WASDE Report Holds Few Surprises

Monday’s USDA World Agricultural Supply and Demand Estimates report held few surprises for traders, and many moved quickly to other issues like world events and economic progress.\r\n   Corn prices continued to fall as fundamental traders with long positions exited ahead of the March Stocks and Seedings report March 31, and technical traders responded to ominous signs on daily charts signaling lower prices.  \r\n   Soybeans were down with crush margins falling sharply over the last two weeks, market analysts said.  The WASDE report showed a little increase in exports for the crop year, but collapsing crush margins could limit domestic demand even more.\r\n   China also was actively cancelling Brazilian soybean orders as crush margins there wallow in red ink, analysts said.\r\n   AgResource said the cancellations in Brazil won’t help US soybean supplies directly, but the bearish demand in China could mean lower prices in Brazil and an opportunity for US imports of Brazilian soybeans or soymeal.\r\n   More importantly, “the odds are high that Friday marked important spring seasonal highs (in corn and soybeans) unless Central US spring weather becomes adverse for planting,” AgResource said.\r\n   The WASDE report was slightly bearish for wheat on increasing global ending stocks.  US stocks were left unchanged at 558 million bushels, but production in Australia and India was raised, overcoming a lower estimate of China’s wheat production.\r\n   The WASDE report cut its forecast for US red meat and poultry production as it estimated reductions in pork and poultry output would offset possible increases in beef production.\r\n   “Continued relatively large cattle placements in the first quarter are expected to result in higher slaughter in 2014,” the report said.  â€œCoupled with heavier carcass weights and higher expected first-quarter cow slaughter, the beef production forecast is raised.”\r\n   Fed steer price estimates for 2014 were raised to a range of $138 to $146 per cwt from February’s estimate of $132 to $140.  Continued tight supplies of slaughter-ready cattle and higher hog prices amid declining supplies and strong demand were cited.\r\n   The USDA left its estimate of 2014 beef imports unchanged from last month, but with higher domestic prices for red meats, it’s hard to imagine that imports would hold.  \r\n   In fact, Australia’s beef exports to the US surged 38% in February from a year ago and were up almost 10,000 tonnes from January, Australian statistics showed.\r\n   Live cattle futures remained stable Monday after Wednesday’s reversal day.  The gap on the daily chart for April futures remains open, but the market appears to be showing some indecision by traders.\r\n   As the weather warms seasonally, so too will backyard grills, and that usually means beef consumption goes up.  Whether it’s hamburger or steaks, beef and grilling are connected in the minds of most consumers.  And March and April are transition months into the grilling season, so prices and demand can waver but tend to work unevenly higher.  \r\n   Lenten season does not have the draw away from red meats toward sea food that it once did, although local retailers may remain sensitive to their specific customer bases it by offering more fish in their meat cases at the expense of space devoted to meat items.\r\n   That doesn’t mean a lot less red meat is sold.  It just results in more uncertainty.\r\n   Given that feedlot supplies of slaughter-ready cattle remain tight going into the greatest demand period of the year, some still see last week’s setback as just a little speculative profit taking and sell stops.\r\n   Cash cattle prices declined last week with average prices for fed steers and heifers ranging from $148 to $150 per cwt on a live basis, down $1 to $2 from $150 to $152 the previous week.  \r\n   The USDA reported higher boxed-beef prices Monday, with choice beef at $238.90 per cwt, up $2.88, while select was $235.99, up $3.12.  The choice/select spread narrowed to $2.91, but the number of fabricated loads sold into the spot market was only 74.\r\n   Feeder cattle moved higher Monday as corn prices declined and cash prices rose.  They remain generally higher in overnight trade.\r\n   The CME Feeder Cattle Index for the seven days ended Friday was $173.34, up $0.86 while the March futures contract closed Monday at $173.70, up $1.32.\r\n