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WEEKLY UPDATE JANUARY 24, 2014

Posted by on Jan 24, 2014 in Blog, Weekly Updates | 0 comments

NORTH MOUNTAIN AG SERVICES WEEKLY UPDATE

Agricultural News:

  • Corn growers have marketing decisions to make.
  • Soybean prices continue to be a challenge for livestock producers.
  • Live cattle futures at historical highs.
  • Retailers challenged with high protein prices.

Market Updates:

  • There has been a slight increase in corn basis in many regions this past week as corn producers have dug their heels in and are not interested in selling corn in the current declining corn futures market.  While futures were firm in response to recent reports containing revised 2013 yield data, the market continues to trend lower.  For our grain producing clients, we are recommending a strategy of marketing 20% of 2013 production by the end of February.  The next layer of recommended selling will be an additional 20% by March 30.  While it may seem hard to sell corn at a discount to prices received at the bin last year, there is significant margin with sales targets in the area of $4.50 per bushel.
  • Our reports from Brazil indicate that producers expect a bumper crop as they continue to harvest across Campo Verde.  Despite these expectations, the futures market has remained firm with expectations that South American exports of beans will suffer as shipping channels are flooded with other commodities.
  • Live cattle futures are at historically high prices as the market acknowledges the short supplies that have resulted from multiple years of drought.  The spread between live cattle and lean hog prices is as wide as we have seen it.  This is important for poultry and pork marketers.  As beef packer margins suffer, the alternative proteins have an opportunity to attract consumers.
  • Nearby milk futures are trading at $21.05.  Bear in mind that Class III futures set a record high of $21.67 in August 2011.  Why the firmness in the market over the past 30 days?  As producers struggled this fall with unusually warm weather, poor silage quality had an impact on the ability to manage rations.  As the cold weather continues, we can expect cull rates to soften and heifer prices to rise.  Block cheese prices continue to trade at the highest levels since 2008, and we expect futures to find support.
  • Hog prices are firm to stronger with the June 2014 contract finding continued support above $1.02.  Right now hog producers have very attractive opportunities to lock in profitability as corn futures soften.  Over the next month, we are recommending that hog producers consider hedging their production at summer values that fall into high historical percentiles.

 

Key risk management points:   We have issued a recommendation for livestock producers to cover 25% of PA corn basis feed needs for the first quarter at $0.24 over the CBOT.  We do not recommend adding to soybean meal coverage this time.  If producers are using bakery byproduct in their rations, we are suggesting a number of alternatives that may reduce cost while not compromising quality.  Dairy production recommendations include locking in feedstuff prices for the second quarter while pricing against the February and March 2014 milk contracts.  We are targeting 25% coverage for our hog clients’ production in June and July 2014.  As always, please call for specific targets and recommendations.

Weekly Update

Posted by on Sep 23, 2013 in Blog, Weekly Updates | 0 comments

NORTH MOUNTAIN AG SERVICES WEEKLY UPDATE

Agricultural News:

  • Corn futures trending lower.
  • Soybean meal basis proving to be a challenge for livestock producers.
  • Broiler production filling in the gap left by beef in the retail sector.
  • Retail meat prices at historically high levels.

Market Updates:

  • This week’s USDA crop production report forecasts US corn production at 13.84 billion bushels in 2013.  This is an average yield of 155.3 bushels per acre.  With nearby corn futures dropping $0.17 per bushel this week, it appears traders are not being swayed by reports of dry weather in the western US.
  • The soybean complex has softened this past week as a whole, but there has been little relief for livestock producers feeding soybean meal.  With basis levels ranging from +$130 to +$150 this past week, North Mountain is still recommending that end-users limit purchases to quantities required for immediate feed needs.
  • With August 2013 feeder cattle placements down nearly 9 percent from last year, the price outlook for beef is firm.  In addition to low domestic placements, global cattle numbers are trending lower.  The critical issue is consumer spending in 2014.  Demand substitution has been a significant issue for beef processors over the past 7 months.  Both retail and food service customers proved they were willing to change their eating habits based on price.  With egg placements on the rise in the broiler industry, and corn futures trending lower, all eyes will be on the possibility of increased poultry supplies.
  • Nearby milk futures are currently trading at $18.14.  With milk futures trading sideways for close to five months, softer corn prices will be critical to improve producer profitability.  It will continue to be critical for dairy farmers to procure as much of the coming year’s feed needs as possible in order to protect input costs.
  • Hog prices remain firm as hog futures trade at a discount to cash hog values.  With retail cattle prices forecasted to be higher in 2014, traders are viewing lean hog futures as being supported in the first quarter of the year.

