to return to shorter trading hours.
CME Group expanded its trading hours in May to fend off a challenge from rival Intercontinental Exchange (ICE). However, interest in ICE’s grain contracts has been less than expected, prompting more than 600 local traders, brokers and farmers to sign a petition calling for a return to shorter hours on the CME.
In a recent interview with Brownfield, the managing director of agricultural commodities for CME, Tim Andriesen, said there have been both positives and negatives to the longer hours.
“With any change, there are people that benefit from that. And certainly there are people that are—the fact that we have longer hours—are changing the way they have to think about the market—having to look at the exposures a little bit differently,” Andriesen says. “So not everyone is 100 percent in favor of it.”
Andriesen says some of the most positive responses have come from country elevators.
“In the past, for example—if you’re a country elevator—you bought some grain from a farmer and you’d have to wait until the market opened to hedge it. Or if something was going on and you wanted to get a hedge off, you’d have to wait until those hours,” he says. “Today, some of the country elevators are telling us they like the ability to lay that risk off as soon as they get that risk.”
However, the push for a return to shorter trading hours seems to be picking up steam. In late October, Bunge, one of the world’s largest agricultural trading houses, threw its weight behind the effort, saying 21-hour trading was “too much.”
But CME executive chairman Terrence Duffy recently told Reuters that the exchange does not plan to trim its hours. Duffy says the CME must retain the longer hours to remain competitive.
AUDIO: Tim Andriesen (2:13 MP3)
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