Sue Martin column: Retail beef prices at record highsActive trade developed midweek last week in Nebraska at $2 lower than the previous cash trade. This set the tone for the Plains and helped the futures to sell more into the June 1 close.
By: Sue Martin,
Active trade developed midweek last week in Nebraska at $2 lower than the previous cash trade. This set the tone for the Plains and helped the futures to sell more into the June 1 close.
After seeing major highs in the choice boxed beef, values also fell there. It's not surprising, considering the choice boxed beef had set new nine-year highs. However, the trimmings tended to stabilize and trade better. Is a sign of a boxed beef low near?
The May 31 trade volume was huge, and this, too, shows interest in the product with the recent decline. Packers have not backed off the kill, and this should indicate that the packer is friendly toward demand for the product. I look for China and Japan to become buyers of U.S. beef.
Retail prices are record high and there has been much newspaper advertising featuring beef. Retailers appear optimistic with Japan back into the U.S. market. Lower carcass weights and fewer steer and heifers have beef production down. With high price corn, cattle are not feed to the weights they were a year ago. One concern for June and July is the potential supply of Canadian imports. Furthermore, placements earlier were heavier weights. Are carcass weights at a low?
I wonder if the high cost of gasoline is taking a toll on prices when seasonally cattle tend to cheapen during June to early July? One seasonal that appears to be working is fed supplies of Canadian cattle in June appear to be up by 38 percent and July up by 55 percent. With time left for the negative seasonal, the bear's target of 88 to 89 cents seems to be coming quicker than expected. I remain friendly prices for October.
Soybeans closed May with wonderful price gains. I continue to look for the July soybean contract highs to be exceeded - perhaps, this week. November closed last week at new highs and over the previous contract high. Not bearish. The first-leg rally from last fall lows was $1.37 into November 2006 highs. The second leg into February highs was $1.39 from the January low, but shorter in time. This rally is just shy of a dollar so far. Will the length be longer in price and equal in time to the first leg?
New nine-year highs for palm oil are helping to put support under the soyoil. I look for soyoil on a lead month to trade over 42 cents. This market already has taken the 2004 highs out. Meanwhile, soymeal has made new contract highs this past week and when soyoil goes quiet, soymeal kicks in. Producers should have forward coverage on meal for the summer through August. The prices need to be watched as when soybeans exceeds 850, they tend to go to 900, but I have some short-term time indicators saying the market is near a brief correction. I recommend producers sell 30 percent of old crop soybeans in the bin. We will want to make more sales in the next 60 days. Forward cash sales of 20 percent on new crop may be in line.
It's interesting that some Agweek readers will be where corn is not planted yet or looking all that good, but a chunk of Minnesota, Iowa, two-thirds of Illinois and a large part of Nebraska all look great for corn. The season is just getting started and continual rains, while good for crops, may keep the roots from going down to find moisture. Illinois should not have this problem, but Iowa and Nebraska may. Clients in Kentucky, Alabama and Tennessee say crops are suffering from drought. Clients in southern Illinois and parts of Indiana and Ohio tell me the same thing. I look for new contract highs on the December corn. July should at least try for $4.40. Basis levels showed marked improvement. Much to the surprise of the end user, producers did not sell much. What volume of cash sales seen were mostly in the western Corn Belt, and that wasn't too good. Maybe farmers do only have 20 percent of their crops left. Hold cash corn for better prices.