On March 18, the USDA released the March Cattle on Feed Report. The report was not expected to produce any fireworks within the cattle industry and the report lived up to those expectations.
On feed supplies continue to be large, however strong demand trends have been able to keep cash trade and futures at or near record high levels. If the demand would begin to weaken, as feared with the earthquake in Japan, cattle prices would appear overvalued.
The report indicated cattle and calves on feed for slaughter market in the United States for feedlots with capacity of 1,000 or more head totaled 11.4 million head on March 1. The inventory was 5 percent above March 1, 2010.
Placements in feedlots during February totaled 1.66 million, 1 percent below 2010. Net placements were 1.60 million head. During February, placements of cattle and calves weighing less than 600 pounds were 400,000, 600-699 pounds were 365,000, 700-799 pounds were 489,000, and 800 pounds and greater were 410,000.
Marketings of fed cattle during February totaled 1.79 million, 4 percent above 2010.
Other disappearance totaled 60,000 during February, 12 percent below 2010.
The bottom line for the report is this information will not change or directly impact the direction of the cattle industry. (For a state-by-state chart of the report see page 2B.)
Corn closed the week $.19 1/4 higher. Last week, private exporters reported a 116,000 metric tons of corn to an unknown destination. The weekly export sales report showed net sales of 1.036 million metric tons were up noticeably from the previous week and up 1 percent from the prior four-week average.
Increases were reported for Japan (455,700 MT, including 48,200 MT switched from unknown destinations and decreases of 7,100 MT), Taiwan (195,000 MT), Mexico (178,500 MT), Indonesia (125,100 MT, including 125,000 MT switched from unknown destinations and decreases of 3,000 MT), Egypt (99,000 MT, including 30,000 MT switched from unknown destinations), and South Korea (49,300 MT).
Net sales of 300,800 MT for delivery in 2011/2012 were for Mexico (169,000 MT), unknown destinations (76,200 MT) and Japan (55,600 MT). Optional origin sales were reported for Mexico (56,000 MT).
This year’s net export profile is now at 1.397 billion bushels versus the USDA forecast of 1.950 bb.
Strategy and outlook: Only limited selling is expected from now until more is known about the 2011 growing season of both old and new crop inventories.
Producers are now sold/hedged on 80 percent of the 2010 crop and re-owned 35 percent of sales/hedges with at-the-money May call options after rolling up March $5.20 calls. Producers should have 30 percent of new crop production sold. Make another old and new crop 10 percent sale at $7.59.
Soybeans closed the week $.28 higher from last week. Last week, private exporters did not report any private sales. NOPA February soybean crush was reported at 124.9 million bushels, sharply below market expectations of 131.8 million, down nearly 20 million bushels from last month’s 144.6 million, and down 16 percent from last year’s 148.4 million.
Weak crush margins and meal demand, combined with historically high soybean oil stocks, have resulted in a weakening crush situation. The range of ideas for February NOPA crush were 129.0 to 136.4 million bushels.
The weekly export sales report showed net sales of 146,800 MT were down 64 percent from the previous week and 59 percent from the prior four-week average. Increases were reported for the Netherlands (77,100 MT, including 70,000 MT switched from unknown destinations), Egypt (52,900 MT), Japan (26,400 MT), Mexico (23,500 MT), and Taiwan (9,600 MT).
Net sales of 67,700 MT for delivery in 2011/2012 were mainly for China (60,000 MT). Exports of 838,700 MT were up 15 percent from the previous week.
This year’s export pace stands at 1.468 BBC versus the USDA forecast of 1.590 bb.
Strategy and outlook: Only limited U.S. selling is expected from now until more is known about the 2011 growing season of both old and new crop inventories. South American producers will become active hedgers if forecasts turn wetter.
Producers have sold/hedged 70 percent of the 2010 crop and re-owned 35 percent of sales/hedges with at-the-money May call options after rolling up March calls.
Producers should have 30 percent of new crop production sold. Make another 10 percent sale of old and new crop at $14.85.
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.