Professional Documents
Culture Documents
DLR 08-29-11
DLR 08-29-11
Market Comments
The USDA S/D report on August 11 seemed to catch market participants by surprise when it lowered estimated corn yields to 153 bu/acre, the same level as the dismal yields of the previous year. It now appears that the damage to the corn crop has been even more significant than this lower forecast indicates. Indeed, there has been much speculation recently about the effect that high overnight temperatures had on the developing corn crop. Now we are getting some actual field observations and the results are not encouraging. Every year, Pro-Farmer sends a group of professional farmers and crop scouts along a predetermined route across the Midwest and collects samples of the maturing crop. The results of their empirical observations trickled in for much of the week, and for the most part they were worse than most expected. On Friday, the group published their final estimate of the US corn crop, pegging it at a dismal 147.9 bushels per acre, 3.3% lower than the USDA August estimates. It is still early to have a firm grasp of corn yields and the late plantings all but assure that we will not know the size of the final crop until well into October. Some late rains could benefit the crop in Ohio, Iowa and other areas and help boost yields. There are plenty of livestock and poultry producers that are hoping that the corn harvest somehow turns out better than recent dismal predictions but it is a good idea to start preparing for the worst and hope for the best. The chart to the right outlines the usual corn supply/ demand table, showing implied total production and the three primary demand channels, namely feed, ethanol production and exports. The table outlines the latest USDA estimates issued in August, which pegged corn ending stocks at 714 million bushels, or 5.4% of total use. If the Pro-farmer yields materialize, corn production could subtract another 430 million bushels from the already tight supply, pushing ending stocks to an impossible 233 million bushels or 1.8% of use. Clearly this is not going to happen, implying that corn use will have to decline further to maintain minimum pipeline supplies of around 660 mil bushels. At this time, it appears that the favorite place to look for such reductions is the feed complex, implying significant reductions in beef, pork and poultry output. Another way to alleviate the situ-
2011/12 USDA Aug Est 92.3 84.4 153.0 940 12,914 20 13,874 4,900 5,100 1,410 11,410 1,750 13,160 714 0 0 0 6.20-7.20 5.4%
2011/12 With Pro-Farm Yield Est. 92.3 84.4 147.9 940 12,483 10 13,433 4,900 5,100 1,410 11,410 1,750 13,160 12,773 where will reductions come from? Pro-farmer estimate
88.2 81.4 152.8 1,708 12,447 30 14,185 5,000 5,020 1,410 11,430 1,825 13,255 940 0 940 100 5.20-5.30 7.1%
273
660
pipeline
2.1%
5.0%
ation is for the EPA to provide a temporary waiver of the ethanol mandate. While the possibility exists, such a waiver has never been issued. In 2008, governor Perry of Texas petitioned the EPA for such a waiver but it was denied. For such a waiver to be issued, the agency needs to prove severe harm to the economy and it is unclear how the agency would arrive at such a conclusion. Finally, one can look at even lower exports but strong demand in China and other areas as well as a weaker dollar makes that a difficult challenge. The corn crop is not progressing well, and given the disconnect between current feed and meat protein prices, the livestock and poultry industry is looking at even more painful cutbacks in 2012.
The Daily Livestock Report is published by Steve Meyer and Len Steiner. Please forward to others that may benefit from this information. To subscribe/unsubscribe visit www.dailylivestockreport.com.
Disclaimer: The Daily Livestock Report is intended solely for information purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade any commodities or securities whatsoever. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures trading is not suitable for all investors, and involves the risk of loss. Past results are no indication of future performance. Futures are a leveraged investment, and because only a percentage of a contracts value is require to trade, it is possible to lose more than the amount of money initially deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyle. And only a portion of those funds should be devoted to any one trade because a trader cannot expect to profit on every trade. CME Group is the trademark of CME Group, Inc. The Globe logo, Globex and CME are trademarks of Chicago Mercantile Exchange, Inc. CBOT is the trademark of the Board of Trade of the City of Chicago. NYMEX, New York Mercantile Exchange, and ClearPort are trademarks of New York Mercantile Exchange. Inc. COMEX is a trademark of Commodity Exchange, Inc. Copyright 2011 CME Group. All rights reserved.
Page 2
Week Ending
Last Year Pct. Change 28-Aug-10 683 113 1280 778 530.0 98.97 154.88 120.51 163.79 10.85 2,121 53.1 199.0 422.2 80.50 80.20 82.92 94.99 164.3 5.48 900.1 207.4 171.7 84.73 87.21 4.733 28.15 133.2 100.42 3.81 102.50 6.15 10.50 333.30 -2.05% 12.45% -1.17% -0.51% -2.58% 14.13% 16.30% 15.18% 14.32% 23.32% -0.31% 9.07% -0.50% -0.57% 17.47% 20.59% 20.20% 9.53% -3.35% 3.47% 0.00% -6.58% -5.78% -4.14% -0.18% -2.66% 3.84% 1.07% 6.65% 97.64% 78.05% 35.93% 33.71% 8.01%
8/27/2011
2011 YTD 22,066 3,941 1,273 771 16,954 Y/Y % Change -0.1% 2.2% 0.1% 0.5% 0.4%
C A T T L E
H O G S
C H I C K E N T U R K G R A I N
* Chicken & turkey slaughter & production are 1 week earlier than the date at the top of this sheet. ** Cow and sow slaughter reflect levels from two weeks ago due to reporting lag.
Disclaimer: The Daily Livestock Report is intended solel for information purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade any commodities or securities whatsoever. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures trading is not suitable for all investors, and involves the risk of loss. Past results are no indication of future performance. Futures are aleveraged investment, and because only a percentage of a contracts value is require to trade, it is possible to lose more than the amount of money initially deposited for a futures position. Therefore, traders should only use funds that they can afford to lose without affecting their lifestyle. And only a portion of those funds should be devoted to any one trade because a trader cannot expect to profit on every trade.