Ukraine Crisis Bubbles Up Again

4-8-14 – The situation in Ukraine just won’t go away.  Authorities there say forces have retaken a regional administration building in the eastern city of Kharkiv after it was occupied by pro-Russia separatists Monday, and Russia has warned that Ukraine is in danger of sinking into civil war.\r\n\r\n   Such a prospect is not good for agricultural production or trade as populations become consumed with the conflict and could encourage traders to add risk premium to corn and wheat, although both are down in overnight trading ahead of Wednesday’s USDA crop reports.  Ending stocks are expected to be down from the March estimates on strong exports, but there are concerns the markets may have become overdone.\r\n\r\n   Russia recently annexed the Crimean peninsula after an overwhelming referendum, and some political analysts have speculated that Russia would like to annex a sliver of eastern Ukraine along its eastern border to establish a land route to the area, which holds its only warm-water naval port.\r\n\r\n   Russia has denied any such intentions, but the continued unrest in eastern Ukrainian cities may cause Russian President Vladimir Putin to rethink the issue.  He may decide to use the troops amassed along the border to “protect” ethnic Russians in these areas the way he did in Crimea.\r\n\r\n \r\n\r\nWEATHER BECOMING PRE-EMINENT FOR TRADE\r\n\r\n \r\n\r\n   Once Wednesday’s USDA reports are out of the way, traders will focus almost exclusively on Northern Hemisphere weather and crop conditions.  For the US, this mostly means anything east of the Rocky Mountains\r\n\r\n   However, California’s ongoing drought is sending cattle to other states, to feedlots or to slaughter as forage, feed and water are used up.  California’s extensive dairy industry is being threatened with severe damage.\r\n\r\n   The latest weather forecasts hold the promise of rain in California, but the state has a long way to go before ending the extreme drought.  Forecasts also offer warming temperatures and alternating bouts of rain and sunshine in the Midwest and Delta.\r\n\r\n   Such conditions likely will allow farmers to make planting progress, but how much progress will remain a subject of daily speculation based on the latest weather forecasts.\r\n\r\n   The Plains also could see some rain, but areas of exceptional drought may remain dry.  The latest National Oceanic and Atmospheric Administration Drought Monitor shows the regions where rain is most needed.  Aside from California and part of Nevada, the Texas Panhandle and western Oklahoma show the greatest stress.\r\n\r\n \r\n\r\nBEEF CUTOUT VALUES DOWN AGAIN\r\n\r\n \r\n\r\n   The USDA’s beef cutout values were down again Monday amid light demand and increased supplies from slightly improved slaughter rates the last couple of weeks. \r\n\r\n   The USDA reported its choice beef cutout value Monday was down $0.81 per cwt at $227.93 and select was down $1.38 at $215.99.  There were 85 loads of fabricated product sold into the spot market.\r\n\r\n   Slaughter Monday was 115,000 head, compared with 114,000 last week and 113,000 last year.  Slaughter rates are expected to increase into summer as fall feedlot placements come to market.\r\n\r\n   However, the number of cattle offered to packers this week was estimated to be about steady with last week.\r\n\r\n   And the cold weather may delay or even threaten cattle herd expansion plans as pastures await warmer weather to begin growing again, and northern grass remains covered with snow.  Forage and grass conditions are expected to improve in the Delta/Southeast soon, but that’s not enough for the whole country and persistent drought likely will cap western herd growth plans.\r\n\r\n   The CME Feeder Cattle Index for the seven days ended Friday was $178.42, up $0.33, while the April futures contract settled Monday at $177.50, down $0.20, pulled lower by profit taking, pressure from lean hogs and a resilient corn market.\r\n\r\n \r\n\r\nIN OUR OPINION\r\n\r\n \r\n\r\n–We hear black box funds have their sights on $177.27 to begin buying April feeder cattle.\r\n\r\n–Lower-than-expected weekend beef sales because of cold, wet conditions likely contributed to the low beef demand reported by USDA Monday.\r\n\r\n–The April/June live cattle spread is unusually wide, which is encouraging marketings now.\r\n\r\n–Sources say US beef shipments to Japan may take a hit after Japan and Australia Monday inked a trade agreement that lowers tariffs on Australian beef.\r\n\r\n