12-01-2011 07:46 AM - edited 12-01-2011 12:37 PM
What a difference a couple of hours can make! Earlier this morning, we were talking about whether or not the bottom is in for the grains. Well, the answer to that question's pretty clear now: The grains have turned around to mixed, with corn and soybeans dipping sharply lower. It's all because of some lower-than-expected USDA export figures released this morning. Add to that some favorable crop weather in South America, our biggest soybean competitor on the world market, and it's really putting the heat on corn and beans.
At mid-day, March corn was 8 1/4 cents lower at $5.93 per bushel, while January soybeans were 13 cents lower at $11.18 1/4. March wheat was the lone grain on the positive site, trading 3 cents higher at $5.98 3/4.
Well, did everybody survive yesterday's trade with your delicate sensibilities intact? Sure was a roller coaster. Do we have another one of those in store today?
Looks like to start, things are looking higher again: Early calls for the grains are corn 4-6 cents higher, soybeans 9-11 higher and wheat 6-9 higher. Overnight trading found March corn trading 3 1/2 cents higher at $6.04 3/4 per bushel, while January soybeans were 9 cents higher at $11.40 1/4 and March wheat was 7 1/2 cents higher at $6.03 1/4.
Jump over to today's OptionEye report with Scott Shellady to see some interesting insights on this whole global economic situation and yesterday's interest rate reduction. And, there's word out this morning from folks at Goldman Sachs -- they say corn prices will likely trend higher for the next 6 months because of short inventories. That's even despite declining export & feed demand. What do you think? Here's that report.
So, besides watching what these crazy markets are doing, what's going on at your place this morning?
12-01-2011 08:32 AM
Jeff I had heard we have a record # of cattle on feed and an expanding hog herd? I am patiently waiting on a target price of $6.00 on corn and $12.00 on soybeans to forward contract new crop 2012 grain.... With new crop 2012 prices for corn in the high 4's locally I can't see how this market could buy fringe acres?
12-01-2011 08:40 AM
Hey, Blacksand. Yep, I've heard those cattle numbers too. I wonder if it's just because ethanol demand, though higher, isn't as high as the trade expected it would be. But, those cattle numbers sure are impressive. Think it will just take some of that corn to actually be fed to that record number of cattle on feed before the market takes it fully into account?
12-01-2011 09:32 AM
cattle #s are an interesting deal.
Higher #s in lots because???? Fat price is pulling them in while profits are possible-----or, drought shoved them in cause there is no place else to go.
Fat $$$ are high because??? We have been weather triming the herd for several years----or demand for beef is high because of weak $$$
Jeff, I think u r right. Demand is there---for now. A monsoon in the sw could lower the numbers at some point.
Eventually we are going to take a little time to rebuild herd. Fat price may be stronger than #s on feed. #s on feed may inverse along with the corn market.
12-01-2011 09:45 AM
To clearify, We may need to drive grain prices up to the point of break even in the feedlot to trim demand. And that may be our best indicator of an upward limit this spring.
12-01-2011 09:49 AM
Hay prices are about double of last year, cattle prices sky high. Fringe acres in our area will go back to hay and pasture if we don't see a 7 in front of the corn number. If we really need 95 million acres of corn next year the current price won't get it.
12-01-2011 09:56 AM
There are a couple of points to ponder with regards to the cattle placements. Yes, they are very high. The placements have been high because calves were weaned in the drought stricken areas at much lighter weights and shoved into lots a lot quicker than normal because of the drought. A couple of things here. Placements in the first and second quarter of 2012 could fall off of a cliff. The other point here is that with lighter weights being placed it will take more feed to get them to market weight. It takes more corn to get a 400 pounder to 1300 pounds than it does to get a 700 pounder to 1300 pounds.
Here's the thing I'm still pondering in my mind. If the U.S. dollar continues to rise, the currency exchange with other countries gets a lot more attractive. If fat cattle do eventually trade to the 135-140 level like some analysts are calling for, it leads me to believe we'll just import large quantities of feeder cattle into the U.S. from Mexico and Canada. I have read where Mexico is enduring its worst drought in 70 years. This should make it very attractive to get their cattle into the U.S. to reduce their feed burden. At this juncture, it's just too early to make the bet that feed demand falls.
The ethanol market is burning corn as fast as possible. From what I've read, they're running at maximum capacity. If analysts thought there would be more corn used faster for ethanol, they must have not read the memo where there hasn't been any new plants built for quite some time. If I read the report correctly, we used a record amount of corn for ethanol in a weekly period yet the ethanol stocks still fell. For the next year or two, exports of ethanol will be high as SA continues to try and build their sugar cane acreage back unless they lower their mandates again.
Even though USDA has trimmed usage of corn this year by nearly 500 million bushel from usage last year, we're still basically at pipeline supplies for carryout. What happens if they again lower production in the January report? They will have to lower usage. Where will this come from? I hold no illusions that we run out of corn. It just won't happen. However, at what price will it have to take to keep this from occurring? I firmly believe the fuse is getting shorter and shorter on this time bomb. With all of the parabolic moves in land prices and such, I just don't see how it doesn't end horribly.
12-01-2011 09:58 AM
Same thing here. With hay prices through the roof, and MANY cattlemen feeding out old stale bales, and scrambling to bale corn/bean stubble, and wondering if they can buy any more hay, at any price, the fringe acres are going back to hay, unless corn is at least $6.50, or maybe $7+. Hay meadows that often have a few rows of 'extra' bales left overwinter, this year have every bale hauled off of them. Stackyards that usually have piles of hay left over from last year, are starting this winter with very few 'old' bales. The inventories are dropping fast, and with any extra hay going South to the drought area, we NEED more hay acres. As long as cattle are profitable, hay acres will be up. It takes many years to build up a good breeding herd, and ranchers will not let them go if they can turn a profit. It just takes too long to build the numbers back up.
12-01-2011 01:33 PM
I think you've hit on the major points in the corn market. It seems to me the answers don't come before we have a good idea of next years planted acres of corn. Exactly what happens between then and now is hard to say. I think it likely a sort of status quo until ending inventories are firmly bracketed. It still seems a bit early for that. Corn is still an amazing price in relation to today's production and still good demand - no, GREAT demand. That implies we will again have to evaluate threats to production next year. We can't bank on reserves for a bad year. It points to unusual tension in the market for the forseeable future.
12-01-2011 02:17 PM
Gored, record E runs = record ddg production for cattle feed.
ddgs are the number 2 used livestock confinement feed in the usa ( replaced SBM bout 2 years ago ie sbm now 3rd most used feed )
Corn btw is still number 1 used livestock confinement feed ( all species ).
Mexico is basically enjoying the same drouth as TX and Eastern New Mexico.
We imported record numbers of feeders from Mexico so far in 011 due to the drouth.
I think they are pretty well bought out now.
Keep in mind Mexico is generally in the top 3 as far as importing fat cattle and beef back from the usa.
( usa basically serves as a feedlot to finish Mexican feeder cattle and send fats back S ).
On Canada: They started importing quite a few usa feeder cattle this year.
That trend will likely expand thru 012.