Grain futures were mixed on the Chicago Board of Trade Thursday as U.S. equities made modest gains and the dollar gained against the yen.

Corn futures rose as winter weather restricted shipping in the Midwest. Wheat prices rose although the U.S. Department of Agriculture lowered its domestic use estimate by 15 million bushels.

Soybean areas of Brazil and Argentina are both expecting beneficial weather for the near future.  Routine soybean exporter purchases were augmented by crusher pricing with speculative buying also evident, according to traders.  Commercials provided much of the selling with grain companies steady sellers throughout the session.

Canola saw an active trade with intermonth spreading continuing to account for much of the volume as commercials dominated the spread trade. The outright trading volume was extremely light.  The total canola volumes were estimated at 19,630 contracts, down from earlier 22,267 contracts, including an estimated 17,226 contracts involved in the spread trade.  Canola was lower in the overnight market prompted by a firm tone in the Canadian dollar. Canola continued to see losses as the North American trading session opened, despite the fact the CBOT soy complex was higher. Canola was lower for most of the session ending with just small losses.  Canola was mainly pressured down by the weak tone in the CBOT soy complex with the firm Canadian dollar also a bearish factor.  There was little fresh news to drive the market and declines were small. Uncertainty about canola export sales to China due to Blackleg infestation maintained a bearish mood over the market.  The lack of farmer selling and firm crush margins, as international vegetable oil markets remain strong, helped to support the canola market. Also giving support was the ability of canola to hold above the C$400/metric ton level in the face of the second largest canola crop on record and the export uncertainties.  Canola climbed back to almost unchanged when the CBOT soybean market turned narrowly mixed at the close.

Retail demand is mixed nationwide. When completed wholesale trades for large and extra large are supporting existing quotations. Mediums are moving at a discount for the most part and smalls are largely unavailable.

Eggs for breaking stock are being exchanged within current ranges but offerings were decreasing as of Wednesday. This segment was quiet by midweek. In the product segment, whole egg demand was moderating. In order to keep product moving sellers were negotiating on price. Liquid white demand was rated average with a limited number of buyers showing interest. Most acquisitions were reported to be within the quoted  range they were just few in number. Liquid yolk was showing renewed interest at midweek. There was limited trade on this product also. Demand for frozen and dried product appeared to have been met through Christmas as of Wednesday. Dried whites have been booked through the first half of 2010 within current quotations.

 

The big news in the red meat world this week was the weather. Many pork plants have slowed or halted production. Tyson was the only one quoting product across the board on Wednesday and with no competition were asking up money almost across the board. Seaboard has been reporting that they are out of product. Hormel offered prices on only 3 items all at up money. Smithfield and Swift were not quoting as well on Wednesday.

Bone in butts were up $.09-$.11 on trade as of Wednesday. Bone in loins were up $.12-$.15 per pound. Picnics and hams are still scare. Cushion meat is still strong with a lot of inventory going to Asia. Tenders and back ribs are the rare exceptions as they are holding and are good value still.

Packers were reporting a positive margin of $3.64 per head on Wednesday.

 

The weather is a factor in the beef world as well. Beef production and delivery has been disrupted. Expect late trucks. Beef processors may increase production on Saturday to catch up if weather permits.

Middle Meats appear to be moving downward earlier than usual for this time of year. End cuts and grinds are mostly steady right now.

Some cattle traded at $80-$81 cwt. on Tuesday which was down $1.00-$2.00 cwt. from last week when live traded at $82.00 cwt. Some trades were reported at $78-80 cwt on Wednesday.

Packer margin was showing at a positive $4.75 per head on Wednesday. The choice/select spread was at $7.81  cwt. Weights on live cattle are still running below this time last year.    

Retail demand is good. Foodservice demand is still poor.

Inclement weather will impact delivery dates and fill rates.

 

Looking at the big picture again this week:

 

Milk output decreased over last year by 1.1% with the 5 year average being at 2.18% increase. Herd size decreased 2.3% in October compared to 2008. The 5 year average is .04%. Production per cow increased 1.2% over October of 2008. The five year average was 1.78%. The Milk Feed ratio, a good indicator of farm profitability, was at 2.19 in November which was a nice improvement but a long way from 3.00 which is the point that is consider positive for dairy market expansion. Cheddar cheese production was up 2.2% when compared to last year.  

