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US Crops
Recent trends in the grain markets continued this week. Corn prices made new contract and all-time highs as concern continues over the possibility of US corn acreage at only 86 million, down from last year's 93 million. Despite economics strongly favoring the seeding of corn over soybeans, overly wet weather in much of the mid-US is slowing the seeding pace. There is still plenty of time for seeding to be accomplished, but while the rains continue, the market will factor in the risk of restricted corn acreage. Also supportive to corn prices has been the continued strong export pace despite the high prices. US corn carryover at the end of this crop year may be 100 million bushels less than last year, even after the large 2007 crop. So, if corn acreage drops by 5 to 7 million acres, yields are only at trendline, and the demand for corn continues as strong, carryover could become precariously low next year. That possibility will tend to support corn prices at record levels well into this summer, and perhaps longer. Soybean prices were supported this week by the record high in crude oil prices, which in turn supported soyoil prices. Also, US soybean exports have benefitted from the labor issues in Brazil and ongoing negotiations between the government of Argentina and farmers there over grain export taxes.
On the price chart, soybean and soybean oil prices have completed a 62 % retracement target from the March 3 high to the April 1 low. To keep the oilseed price recovery intact will require additional gains in crude oil prices or some other news, at least until US weather concerns become more of a factor. Wheat prices, after falling sharply from the March 12 high, are still struggling to find support. There was another failed rally attempt mid-week, and new crop wheat futures prices closed at new "recent" lows on Friday. US wheat exports have dropped off, and soon, new crop wheat will be available in India and Pakistan, then in China, the US and the middle east. Presently, there are no major production trouble spots, and even the US hard winter wheat crop condition is improving. That doesn't rule out a reaction from a potential production threat, but right now, complacency (i.e., less risk premium) is being factored into wheat prices.
Here are some of the futures price changes over the week:
- May soybeans up 29 cents to close at $13.61/bushel
- November soybeans up 19 cents to close at $12.81/bushel
- May soybean oil up 1.04 cents to close at 60.98 cents/pound
- May corn up 15 cents to close at $5.99/bushel
- December corn up 19 cents to close at $6.23/bushel
- May Minn. wheat down 62 cents to close at $12.30/bushel
- Dec. Minn. wheat down 35 cents to close at $9.80/bushel
- Dec. KC wheat down 31 cents to close at $9.61/bushel
Canadian Crops
Canola futures prices traded sideways in a tighter range than in recent weeks. Gains in soyoil were supportive, and a rebound in the Canadian dollar was negative. July canola futures closed Friday at $649.30/tonne, up $2.90/tonne over the week. November canola futures closed at $660.50/tonne, a gain of $11.40/tonne. Those July and November futures prices moved to a carrying charge relation this week, implying that the market is becoming comfortable with old crop canola supply and carryover. Canola futures charts have developed strong upside resistance to higher prices. It will take closing prices for November canola above $682/tonne, the March 13 high, to signal higher prices. Farmer deliveries of canola have been high lately, despite or maybe because of the drop in price. In response, canola stocks at Vancouver have rebounded, and no major canola export business has been announced lately. That doesn't bode well for line company basis levels. Crushers, on the other hand, have had good crush margins, and are still eager to process canola.
Note that the StatsCan seeding intentions report will be released Monday morning. Large increases are expected in Canadian wheat acreage, and smaller increases are expected for canola and peas. Barley, oats and summerfallow acreages are expected to be lower. Only a major surprise in this report will result in more than temporary reaction independent from the US grain market direction. Confirmation of large intended wheat acreage may be negative for US wheat prices, especially if snowfall this weekend provides significant moisture to the dry areas of the Prairies.
July barley futures closed little changed at $251/tonne. Higher corn prices were supportive. One CWB feed barley guaranteed delivery contract was still open at Friday's close; the others were filled during the week. New crop non-board feed barley contracts are still available in the price range of $4.50 to $5/bushel. Most cash feed wheat prices remain at $7+/bushel. Edible yellow pea bids were steady in the $9 to $10 range.
Reminder: Crop insurance decision deadline of April 30 is fast approaching!
Livestock Comments
US cash cattle traded Friday at $90/cwt, up $2 to $3 from last week. Further gains in beef cutout values were helpful. US cattle futures were also higher in anticipation of cash price improvement. Friday's USDA cattle on feed report was interpreted as positive: April 1 on feed numbers at 100 % of last April, and lower than pre-report estimates; placements at only 89 % of last March; and March marketings the same as last March, more than expected. Also positive to US cattle markets was the announcement of an agreement with South Korean to resume imports of US beef, starting with beef from under 30-month old cattle.
Alberta fed cattle prices were up by $2.50 to $3/cwt, and traded in a range of $84.40 to $89.25/cwt. Feeder prices also had an upward bias. Slaughter cow and bull prices were quoted as $2 to $2.50/cwt higher.
US cash hog prices moved $5/cwt higher this week, supported by additional gains in pork cutout values. Hog futures rallied in expectation of further gains ahead. The beginning of the Canadian Cull Breeding Swine Program was supportive to the US hog futures market. The goal of the program is to reduce the Canadian herd by 10 %, implying less Canadian hogs moving to the US. The summer US hog futures market is trading a $13/cwt premium to this week's higher cash prices. Achieving that price gain by summer will be a challenge, considering this week's still large US 2.245 million head hog slaughter. Alberta's weekly average base hog price was $1.12/kilogram, up from $1.06 last week. |
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