CHRISTMAS music is already playing on local radio and turkeys are piled up in the grocer's meat case. That, coupled with a handful of shuttered trading days in the coming weeks, means the holiday season is finally upon us.
The markets will be closed Thursday for Thanksgiving and will close early the following day, as per usual. A similar protocol will be in place for Christmas and New Year's Day.
These holiday-shortened weeks, and general year-end sluggishness now that the U.S. Department of Agriculture's November crop reports are on the books, typically mean lower futures trading volumes and less volatility.
Last week was certainly representative of the latter.
Corn prices closed slightly firmer last Thursday after dropping a full dime in Monday's session. Prices rebounded such that Thursday's settlement was actually a penny higher than the previous Friday's close.
Cash prices are still hovering just above $4/bu. and could firm up somewhat in the coming days.
"Basis in southern Illinois has moved to nearly 25 cents over (the futures) this week as end users are seemingly having difficulty pulling corn away from farmers intent on holding for better prices," Farm Futures analyst Paul Burgener noted late last week. "That basis strength has not moved to the western Corn Belt yet, but current basis levels are a little stronger than usual as harvest finishes up."
Burgener said it's becoming a little tougher for farmers to price corn lately because concerns persist that the marketing-year low might not be set until after the first of the year.
Meanwhile, soybean prices staged a late-week rally, rebounding last Thursday after a 30-cent drop earlier in the week. The trade might be starting to realize that USDA's projection of a 170 million bu. ending stocks figure is not exactly a wealth of beans in the pipeline.
One of the biggest challenges to the U.S. soybean market this season will be the size of the South American crop. Most forecasters have increased their projections of Brazil's crop in recent weeks, with USDA's official forecast now at 88 million metric tons.
The market is expecting Brazilian farmers to shift as much as 9% of the country's corn acreage into soybean production this season, and weather thus far has been extremely favorable to planting.
Brazilian consultancy Safras last week said soybean production could top 89.5 mmt, and AgroConsult said earlier in the month that a crop larger than 90 mmt was a distinct possibility.
Despite the tightness of the U.S. balance sheet for soybeans, a bin-busting crop from Brazil will keep a lid on global prices.
Cattle markets continued to flirt with record prices for both live cattle and feeder cattle. While the cash market did not top its recent record last week, prices held firmly above $130/cwt.
An ongoing concern for cattle feeders — just recently reintroduced to the prospect of profitability — is paying too much for feeder cattle. The smallest cattle inventory in more than 60 years is really showing up in feeder cattle prices, which have averaged more than $165/cwt. in the southern Plains for the past three weeks.
According to economists Steve Meyer and Len Steiner, the spread between feeder cattle and fed cattle has exceeded $35/cwt. every week since August. While that is not a record spread, such a spread over such a long period of time doesn't bode well for feeders' profit margins.
"The effort to keep yard utilization rates at reasonable levels has left too many bunk spaces chasing far too few cattle," Meyer and Steiner said. "The number of feeder cattle available isn't going to increase any time soon."
USDA was scheduled to release its monthly "Cattle on Feed" report last Friday, which was expected to show a 6% lower fed cattle inventory than last year, with feedlot placements during September expected to be nearly 9% larger than year-ago levels.
Prices continued to soften in the hog markets over the past week, with weighted average base prices falling another $4/cwt. from the previous Friday. Although the pace of slaughter has picked up somewhat in recent days, year-to-date slaughter (last year's Thanksgiving holiday shutdown notwithstanding) is still running nearly 1.5% behind year-ago levels.
Packers appeared to have purchased enough hogs to fill their needs for the week, and prices slipped absent more eager buying action. A key concern last week was the further erosion of the pork cutout value, which has fallen nearly $5/cwt. since the start of the month.
The drop in hog prices has pushed the hog-to-corn ratio back below 20, which signals an industry that is a little less stable, relatively speaking.
Contrast that to a steer-to-corn ratio that has improved (above 32 last week) over the course of the month, and there are some concerns developing about where the hog market is heading to close the year.
Poultry and egg prices were steady to firm last week, with chicken prices holding mostly steady and egg prices moving sharply higher.
With wing prices settling back down to a historically normal level, the whole broiler price has leveled out over the past two weeks after having dropped a couple of cents from mid-October through early November.
Egg prices jumped several cents in most regions of the country last week, with Midwest warehouse prices for large eggs up nearly a dime and now mostly $1.38-1.41/doz.
Turkey prices firmed slightly last week, but production continued to trail behind last year. Year-to-date slaughter is down nearly 3%, but heavier birds have kept ready-to-cook volumes down only 2.4%.