June 3, 2019
Behind-schedule corn planting last week began to weigh on feeder cattle prices.
USDA-National Agricultural Statistical Service (NASS) reported that as of May 26, 58% of the intended corn plantings had been completed. This compares with 90% average for this date in the prior five years. Last year, 92% of the crop had been planted by this time. Corn plantings last year totaled 89.1 million acres, so the 92% completion mark calculates to 82.0 million acres planted as of late May in 2018.
In March, USDA-NASS surveyed farmers, and based on that data collection effort, estimated that farmers would plant 92.8 million acres. The 58% planting progress reported for the end of last week implies that only 53.8 million acres of corn have been planted through the end of last week, a 28-million-acre decline from a year ago.
The Daily Livestock Report, sponsored by the Chicago Mercantile Exchange, said at the end of last week that market conversation was being dominated by the question of how many acres will be planted to corn and whether it will even be as much as last year. Less supply via fewer acres planted and less corn production would result in higher prices to ration the reduced supply, of course.
Corn prices reacted quickly to the report. On a Thursday-to-Thursday week, July futures climbed 46 cents to $4.36 per bushel. New crop (December) corn prices increased 44 cents, not exactly consistent with the issue that the change in supply is associated with next year’s crop. Out in cattle feeding-land, cash corn prices in the Texas Panhandle were up 47 cents. In the western Corn Belt, where and hogs and cattle are fed in numbers, Omaha corn prices mirrored the increase in the new crop futures with a 44-cent gain.
These are the highest cash corn prices since the last week in June of 2014, the analysts noted. The situation should change likelihood of feeding more wheat this year, thereby affecting the generally weak wheat market.
Further, the analysts noted, new-crop corn futures are on track to average above $4.40, which would be the most expensive weekly price since mid-June 2016.
The feeder cattle futures market did not show vulnerability to the corn price action until Thursday. The August feeder cattle contract dropped a dollar on Tuesday, regained half of it back on Wednesday and then fell $4.50 on Thursday. The loss was close to $5 per hundredweight from a week earlier. The Friday market was pummeled another $4.50 to $133.70. Cash trade during the prior two weeks was starting to look healthier following the debacle of late April and early May when prices dropped 10% in the Southern Plains. Southern Plains yearling steer prices had posted two weeks of gains, albeit modest, but this week saw it all slip away. Medium and large frame No. 1 steers weighing 700-800 pounds in Kansas and Oklahoma were $3 lower than the previous week, the lowest price since mid-May of last year.
Live cattle prices held steady most of the week. The Five Area live steer average price was in the $115-118 range for most of the week, compared to $115.78 in the prior week. Prices had declined for five consecutive weeks. Live cattle futures were steady to slightly higher until Thursday, when the specter of government policies on international trade intersected with immigration policies.
The situation bears watching for marketing decisions and opportunities.
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