Agribusiness Weekly Update: Drought worsens

Beef
U.S. beef packer margins averaged $4.58 per head last week, recovering to $11.50 by Tuesday (July 24), according to Hedgers Edge. Steve Kay of Cattle Buyers Weekly said margins have declined from $77 per head during July. That loss is related more to price declines in boxed beef than live cattle prices. He said aggressive beef promotions by Wal-Mart help push stronger demand in May and June, which have now subsided. On the live side, the mid-year total cattle inventory is down 2% while the beef cow herd is down 3%. Though beef cow slaughter is down over 9% from last year, cow culling still exceeds heifer placement and the herd continues to decline, according to Derrell Peel, analyst at Oklahoma State University.                                        

Hogs & Pork
Fresh pork processing margins ran in the red by roughly $6.51 per head last week, according to Hedgers Edge. Steve Kay said hog slaughter is up 1.2% from a year ago and pork production is 1.8% ahead of last year, which is a good indication that packers aren’t losing money on average. Kay said hog supplies are tighter and rising grain costs continue to squeeze hog farmers that have been downsizing their herds accordingly.

Chicken
Chicken processors continue to post positive margins thanks in part to production discipline averaging 3 to 4% below a year ago. Broiler-type chicks placed for meat production in Arkansas were 19.2 million last week. Placements were up 1% from a year ago. Arkansas hatcheries set 19.7 million broiler-type eggs during the week. Wholesale boneless breast prices averaged $1.60 per pound last week, down from a seasonal high $1.75 per pound in June. Prices have risen 4% in the past year, according to Georgia Dock pricing. Total frozen stocks of chicken were up 1% from the previous month but down 14% from last year, according to USDA Cold Storage Report July 20.

Table Eggs
U.S. egg production totaled 7.50 billion during June, down slightly from 2011, according to USDA. Production included 6.47 billion table eggs, and 1.03 billion hatching eggs, of which 965 million were broiler-type and 68 million were egg-type. June egg production per 100 layers was 2,227 eggs, down slightly from June 2011, according to USDA report on July 23.
       
Grains
Cash corn prices traded Monday (July 24) at $8.07 per bushel, up from $7.24 a year ago. The September corn futures closed at  $7.90, corn for December delivery traded at $7.78, according to the Arkansas Farm Bureau. Corn closed lower across the board. Down the limit at one point December retraced over 30 cents to close just 7 cents lower. Crop conditions fell another 5% in Monday’s USDA report with big declines in Iowa. Rain isn’t likely to help corn as much as beans, if forecasts prove to be correct, according to Arkansas Farm Bureau analyst.  

Cash soybean prices closed Tuesday (July 24) at $16.80 per bushel, up from $13.85 a year ago. The August contract traded at $16.494, down 50 cents while November beans close at $15.69. Soybeans traded down the 70 cents limit at one point Tuesday, before retracing a portion of that decline. The market has declined well over a dollar the last two sessions with forecasts of rain and negative outside markets provided the downward impetus. Rain could help some beans, but the crop condition continues to deteriorate with the good – excellent category down another 3% to 31% in this week’s report. The big question is whether the market has topped; November would need to close below trend line support around $15.30 for confirmation, according to Arkansas Farm Bureau.

Dairy
USDA reports a milk cow herd of 9.2 million head on July 1, unchanged from a year ago. Milk replacement heifers totaled 4.1 million, down 2%. The all-milk price is forecast by USDA to average $18.00 to $18.70 per hundredweight in 2012, compared to $20.14 in 2011. In the fist half of 2012 milk prices fell from $20.14 per hundredweight to  $17.05.

Ethanol
Cash ethanol prices traded at a $2.40 per gallon last week, down  from $2.85 per gallon a year ago, according to USDA.  Ethanol was priced at an 95-cent per gallon discount to gasoline as of July 20.