Professor Brown Latest Ag News July 7, 2015

LATEST AG NEWS July 7, 2015

QUICK UPDATE:  June 30 is a major date in USA ag statistics reporting.  The report was considered neutral to the markets, but the markets went a little crazy anyway, with all the wet weather.  Corn and the other grains took another jump up for a few days.  But the sun is shining all over the USA this week and all the grains are slipping back to their previous levels (very low) as the crop improves with warm dry weather

Moral of the story:  “Rain Makes Grain” is what we have said in the USA for centuries.  History repeats itself.

JBS bought the pork production unit of Cargill.  This is pretty big news and the market is still digesting the consequences.  More to follow.

Oil:  The number of rigs drilling for oil in the USA went UP for the first week since January 2015.  This is in response to improved oil markets.  The USA still has the capacity to BURY the world in oil if the price is right.  With Iran coming back to the market,  oil is going to stay cheap.

Avain flu appears to be under control for the time being, over 50 million chickens and turkeys destroyed so far.  Some industry analysts are predicting a second outbreak when the migrating birds head south for the winter.  More to come.

COMMODITIES QUICK TAKE AWAY

CORN:  Prices spiked $0.74 from the lowest level during the month of June. But this week has seen both corn and soybean prices retreat every day.  With move warm weather, corn will quickly be back in the $3 per bushel range instead of the current $4 price.

Soybeans:  Will follow corn up and down based on usage and weather.  As the sun comes out, soybean prices will go down.  On July 7, soybeans are down at least $0.20 across all months.

MILK: Production across all regions of the USA continues to set records, with no end in sight for production increases.  “CHEAP GRAIN MAKES CHEAP MILK” is another age old adage we use in the States to predict markets.  The only bright spot is butter demand, which continues with strong support from the recent FDA (Food and Drug Administration, the USA Government agency in charge of food safety) decision to ban trans fats in processed food production.

LIVE CATTLE (for Slaughter)  Prices continue at the same level as our last report.  All months from August forward are trading at $1.50+ per pound.  The fundamentals remain the same:  no cattle available.  The recent decision by President Obama and the USDA to allow in some small amounts of fresh beef from Brazil and Argentina did not have any affect on the market as of yet.

FEEDER CATTLE (300 kg for feeding):  Light cattle continue in short supply.  Prices retreated in response to the spike in grain prices but are climbing again as grain prices decline.  Again, it’s the fundamentals:  no cattle available.

DAIRY CATTLE:  These prices continue at the same levels as the last report.  Baby male and female calves are selling for $600+ across the USA.  Springer heifers (7 months pregnant and more) are staying at about $400 to $500 above the meat price.  Supply is TIGHT but prices are capped by low milk price.

Do you have questions, comments, complaints, insults or general discussion?

Please feel free to contact me professorbrownmicroeconomics@gmail.com

Professor Brown Ag Report is affiliated with BreedEx USA LLC

Latest Ag New from USA June 22

LATEST AG NEWS June 22, 2015

Quick Update:  Its wet in the USA, all over the place.  The corn crop looks excellent, with the exception of a few drowned out patches in fields in low spots.  Prices are reflecting this.  Corn is down, and despite some marketing strength in the other commodities, these other commodities are experiencing downward pressure also.

Oil is in plentiful supply which will keep gasoline prices in check for the rest of the summer.

FRACKLOG: This is  a new term to describe the number of “fracked” wells that have been drilled and are 95% complete, waiting only for a slight uptick in oil prices so that these wells can be completed and their production brought to market.  Don’t expect world oil prices to make any significant rebound past $60 per barrel as long as this large volume (3000+) of unfinished wells remain on tap to increase world oil supply at the slightest price move above $60.

Avian Flu:  Big news in the meat/protein industry is the horrible outbreak of Avian flu on large chicken and turkey farms in the Midwest USA.  The outbreak is ongoing and no one seems to have a good handle on the eventual effects this outbreak (and destruction of 30 million chickens SO FAR) will have on prices for the rest of the meat complex.  Short Answer:  Prices are going up.

COMMODITIES QUICK TAKE AWAY

CORN:  All systems are GO for a record crop.  Too much rain has been a problem, but that will just serve to carry the crop through the eventual dry spell.  New Crop  (December 2015) Corn closed at $3.65 on June 19 and the potential is to go lower, not higher.

Soybeans:  It’s the same story as corn, conditions are too wet, but no significant damage has been done to the crop.  The excess rain will carry the crop through the coming dry spells.  New crop beans (November 2015) closed at $9.50 on June 19, with no price supporting news in sight for the near term.

Milk:  Milk production in the USA continues strong.  Class III futures (the basic support price for US Milk) closed with all future months in the $16 range to end the week.  By comparison, these prices are down $0.50 to $1.00 in the past 30 days, mostly in response to recent reports of excess world production.  The bright spot remains butter production and prices which both remain high.   This will only continue especially in view of the recent US Government decision to ban ALL TRANS-FATS in food produced for consumer production in the USA.  These trans-fats are often replaced with butter.

Live (Slaughter) Cattle:  Prices go up and down, but the fundamentals remain strong.  Numbers are down, and consumption of beef remains strong. Live cattle futures are all trading above $1.50 per pound for the next 12 months.

Feeder Cattle:  These prices mirror the fat cattle prices, with the exception that a decrease in the corn price improves the profitability of feeding slaughter cattle.  Thus decreases in corn prices are reflected in increasing strength in Feeder Cattle prices.  Feeder cattle futures are mostly trading in the $2.20 per pound range moving forward, with the occasional movement down to the $2.10 range.

Dairy Cattle:  Prices for day old baby calves have strengthened in the past 30 days.  Day old bull calves have been above US$500 for several months while baby heifer calf prices have been in the US$350 range.  For June, both bull and heifer calves are trading in the $600 range. Open heifer prices are reflecting this, with local reports of $2.30 per pound for 700 pound dairy heifers.  Springers are strong, although historical highs from the past have not yet been reached.  Cull (slaughter) cow price also continue very strong.

Do you have questions, comments, complaints, insults or general discussion?

Please feel free to contact me professorbrownmicroeconomics@gmail.com

Latest Ag News March 31

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.