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BRIAN HOOPS

By Staff | May 29, 2009

Last Friday, the U.S. Department of Agriculture released the May Cattle on Feed Report. Previous reports have shown a trend of tighter front month supplies and increasing placement levels. This latest report continued this trend.

The USDA estimated cattle and calves on feed for slaughter market in the U.S. for feedlots with capacity of 1,000 or more head totaled 10.8 million head on May 1. The inventory was 3 percent below May 1, 2008.

Placements in feedlots during April totaled 1.60 million, 4 percent above 2008. Net placements were 1.53 million head. During April, placements of cattle and calves weighing less than 600 pounds were 355,000, 600-699 pounds were 315,000, 700-799 pounds were 405,000, and 800 pounds and greater were 525,000.

Marketing activity of fed cattle during April totaled 1.87 million, 7 percent below 2008.

Other disappearance totaled 69,000 during April, 8 percent below 2008. This is the second lowest “other disappearance” for the month of April since the series began in 1996.

The report will be viewed by the trade as slightly negative for the front month cattle futures of June and August.

Feedlots show feeder cattle supplies are tightening, however the marketing number is concerning. Feedlots appear to be holding cattle in an attempt to profit from the tight supplies, however the lack of consumer demand has left cash supplies weak.

Backing up supplies is never bullish and will undoubtedly keep a lid on cash cattle prices. The continued trend of larger placement levels will be bearish for the third and fourth quarters of 2009 as this will mean more supplies hitting the market at the same time that demand will remain soft.

The USDA also released the monthly cold storage report last Friday. The USDA reported frozen food stocks in refrigerated warehouses on April 30 were greater than year earlier levels for turkey, eggs and cheese. Butter stocks were up 14 percent from last month, but down 3 percent from a year ago.

Total red meat supplies in freezers were up 1 percent from the previous month, but down 5 percent from last year. Frozen pork supplies were up 3 percent from the previous month, but down 7 percent from last year.

Stocks of pork bellies were up 9 percent from last month, but down 21 percent from last year.

Total frozen poultry supplies on were up 8 percent from the previous month, but down slightly from a year ago. Total stocks of chicken were up 4 percent from the previous month, but down 12 percent from last year. Total pounds of turkey in freezers were up 12 percent from last month and up 18 percent from April 30, 2008.

Corn analysis

Corn closed the week $.13 higher. The weekly export sales report showed net sales of 683,400 metric tons were down 27 percent from the previous week and 31 percent from the prior four-week average.

Increases reported for Japan (272,900 MT, including 21,700 MT switched from unknown destinations), unknown destinations (116,600 MT), Mexico (84,400 MT), South Korea (82,900 MT, including 25,000 MT switched from Japan), Taiwan (42,400 MT), and Canada (22,100 MT), were partially offset by decreases for Guatemala (31,300 MT) and the French West Indies (2,100 MT).

Net sales of 138,600 MT for delivery in 2009/10 were for unknown destinations (83,400 MT) and Mexico (55,200 MT). For the marketing year, the U.S. has now exported 1.557 billion bushels of corn compared to 2.267 bb last year.

To reach the USDA forecast, the U.S. needs to export 13.8 million bushels each week. Planting progress remains the driving force for price direction as the U.S. is only 62 percent seeded. The Eastern U.S. remains well behind normal with Illinois only 20 percent completed as of May 17 with Indiana only 24 percent seeded. Iowa is on pace at 90 percent planted with Minnesota also 90 percent seeded. Watch weather forecasts closely for price direction as continued delays in plantings will drive prices higher in an effort to encourage farmers to plant corn and not switch corn acres to soybeans.

Soybean analysis

Soybeans closed the week $.35 1/2 higher. The weekly export sales report showed net sales of 700,600 MT were up 74 percent from the previous week and 12 percent from the prior four-week average.

Increases were primarily for China (192,600 MT), Egypt (161,900 MT), unknown destinations (128,000 MT), Taiwan (55,200 MT), Japan (52,000 MT, including 18,000 MT switched from unknown destinations), and Turkey (44,000 MT).

Decreases were reported for Mexico (22,200 MT), Spain (15,000 MT), and Guatemala (8,000 MT). Net sales of 667,000 MT for 2009/10 delivery were mainly for unknown destinations (293,500 MT), China (236,000 MT), and the United Kingdom (60,000 MT).

For the marketing year, the U.S. has now exported 1.233 bb of corn compared to 1.083 bb last year. The U.S. only needs to average 0.5 mb to reach the USDA forecast. Planting progress is has now reached 25 percent seeded, but should reach over 50 percent completed by next week. Iowa is ahead of pace at 41 percent planted with Minnesota 52 percent seeded. The Eastern Corn Belt is lagging as producers there are still trying to plant the corn crop. Illinois is only 1 percent planted with at Indiana 6 percent planted.

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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