To hear Brandon’s recap of today’s trade, click here.
ADEL, Iowa – The grain trade watches and waits for news from South America. Today’s market analyst is Steve Meyer, President of Paragon Economics, Inc.
Corn
There aren’t a lot of supply and demand things that are happening at the moment in North America, anyway. Of course there’s some focus on South America; some heat and such that have impacted the crop. Really I think we’re waiting to see what those harvest numbers look like in that South American crop. We’re kind of rocking along here; I think if there’s any strength that’s coming out of those there’s some questions arising on feed demand here in the United States, especially with PEDV losses on pigs, and just what that’s going to impact.
Of course, last week’s forecasts from USDA – their baseline forecasts – were pretty bearish; the futures market certainly is not reflecting those at this time, with USDA having a $3.90 or so average farm price for next year. That’s a lot of trendline kind of things, but they’ve marked acreage down about a million acres more than what I’d seen before that time, and a trendline kind of yield – we’d still end up with a very large corn crop this year.
So, a bit of a dueling thing with not a lot of real strong fundamentals at work here at this point.
Soybeans
The same kind of thing is happening on the soybean side. I mean, you’ve got kind of a wait and see what happens in South America, and we’ve seen reductions for sure, announced even by South American analysts and government agencies saying that that crop’s going to be smaller, so we’ve seen this rally on soybeans mainly because of that.
The other one is that soybeans still need acres going into the spring, and this market’s going to have to bid for those in those deferred contracts, so I think that’s really what’s kind of happening here as we get in toward planting season.
Cattle>
The cattle trade’s been a little bit hot the last couple of weeks. I mean, we sold some live cattle, I guess, at $150/cwt yesterday and you’ve got nearby futures traded at $150 and a half yesterday or this morning. Obviously the supply situations are extremely tight on fed cattle, and they’re going to stay that way at least until June or July, maybe August. We had some increase in placements last week – higher placements than what we thought – but January placements won’t be to the packing plants until at least July, in general, and so, we’re going to have very strong prices – higher than anybody expected.
Now, these cash cattle prices don’t fit with the cutout value right now, and so margin situations at packers is very, very red as of last week, so they’re probably going to put a little pressure back on those cattle prices.
Hogs
The big thing on hogs right now is how many pigs we’ve lost going into summer to PEDV. The number of cases set a record three weeks ago at 310; it backed off a little the next week. We don’t know if – you know, that’s one point, that doesn’t make a downtrend (the number of submissions at animal health labs is what those numbers were). But it certainly looks like the losses, the reductions in slaughter come July and August, are going to be substantial.
We’ve seen record highs on futures this week – we’ve got June traded at $109 and a half this morning. Probably$110, I’d say is certainly there. I don’t know if those are even high enough, given the losses we’ve had from pigs yet. And so, a huge rally there as well. Certainly no breaks forthcoming, I don’t think, in retail for pork or beef this year. The chicken business is not growing like we thought it would; they’re only going to be up about 1% on production for the first quarter. So I think consumers are going to have pretty high meat and poultry prices as we go through this year. The anticipated break in those prices was really driven by chicken and pork.
Hogs – it’s not a matter of whether they want to increase production – they’re just not going to be able to given this disease, and on the chicken side, it looks like breast meat prices have been pretty soft, and those high soybean meal prices impact chicken a lot more than they impact anybody else because their diets are more soybean meal than anyone else.
