| | US crops | Canadian crops | Livestock comments
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US Crops
Again this week, US crop futures prices rallied. The main contributing factors were overly wet US weather and speculative buying. Additional rains and flooding, mainly in Iowa, Illinois, Indiana have prevented the completion of seeding and has damaged crops that have been seeded. In Iowa alone, an estimated 1.2 million acres of corn and two million acres of soybean production have been lost for this year. Also, late-seeded crops and shorter-season varieties tend to be lower-yielding. In Tuesday's monthly supply-demand report, USDA reduced the estimated 2008 average corn yield by five bushels an acre to 149. Even after cutting projected corn usage during the 2008-09 marketing year, USDA projected September 2009 corn carryover at only 673 million bushels. That level is considered minimal, and is down from the estimated 1.4 billion bushels this September. Soybean production estimates were left unchanged from the May report, but projected 2008-09 soybean carryover was reduced by 10 million bushels to 175 million. US and world wheat production and carryover estimates were increased from the May report. However, with corn futures prices reaching new all-time highs this week, wheat prices followed from a feedgrain perspective.
In other news, the Argentina farmers' strike is officially suspended. However, blockades by smaller farmer groups and truckers are still disrupting deliveries. Strong weekly US soybean exports imply that the strike has moved some demand from Argentina to the US.
How high will grain prices go? Much of market action is driven by sentiment, and right now, that sentiment is "bullish". Prices will overreact, and exceed the level needed to ration demand to whatever supply is available. Thus, prices will likely trade steady to higher in the short term. However, corn prices have already moved quickly to record-high levels. Given a turn in the weather to warmer and drier, a strengthening US dollar, and more news of cancellations of biodiesel plant construction and poor ethanol production margins, the current "bullish" sentiment will wane. Keep the June 30 USDA acreage and stocks reports in mind as they will likely be a market-movers.
Here are some of the futures price changes over the week:
July soybeans up $1.02 to close at $15.60/bushel
November soybeans up 92 cents to close at $15.31/bushel
July soybean oil up 1.85 cents to close at 66.19 cents/pound
July corn up 81 cents to close at $7.32/bushel
December corn up 87 cents to close at $7.65/bushel
December Minn wheat up 68 cents to close at $12.30/bushel
Dec. KC wheat up 73 cents to close at $9.53/bushel
Canadian Crops
Canola futures prices rallied, but at a distance to the US markets. As a result, crush margins were very strong at times this week, and that bodes well for crushers to continue as the best buyers. Canola export demand remains mediocre, and current prices are considered well above levels of interest to China. The weakening Canadian dollar was positive for Canadian prices this week, with the dollar back to the 97-cent US level. Some buyers have weakened basis levels in response to higher futures prices and an increase in farmer pricing. Over the week, July canola futures gained $14.50/tonne to close at $660.60. November canola futures closed at $684.20/tonne, up $13 on the week. Lethbridge-area cash barley prices gained $6/tonne last week. In comparison, July barley futures rallied by $27/tonne to close at $257/tonne.
Livestock Comments
US cash cattle traded this week at $93.50/cwt, $1 lower than the last week. US fed cattle owners are pricing cattle earlier in the week lately, possibly due to rapidly rising feed costs. That is shifting bargaining power to the packers. Beef cutout values were steady in the mid-150's. US live cattle futures were higher, with contract highs set in the nearby months, and new record highs in the deferred months. The rapid rise in corn prices implies livestock being marketed at lower weights, thus lowering meat production. However, there is also an implication of livestock liquidation, which would make more meat available in the short-term.
Alberta fed cattle prices were $1/cwt lower, with sales in the $86 to $89.50/cwt range. Alberta feeder cattle prices were steady to stronger, with the weaker Canadian dollar a positive influence. For the week ending June 7, there were 12,104 head of feeder cattle, 10,066 fed cattle and 3620 head of slaughter cows and bulls exported from Canada to the US.
US cash hog prices were weaker on lower pork cutout values, with notable pressure on hams. Lean hog futures prices traded steady to lower. Alberta's weekly average Index 100 hog price was $134/ckg, compared to $133 last week. |
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