Feedlots are liable to see their feed costs hold relatively stable for the foreseeable future as corn prices rattle around in a sideways pattern, a prominent agricultural economist wrote.
Darrel Good, agricultural economist at the University of Illinois, said, “A broad sideways pattern (for corn prices) is expected to continue through the winter months. A test of the high side of the price range will likely require a threat on the supply side, either in South America this year or the US next year.”
Good pointed out that Mar 2016 corn futures have traded in a sideways pattern, with a range of about $0.95 per bushel over the last year. The range narrowed to about $0.40 over the past four months, and to about $0.15 over the last three weeks. Prices currently are near the low point of this range.
MARKET LACKS BULLISH SURPRISES
The corn market has been relatively uneventful since the beginning of the 2015-2016 crop year on Sep. 1. There were no surprises to either supply or demand as the US harvest progressed with few speed bumps and other exporting countries continually undercut US export prices, Good said.
Corn futures traders had to content themselves with the latest rumor about export or domestic demand while all the time corn was coming out of the fields. Basis levels have risen over the last few weeks as farmers store grain rather than sell it, but market advisors are telling farmers to watch for rallies to sell, so price gains may be capped quickly.
Market expectations about this year’s crop size have varied, USDA forecasts have been stable, he said. The USDA’s 2015 yield forecast, at 168 bushels per acre is little changed from its initial forecast of 168.8 bushels in August after dropping to 167.5 bushels in September.
The US’ corn production forecast declined by only 131 million bushels from August to October, slightly less than 1%.
New yield and production forecasts are scheduled for Nov. 10, and changes from the October numbers are expected to be modest, Good said.
EXPORTS SEEN DISAPPOINTING
If corn farmers are looking to export markets for support, they’re liable to be disappointed, just as they have been all year. For the current marketing year, the USDA projects US corn exports at 1.85 billion bushels, only slightly less than the 1.864 billion bushels shipped out last year.
But for the marketing year to date, total exports have only amounted to 206 million bushels, down from 270 million over the same period last year. As of Oct. 22, export commitments (shipments plus unshipped sales) amounted to 496 million bushels, compared with 738 million on the same date last year.
While early export commitments vary greatly, early year figures often aren’t a good indicator of how the year will go, Good said. Still, the slow start and ongoing South American competition don’t bode well for corn farmers.
Still, ethanol production is up, which will consume more corn with September and the first three weeks of October up about 5%, helping to gird up prices.
Feed/residual corn use was projected by the USDA at 5.275 billion bushels, only slightly less than last year.
CASH FED CATTLE MARKETS UNTRADED
Cash fed cattle markets remain untraded this week, with some projecting trades as much as $2 per cwt higher. No bids have been reported, although asking prices were pinned around $142.
Cash action last week, at mostly $138 per cwt on a live basis with some up to $139, was up from $136 to $138 the week before. Dressed-basis trade was reported at $206 to mostly $208 and up to $210, compared with $206 to $209 a week earlier.
Wholesale beef prices Tuesday were lower, with the USDA choice cutout value at $218.40 per cwt, down $1.21 on the day, and its select cutout at $210.32, off $2.20.
The choice/select spread widened to $8.08 from $7.09 on Monday, and there were 75 loads of fabricated product sold into the spot market.
The CME Feeder Cattle Index for the seven days ended Monday was $192.84 per cwt, down $0.40. This compares with the Nov settlement Tuesday of $190.65, down $1.62.