Ethanol’s return to profitability should rescue coarse grains from what appeared to be a burdensome supply, says a Winnipeg crop analyst.
World coarse grain crop estimates rose since May mainly because of growing U.S. corn forecasts, which gained 20 million tonnes between seeding and harvest.
Mounting supply pressured prices lower during the growing season but they’ve risen since September because of an improving global economy and rising oil prices that ushered in a return to profitability in the U.S. ethanol sector.
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Ethanol plants are big buyers of corn, a crop that sets the overall price tone for grain markets.
“The expensive gasoline and expensive crude oil that you don’t particularly like because you fuel your equipment with it has been very good for the grain demand,” Marlene Boersch, managing partner of Mercantile Consulting Venture Inc., told farmers attending Agri-Trend’s 2009 Farm Forum Event.
A factor that might confuse grain markets is the influence of investment funds, which have expressed a renewed interest in commodities.
They can create befuddling day-to-day variability in prices of the major crops. Soybean futures recently jumped 20 cents US per bushel in one day because of fund activity.
Boersch advised growers to focus on long-term sales targets and to ignore the confusing noise caused by such sporadic activity.
Dave Reimann, vice-president of Informa Economics, said fund money could evaporate as fast as it appeared if interest rates rise or the stock market shows sign of sustained growth.
He is not convinced the global economy has fully recovered. Commodity prices are strengthening, but there hasn’t been the job creation needed to stimulate demand. Consumers are saving money, not spending it, he added.
“I don’t know if the shoe is completely finished dropping yet,” Reimann said during a speech at the Balancing the Bottom Line conference.
He advised growers to pick target prices that can assure a profit and quit second guessing the market’s daily ups and downs.
To do that, he said, a grower must know his cost of production. A recent survey showed 80 percent of U.S. farmers still don’t know that number.
If growers know their costs down to the penny, they are better positioned to forward price their product and avoid the stress caused by market fluctuations, bin space constraints and cash flow needs.
U.S. hog cash prices were steady last week, supported by Thanksgiving demand.
The U.S. weekly sow kill to Nov. 7 was down 0.4 percent from the year ago level. Analysts say the sow herd must shrink to bring supply and demand in line and lift prices.
U.S. slaughter pigs are heavier than last year, weighing 273 pounds live two weeks ago compared to 271 lb. a year ago.
Iowa-southern Minnesota cash hogs delivered to plants were steady at $38.50-$39 US per hundredweight Nov. 20.
The U.S. pork carcass cut-out value fell midweek but closed at 58.21 Nov. 20, up from $57.38 Nov. 13.
U.S. federal slaughter to Nov. 21 was estimated at 2.32 million, down slightly from 2.29 million the previous week.
The Canadian Bison Association said younger than 30 month grade A youthful bulls in the desirable weight range in Canada dipped at the low end of the range to $2.25-$2.60 Cdn per lb. hot hanging weight.
Younger than 30 month grade A youthful heifers were also weaker at the low end at $2.15-$2.45 per lb.
Older than 30 month bulls and heifers were 10 to 15 cents lower than their younger counterparts.
Cull cows and bulls sold from $1.35 to $1.60 per lb.
Weight, quality, age and delivery location affect final price.
The sheep report is on page 66.
This cattle market information is selected from the weekly report from Canfax, a division of the Canadian Cattlemen’s Association. More market information, analysis and statistics are available by becoming a Canfax subscriber by calling 403-275-5110 or at www.canfax.ca.
Weak beef demand pressured fed cattle lower.
The Canfax weighted average price for steers was $77.25 per hundredweight, down 45 cents from the week before, while heifers fell 75 cents to average $77.10.
Dressed prices were $1.25-$1.90 lower.
American packers bought Canadian cattle. Bids were generally low, but they will kill cattle sooner than Alberta packers.
Delayed delivery is a contentious issue in Canada.
Volume rose 10 percent from the week before, totalling about 14,000 head, but there was carryover.
The cash to futures basis weakened to $11.61 under compared to $9.64 under the week before.
Weekly fed exports to the United States to Nov. 7 totalled 11,193 head, down 16 percent.
That was down 12 percent from last year.
Beef demand is expected to improve following American Thanksgiving, but fed supplies will likely increase.
The fed price slump has pushed front-end fed cattle back, leading to an increased volume of market-ready cattle in December when more summer-placed yearlings will hit market weight.
Steer and heifer feeder price averages fell about $1.10.
Auction volumes totalled 68,734, down 23 percent from the week before but up 10 percent from last year.