 

On the demand side:

Cold storage inventories for American type cheese showed a 7.3% increase over Oct. ’08. Inventory decreased 2.8% from September to October. The average decrease from September to October was 3.4% over the last 5 years. The consumer price index for cheese during October increased by 1.2 points over September. The overall CPI for food increased .1 points in the same period.

 

November started with the monthly low of $1.5075 coming on 11-2. At the close of the month, 11-30, it hit the high for the month of $1.66. The block averaged $1.58 for November. 61 loads traded on the CME in November which was dead even with October. In November we saw a steady increase in pricing on the block yet movement held firm. Last Friday, 12-4, blocks closed at $1.715. The block to barrel is a whopping $.2575 lb. The spread usually widens this time of year as the demand for natural cheese is higher with the holidays. The amount of the spread and the duration of it is greater than expected however.  Market analyst are divided at this point with one group saying that the markets are now overstated especially on blocks and prices may be higher than market fundamentals would dictate. This would mean prices should adjust downwards. Others are saying the combination of reduced milk production and the potential for increased export demand will continue to strengthen prices. The consensus on the short term is that the market will weaken as we enter post holiday demand.  The spread of the block to the barrel is expected to correct with block prices coming down and barrel prices moving upward. Some combination of the two should occur.

 

For the remainder of 2009 the 40# block market is projected to average $1.29 for the year. This is up $.02 from last month. The first half of 2009 average d$1.17 Lb. with the 4^th quarter is projected to average $1.41 a lb. Projections for 2010 is that blocks will average $1.6350. The low side is projecting to $1.57 and the high side at $1.70 lb. The five year average for the block is $1.5225. Improved export demand and lower milk production equates to higher dairy prices in 2010 particularly if the export demand materializes and the spreads between U.S. and International prices are there for that to happen right now.

 

This week the block opened at $1.70 on Monday and held through Thursday. This was $.0025 higher than last week’s closing average of $1.6975. The barrel opened at $1.46 on Monday and held there through Thursday which was down $.0185 from last week’s closing price off $1.4785. Butter was at $1.45 on Monday, fell to $1.43 and held there through Thursday. The Monday through Thursday average was at $1.4350 which was down $.06 from last week’s closing average of $1.4950. Non Fat Dry Milk grade A opened at $1.4075 on Monday held there on Tuesday and dropped to $1.3850 on Wednesday. It dropped again on Thursday to $1.38. The Monday through Thursday average was at $1.395 which was $.011 below last week’s closing average of $1.406. Extra grade Non fat Dry Milk opened at $1.40 on Monday and held there through Thursday. This was dead even with last week’s closing average.

 

The majority of the complex is steady, mostly due to limited supply available across the board.  Demand is minimal for the most part and mostly hand to mouth.

WOGs and whole birds have picked up a little as we wind down the week, with majority of the interest on the retail side. 

Breasts continue to move into Canada keeping these items at market.  Breast fronts have slacked off some, but still holds steady as supply is limited.

Wings remain strong,  with product short of full needs.  Dark meat interest has increased in the last few days.  Legs and leg quarters are stronger.  Thigh meat in good shape as well.

It has not been as favorable of a year to beets as it has for other canned vegetables. No canner is reporting a budget pack of beets. Barring some major change in demand beets are expected to have limited availability. Pricing is expected to  remain at about the same level and probably increase as the year progresses.

 

Potatoes are another ground crop that was affected by all the rain. Potatoes are a crop that are able to be stored and processed later rather than going straight from the field and into the can like green beans. This allows the canner to process other crops that have a much shorter hold time like green beans. A full budget pack can’t come from storage. The size of the potatoes is also a major factor in what is available for canning. The large sizes usually go to potato chip manufacturers. This year potatoes are so far being reported as large. Indications are that this year is going to lee than budget with allocations likely to continue. All of this of course is heavily dependent on demand.

 

It looks like a very interesting year is ahead of us for  the highly demanded pintos and the theme is “buyer beware”.  Demand is still high, export pressure still persists, and crops are being reported as short; for the good stuff. Quality this year will be the driver of customer satisfaction in pintos.  Due to rain the large plentiful crop that was expected was cut short.  Quality beans were harvested and put away but it has been reported to be 20% less than was needed. In that this was expected to be a large harvest there were wet beans in the fields that were harvested and put away still wet. This will create serious quality issues all the way through the distribution channel. There will be some low pricing out there and this is why. The quality levels that the market is accustomed to seeing will demand a premium especially as the year progresses.