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US Crops
After trading to new highs early in the week, US corn and soybean futures turned lower to close Friday with limit down losses. Soyoil futures, which had been mainly responsible for the rally in soybeans (and canola), registered a reversal day on Tuesday by making record highs (over 72 cents/lb), and then closing lower. The news blamed for the downturn was that China, which has been a huge buyer of soybeans this season, announced that it was releasing soybean oil from government-held reserves in an effort to curtail the high price there. That inspired the suggestion that China would not need to import vegetable oil in the near-term. Also negative were: (1) lower US exports for corn, soybeans and wheat in Thursday's weekly report, (2) increasing estimates of potential South American soybean production, and (3) liquidation of "long" positions by speculators. In overnight trade Thursday, Malaysian palm oil futures dropped 7.3 %, the biggest one-day drop since 1995. Corn prices had reached record-high levels this week ($ 5.84 December) before spill-over selling from the soybean complex pushed corn down the 20-cent limit on Friday. Old crop Minneapolis wheat futures continued to drop this week, but new crop futures at all three wheat exchanges actually increased after a week of "choppy" trading. There are still concerns of dryness in US hard winter wheat areas despite recent showers. The monthly USDA supply-demand report is due on Tuesday morning (March 11th), and it will likely provide a reminder of how tight grain balance sheets are. If, for some reason, that report is interpreted as "market-negative", then prices could head lower yet.
Here are some of the futures price changes over the week:
May soybeans down $1.28/bushel to close at $14.09/bushel
November soybeans down $1.15 cents to close at $13.11/bushel
May soybean oil down 5.49 cents to close at 63.33 cents/pound
May corn down 9 cents to close at $5.47/bushel
December corn down 5 cents to close at $5.59/bushel
May Minn. wheat down $3/bushel to close at $13.20/bushel
Dec. Minn. wheat up 16 cents to close at $11.29/bushel
Dec. KC wheat up 45 cents to close at $11.40/bushel
Canadian Crops
Well, it was inevitable! Canola futures prices went much higher much faster than anyone predicted, and the "big elastic band got stretched a bit too far". Prices for most canola futures months, after sharp gains on Monday, moved down the $30/tonne daily limit each of the next four days. That amount of drop is unprecedented. Producer selling has also increased, which only adds to the price pressure. Some buyers have even stopped offering a price until markets stabilize. Canola futures have quickly lost all the price gains since mid-February, and the question is "how far can they drop?" July and November canola futures closed limit down Friday to end right on the price uptrend line. With March soybean complex futures unrestricted by limits, and closing much lower than the months with limit losses, the probability is high that more losses will happen Sunday night. For example, March soyoil futures lost 3.45 cents/lb on Friday compared to the 2-cent limit losses for other months. Critical for these markets is how they close on Monday and then Tuesday, after the monthly USDA supply-demand report, which has supported the markets in recent months. If prices bottom out near here, then bullish market sentiment can be maintained. The only certainty is continued volatile trading.
Feed barley futures prices moved higher this week before losing steam as corn prices caved on Friday. Barley futures prices ended little changed on the week, and cash feed barley prices were near steady. Note that the CWB opened signup for feed barley Pool B today, and signup is posted as being available until May 2 or until delivery requirements are met. Also note that the CWB released a mid-month updated PRO for feed barley Pool B today. It increased by $23/tonne to a $275/tonne port-based price. That might be worth considering, depending on your location. Also, it may push non-board barley prices a bit higher. Cash feed wheat prices moved higher this week, with more bids now above $7/bushel and the latest CWB PRO. Edible pea bids remain strong, with yellow bids still at $11+/bushel, and greens firm at $12.
Livestock Comments
US cash cattle trade took place Friday at $89 to $90, down $2 to $3/cwt from last week. US choice beef cutout values lost over 2 cents this week to close Friday at $147.71. April live cattle futures prices were $3.80/cwt lower this week to close at $90.52, while futures for next fall and winter were higher. February and April 2009 live cattle futures contracts traded over $105/cwt, and are supporting summer feeder futures prices. Of note is that US beef cow slaughter for the first eight weeks of 2008 is up 7.2 % from the same period last year.
On Wednesday, JBS of Brazil, entered into an agreement to buy US Premium Beef and National Beef Packing as well as Smithfield Beef Group. The deal includes Smithfield's 7600 head/day processing capacity and Five Rivers Ranch feedlots, which have a one-time capacity of 811,000 head. JBS had already purchased US Swift Packing last year. Also this week, JBS bought the Tasman Group, the largest multi-species meat processor in Australia. If approved by the US competition bureau, the purchase of additional US interests will make JBS the largest beef packer in the US, with daily capacity of 42,550 head, about 31 % of the total.
Alberta fed cattle prices were a bit lower this week, and traded in a range of $81.75 to $84.70/cwt. Basis levels to the US market improved to about -$4/cwt. Canadian prices are expected to remain relatively strong in the near-term, considering the tight supply of fed cattle here. Alberta average feeder cattle prices were mixed last week, with most lighter weight classes a bit higher. There is still potential price pressure on feeder prices as volumes increase, and particularly so if feedgrain prices rise and the Canadian dollar stays strong. Slaughter cow prices gained $3/cwt, with D1/D2 cows quoted in a range of $36 to $53/cwt. For the week ending March 1, almost 20,000 head of Canadian feeders were exported to the US, along with over 18,000 head of fed cattle, and 4790 head of slaughter cows and bulls.
US hog futures and cash prices moved lower this week until Thursday, when the market stabilized on news that tough winter weather in China may have killed many young pigs there. However, US pork exports are already strong, and the hog supply is still abundant. Summer hog futures, although well below the highs, are still much higher than current cash prices, implying price optimism into summer. Also, like the live cattle futures set-up, next winter's hog futures prices are carrying a sharp premium to current levels. Alberta's weekly average base hog price was $1.02/kilogram, down from $1.08/kg last week. |
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