Key risk management points:  We have issued a recommendation for livestock producers to cover 25% of PA corn basis feed needs for the fourth quarter at $0.20 over the CBOT. We do not recommend adding to soybean meal coverage this time.  We are focusing with producers on managing distillers usage as new crop corn is anticipated in feed rations.  For hog producers, we continue to recommend beginning February lean hog coverage at $89.  As always, please call for specific targets and recommendations.

Weekly Update

Posted by on Jul 26, 2013 in Blog, Weekly Updates | 0 comments

NORTH MOUNTAIN AG SERVICES WEEKLY UPDATE

Agricultural News:

  • Field reports indicate a strong corn crop.
  • Soybean meal prices are fueled by supply questions.
  • Cattle demand continues to fall below expectations.
  • Cash hog prices strengthen in the face of weaker cutout and futures values.

Market Updates:

While analysts continue to question the impact of this year’s corn crop being later than usual, one thing is for certain- the carryout stocks to usage ratio will be extremely low by historical standards.  If carryout projections stay consistent at 700 million bushels, this will represent less than 6.5% of expected usage.  This past week North Mountain Ag did a field tour of the Midwestern US.  The great news for livestock producers is that the crop looks phenomenal.  While most areas appear to be less mature than this time last year, there were no “poor” areas recorded during the week.  While the crop will still rely on adequate moisture over the coming weeks, the futures are inclined to soften.  For corn buyers in the northeastern US, it will be important to budget a firm corn basis.  Basis is currently running +$1.75 to +$2.25 across Ohio and Pennsylvania.

While the soybean complex has softened over the past three trading sessions, there is still the potential for a great deal of volatility.  Reports from South America will be on traders’ minds as concerns abound over potential flooding south of the equator as US crop quality is still an unknown.

As cattle producers continue to “right size” their herds and the lingering effects of poor quality pasture conditions are endured, imports are being looked at closely as US exports to Asian countries have not materialized to date in 2013 as expected.  The good news for the beef industry is that record high poultry prices have softened the blow to domestic demand.  All eyes will be on slaughter numbers in the remainder of July and August as wholesale prices are flat to weaker.

Nearby milk futures are currently trading at $17.94.  To put this into perspective, it’s only $0.63 higher than four months ago.  When factoring in strong feed prices and flat retail beef demand, market prices are a core focus for producers this fall.  Managing incoming feedstuffs and balancing crop cash flow with forecasted feed demand will be critical regardless of how good corn crop yields turn out to be this fall.

PEDv concerns continue to dominate news in the hog market, as traders continue to try and figure in supply losses during each trading session.  This week cash prices have stayed firm despite pressure on futures prices and faltering cutout values.  Bellies continue to be the saving grace of the pork complex, but it is reasonable to wonder how long bellies can carry the complex.

Key risk management points:   We have issued a recommendation to cover 10% of PA corn basis feed needs for the fourth quarter at $0.35 over the CBOT.  We do not recommend adding to soybean meal coverage this time.  With higher distillers and bakery prices, it is important for livestock producers to reevaluate feed inclusion rates.  For hog producers, we continue to recommend beginning December lean hog coverage at $84.  As always, please call for specific targets and recommendations.

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