Feeder cattle exports to the U.S. to Nov. 7 were 2,783 head, down from 4,313 the week before and 9,446 last year.
Auction volumes should fall as Christmas approaches. Lower fed prices could pressure feeder prices lower.
Quality bred heifers were $800 to $1,150, averaging $950. Bred cows dipped to $350 to $800, averaging $602.50.
D1, D2 cows were $27-$42.50, down 28 cents, while D3 cows were $22-$36, down 74 cents.
Strong demand for trim in the U.S. supported cow prices.
Weekly cow slaughter to Nov. 14 was 15,412 in Canada and 12,158 in Alberta.
Butcher bulls rose 35 cents to average $44.97. USDA reports weekly non-fed slaughter exports to Nov. 7 rose three percent.
U.S. Choice cutouts rose 30 cents US to close at $139.61 per cwt. and Select fell $1.30 to $132.07.
Choice is $18.18 lower than this week last year and Select cuts traded $14.08 lower.
Canadian AAA weekly cutouts to Nov. 13 fell $1.14 Cdn to $142.68. They were $39.01, or 21 percent lower than last year. AA cutouts fell 51 cents to $145.59. That was down $29 from last year.
The Montreal wholesale price for delivery this week plunged $5 to $158-$164.
The Alberta live steer price was 52.06 percent of the choice cutout, down 0.8 percent from the week before.
The number of cattle in U.S. feedlots Nov. 1 was 11.134 million, up about 1.5 percent from last year’s low supply, but still low historically because the weak economy has hurt beef demand.
The U.S. Department of Agriculture said October placements rose one percent from last year, which is less than the trade’s average estimate, but many were in the heavier weight categories.
GREENPEACE’S European campaign against genetically modified crops has hurt Canadian farmers. The organization pressured European authorities to test Canadian flax for the presence of unauthorized genetically altered seed and pressured mustard processors to avoid Canadian mustard seed.
Greenpeace got what it wanted in the Triffid flax situation, a trumped up “scandal” to rail against, to frighten consumers about the alleged dangers of GM crops and inadequate government regulation and oversight.
Canadian farmers got what they didn’t want, market disruption, lower prices and a costly new flax testing system.
But they might take hope in signs that European obstacles to trade in GM crops are eroding and Greenpeace’s anti-GM campaign will eventually fail.
Contributing to the erosion are alterations in European Union structure, changes in consumer attitudes and development of new traits in GM crops.
For several years, the European Commission has been approving GM crop varieties for importation. It is a bureaucratic process, but the list of approved varieties is slowly growing.
While certain European countries maintain bans, the European Commission, the bloc’s executive arm that is less swayed by domestic political pressure, has shown a more open attitude and willingness to follow the recommendations of the bloc’s food safety agency, which has looked at GM crop varieties and determined them safe.
EU agriculture commissioner Mariann Fischer Boel has argued against blanket GM restrictions, such as the bloc’s zero tolerance policy that rejects grain shipments if they contain minute quantities of unapproved GM grain, because they drive up feed costs and damage Europe’s livestock sector.
This more practical attitude might gain more traction since ratification of the Lisbon Treaty, an update to the EU constitution that promises to streamline the way Europe runs its affairs.
Public opinion also appears to be changing, signalling that if government allows GM products to be sold, there will be a level of consumer acceptance.
A majority of Europeans are still wary of GM foods, but the numbers of decided opponents are falling. A regular survey of European attitudes showed that 27 percent had a positive attitude to GM food in 2005, up from 21 percent in 2002. A poll in Britain showed that about half of people believe the technology can be a way to combat global food shortages.
Surveys in countries that allowed GM foods on store shelves showed that most shoppers did not actively avoid GM products and most did not check labels to see if food was non-GM.
Polls also show consumers want more information about GM foods and the more they know, the likelier it is they will accept them, particularly if it can be shown they benefit the environment or consumer health.
Health issues will be addressed by the new wave of GM crop varieties that have traits associated with nutrition.
For example, Monsanto has developed a soybean that produces oil containing omega-3 fatty acids, similar to those in fish and flax oil, that are believed to improve heart and brain health. New Scientist Magazine reports that BASF is developing GM canola that will deliver similar oil.
There is also golden rice, a high beta-carotene grain that could help alleviate widespread vitamin A deficiency in Asia that leads to blindness.
With these developments in European government, evolving consumer attitudes and more healthy GM products, it will be harder for environmental groups to successfully campaign against them.
We hope their recent efforts, though costly to Canadian farmers today, will prove to be their last hurrah.
