Agribusiness Weekly Update: Drought drives corn higher and pressures packers

Beef
U.S. beef packer margins averaged $77 per head last week, but had fallen to $60 by Tuesday (July 3), according to Hedgers Edge. Cattle prices have weakened as drought has forced cattle movement into feed lots earlier than normal. Feeder steers averaged $160 per hundredweight Tuesday. At the other end of the market, boxed beef values have held up rather well the past month moving through the seasonally large beef production period of the year, according to Derrell Peel, specialist at Oklahoma State University.

Hogs & Pork
Fresh pork processing margins ran in the red by roughly $6 per head last week, losses had widened to $15 by Tuesday (July 3), according to Hedgers Edge. U.S. quarterly inventory of all hogs and pigs on June 1, was 65.8 million head, up 1% from year ago. Cash hogs closed Tuesday at $62 per hundredweight. The deferred contracts fell to $96.87 for July and $94.87 for August, pressured by pre-holiday profit taking. Worsening packer margins added to pressure on the nearby contracts, according to Arkansas Farm Bureau.

Chicken
Chicken processors continue to post positive margins thanks in part to production averaging 4% below a year ago. Commercial hatcheries in the 19 state weekly program set 195 million eggs in incubators last week. This was down 2% from the eggs set a year earlier. Average hatchability for chicks hatched during the week was 85%. Broiler growers placed 168 million chicks for meat production last week. Placements were down slightly from the a year earlier, according to USDA.

Table Eggs
South central egg prices ended last week at 71 cents a dozen for medium, $1 for large and $1.08 for extra large, falling slightly from the prior week. Shell egg demand in retail and food service is light to moderate. Current supplies are light on jumbo and extra large eggs, according to the July 2, USDA report.
       
Grains
Cash corn prices finished the week $6.82 per bushel, up from $6.81 a year ago. Arkansas Farm Bureau said corn continued to rally on weather concerns and fear of what could happen to yield. A big portion of the crop is in pollination and high temperatures tend to reduce yield. Yesterday’s crop progress report peeled 8% off the good to excellent category. The crop rating for this time of year is the lowest since the major drought year of 1988. December futures made a new high Tuesday and could be headed to $7 or higher, according to Arkansas Farm Bureau.
              
Cash soybean prices closed Tuesday (July 3) at $14.89 per bushel, up from $13.76 a year ago. The July contract closed at $15.72 per bushel. August beans traded at $15.29. Soybeans closed sharply higher in a holiday shortened trading session. Strong outside market support coupled with continued concern about weather kept soybeans in a strong uptrend. November topped $14.75 and appears headed to $15 or higher. Yield estimates are declining with several around the 40 bushel level which would give U.S. crop of 3 billion bushels or so. A big purchase by unknowns suggest price will have to go higher to ration a tight supply, according to Arkansas Farm Bureau.   

Dairy
Nonfat dry milk powder production in May was 195 million pounds, up 31.4% from year ago.. Skim milk powders totaled 13.3 million pounds, down 62.7% from the prior year. In May butter production totaled 163 million pounds, 4.8% above May 2011 but 3.8% below April 2012. Total cheese output (excluding cottage cheese) was 916 million pounds, 0.4% above May 2011 and 1.4% above April 2012, according to the USDA report on July 3.
                
Ethanol
Cash ethanol prices traded at a $2.08 per gallon last week, down from $2.65 per gallon a year ago, according to USDA.  Ethanol was priced at a $1.28 per gallon discount to gasoline.