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BRIAN HOOPS

By Staff | Mar 27, 2009

On March 20, the USDA released the March Cattle on Feed Report. I would consider the report to be friendly to the market as it showed placements 4 percent below the average trade guess and only slightly above a year ago.

These figures will very likely ease the selling pressure against the August, October and December contracts as feedlots will not be so aggressive on hedging cattle until prices rally further. On feed supplies remain tight, 5 percent lower compared to one year ago. While supplies are tight, demand needs to improve if front end prices are going to rally appreciably.

The USDA reported the following:

  • Cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.2 million head on March 1. The inventory was 5 percent below March 1, 2008.
  • Placements in feedlots during February totaled 1.68 million, 3 percent below 2008. Net placements were 1.62 million head. During February, placements of cattle and calves weighing less than 600 pounds were 320,000, 600-699 pounds were 385,000, 700-799 pounds were 538,000, and 800 pounds and greater were 435,000.
  • Marketing activity of fed cattle during February totaled 1.68 million, 5 percent below 2008.
  • Other disappearance totaled 56,000 during February, 7 percent below 2008. This is the lowest other disappearance for the month of February since the series began in 1996.
  • Frozen food stocks in refrigerated warehouses on Feb. 28 were greater than year earlier levels for turkey, cheese, and pork.
  • Total red meat supplies in freezers were down slightly from the previous month, but up 2 percent from last year.
  • Frozen pork supplies were up 5 percent from the previous month and up 4 percent from last year.
  • Stocks of pork bellies were up 12 percent from last month but down 2 percent from last year.
  • Total frozen poultry supplies on Feb. 28 were down 2 percent from the previous month and down 5 percent from a year ago.
  • Total stocks of chicken were down 7 percent from the previous month and down 15 percent from last year.
  • Total pounds of turkey in freezers were up 5 percent from last month and up 13 percent from Feb. 2008.

Corn analysis

Corn closed the week $.08 higher. The weekly export sales report showed net sales of 440,600 metric tons were down 60 percent from the previous week and 52 percent from the prior four-week average. Increases reported for Japan (276,800 MT, including 48,500 MT switched from unknown destinations), Taiwan (49,200 MT, including 6,000 MT switched from Japan), Saudi Arabia (48,400 MT, including 44,000 MT switched from unknown destinations), Kenya (30,000 MT, switched from unknown destinations), Ecuador (27,400 MT, including 25,000 MT switched from unknown destinations), and Algeria (25,800 MT, including 25,000 MT switched from unknown destinations), were partially offset by decreases for unknown destinations (89,500 MT), Colombia (11,400 MT), Canada (8,900 MT), and Panama (6,400 MT). Optional origin sales of 20,800 MT were for Colombia.

For the marketing year, corn sales are 58 percent behind last year’s demand pace. The

USDA has now exported 1.202 billion bushels of corn compared to 2.055 bb last year. To reach the USDA forecast, the U.S. needs to export 21.7 million bushels each week.

On Friday, the USDA announced a 174,000 mts corn sale to an unknown destination and a 116,000 mts sale to South Korea. The upside for corn remains limited by large farmer inventories.

Soybean analysis

Soybeans closed the week $.75 1/2 higher. The weekly export sales report showed net sales of 143,300 MT, marketing-year low, were down 83 percent from the previous week and 76 percent from the prior four-week average.

Increases were reported for Germany (76,600 MT, including 70,000 MT switched from unknown destinations), Mexico (58,400 MT), Taiwan (54,600 MT), Russia (25,900 MT, including 25,000 MT switched from unknown destinations), and China (25,200 MT). Decreases were reported for unknown destinations (100,000 MT) and Spain (50,100 MT). Net sales of 196,500 MT for delivery in 2009/10 were for China (192,000 MT) and Japan (4,500 MT). Optional origin sales of 120,000 MT were reported for China. On Friday, the USDA announced a 165,000 mts soybean sale to China. This year’s export pace remains well above last year’s pace as the U.S. now has export commitments for 1031 mb compared to 975 mb a year ago, or 7 percent better than a year ago. The U.S. only needs to average 6.7 mb to reach the USDA forecast. New crop soybeans remain too cheap for farmers to effectively plant this year. Prices need to rally over the next three weeks to attract lost acres to corn.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.

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