MARKET REPORT 31
MARCH 2015
Today USDA
released its long anticipated planting intentions report. This report was predicted to have a huge
impact on the market and it did. Corn
acreage will be down by 1.4 million acres, soybeans will be up almost a million
and sorghum will be up 750,000. Sorghum
is enjoying increased popularity in the western states as irrigation becomes
more expensive, water becomes more scarce, and China continues to import more
sorghum. Home brewed liquor is a major
Chinese use for imported sorghum.
The other big news
is the US oil market. Oil prices are
plummeting around the world. The number
of drilling rigs operating in the US is also plummeting. But oil production continues to INCREASE in
direct contradiction to market expectations.
Last year it was common knowledge around the world that US shale
production would shut down and become uneconomical when oil traded below $90
per barrel.
Well, someone
should have checked with the guys out west in Texas and North Dakota. They claim to be fine with $30 per barrel
oil. The only wells that are being shut
in are the wells with really bad production numbers.
And the worse news
is that the US is rapidly running out of storage for crude oil. We are approaching 90% full right now, and if
it gets much worse, oil prices in the US are headed for a short term collapse,
maybe below $20.
More on this in
future columns.
Corn: USDA says that corn acres will be down this
year, but down less than the industry was expecting. Also, ending stocks (corn on hand when 2015
harvest starts) was predicted to be up more than the industry was
expecting. Predictably, corn was down
$0.185 for most months going forward. If
good weather holds for the current spring planting, corn will continue its
decline. New crop futures (December 2015)
closed at $4.00.
Soybeans: Beans closed up slightly on the acreage news
and also good usage reported by USDA.
Wheat: The wheat markets are definitely off their
peak, now the price will be subject to spring moisture reports and crop
inspections tours that estimate the amount of winter kill in the US winter
wheat regions.
Cattle: Feeder cattle continue their seasonal move
upwards as buyers try to stock summer pastures for the upcoming grazing
season. Fat cattle continue strong as
fed cattle numbers continue to decline.
The cattle just are not out there to meet the demand. And as we come into the US summer cook-out
season, the supplies of beef will only get tighter.
Big news in the
past 10 days was Wesley Batista,
Chairman of JBS, announcing that a trade deal between the US and Brazil
was imminent, conclusion of this deal could happen by July 2015. Probable outcome: US will accept chilled and
boned beef form the 13 Brazilian states that are considered by OIE to be free
of FMD with vaccination, plus Santa Catarina which is OIE certified as FMD free
withOUT vaccination.
Milk: Milk prices have softened in the past 30
days. Some market price strength emerged
with the news of the New Zealand drought, but that has gone away. Close in months have class III milk in the
$15.00 range. Prices will advance
through the summer months and reach $17.00 by August, with all future months
from there pricing in the $17 range currently.
This class III price will translate into a $3-$4 higher final milk price
for the majority of US producers.
Dairy Cattle: Prices are steady to slightly lower. The decline in milk futures has removed some
support from the springer and open heifer market, but spring brings the grass
buyers out and supports the open cattle.
Current historically high beef prices continue to put a strong floor
under dairy cattle prices, as large scale western feedyards continue to buy
light Holstein heifers for fattening as an alternative to high priced beef-type
feeder cattle.
Export news: Everything is currently quiet. The strength of the US dollar has moved most
buying interest in breeding cattle to either Europe or Australia.
