CME: Excellent Corn Percentage

US - CME's Daily Livestock Report for 7th July, 2008.
calendar icon 8 July 2008
clock icon 4 minute read

It did not take long for the July 4th fireworks to find their way to the CME Group grain and oilseed pits today as corn, soybean, wheat and soybean product futures were all sharply lower. The spark that lit the downward move was the release of Informa Economics’ forecast (reported by Reuters) that the national average corn yield would be 152 bushels per acre. The Informa estimate is below the long-term trend yield of 153.9 bushels but larger than the 148.9 bushel yield used by USDA in it’s July World Agricultural Supply and Demand Estimates. Moving away from the long-term trend as early as July is unusual for USDA but was, in their opinion, warranted by this years’ cool, wet spring which delayed planting and has corn crop conditions among the worst on record for this time of year. The percent of corn in good to excellent rose 1% to 62% this week.

E-Livestock Volume 7/7/08 7/4/08 6/30/08
LE (E-Live Cattle): 13,630 Holiday 11,310
GF (E-Feeder Cattle): 1,066 Holiday 510
HE (E-Lean Hogs): 12,478 Holiday 14,842

The Informa yield would give us a 2008 corn harvest of 12.002 billion bushels, compared to the June USDA forecast of 11.735 billion bushels. One has to wonder if that extra 267 million bushels is in fact enough to move this market sharply lower — especially since all of USDA’s forecasted usage numbers are arguably low. Or perhaps this weather-dependent market was simply looking for any reason to retrace.

Informa also estimates that the national average yield for soybeans will be 41.9 bushels per acre, just lower than the long-term trend yield (42.1 bushels per acre ) which USDA is still using pending objective yield measurements in July and August. It is obvious from the market’s negative reaction to the Informa number that traders had a lower yield in mind. Recall that we reported three weeks ago that ISU Extension Climatologist Dr. Elwynn Taylor had a national average bean yield of only 37 bu. per acre in early June — again due to late planting and wet conditions. Those conditions actually got WORSE but Dr. Taylor’s website says that he has not changed his “most likely” forecasts yet. He will revisit them July 15.

CME Group corn futures were $0.29 to $0.30/bushel lower. Soybean futures were $0.60 to $0.70/bushel lower and soybean meal was $13 to $20/ton lower. In case you’re curious — the reduction in corn and bean meal futures took about $2.70/cwt off the breakeven price of raising a pig.

CME Group Lean Hogs futures for next summer took a hit ($0.75 to $1.50/cwt carcass) today as well but remain near record high. The question is being posed “Just what has to occur for these $100/ cwt prices to actually happen next summer?” That answer is “Larger cutbacks in supply than are currently apparent OR substantially higher live hog demand.” The CME Lean Hogs Index was $73.47 at the expiration of this year’s June Lean Hogs contract. If hog demand is stable from this June to next, the Lean Index would have to increase by 36.2% to reach $100 next June. Using an elasticity of demand of –0.33, it would take a 12% reduction in hog supplies to cause that much of a price increase. That reduction is FAR larger than anything the June Hogs and Pigs Report would indicate — even if imports from Canada fall dramatically due to Canadian reductions and MCOOL implementation.

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