Morning Commentary

May corn down 3 ½ at $3.70

May beans down 10 ½ at $8.735

The DOW is up

USD is weaker

Crude oil up $.64 at $24

Good morning,

CORN  prices have been helped by the recent strength of both wheat and soybeans. Unfortunately, the ongoing uncertainty surrounding ethanol and just how much demand is going to be lost as some plants are forced to close following the recent collapse in margins.

SOYBEAN  bulls point to increased coronavirus concerns possibly complicating the movement of exports out of South America. There’s also continued talk of positive crush and livestock margins inside China but some crush facilities have a very limited supply of soybeans. At the same time, China is trying to rebuild its livestock inventories and looking for ways to fulfill its trade commitments with the U.S.

Cattle and beef markets have been frothy, to say the least in recent weeks. It is no surprise that the global health crisis, political, economic, and fiscal uncertainty have many traders wringing their hands for now. Apr20 LC was down four consecutive weeks and mounted its first material move higher last week as fundamentals firmed up and the cattle futures seemingly pulled themselves away from trading basis the macro signals. Cattle on feed was an afterthought last week and came in close to pre-report expectations. Cattle on feed is 11.8 million head, Feb. placements were 1.9 million and marketing’s came in at 1.7 million head. The placement weight breakdown was largely 700+ lb. cattle. Cash began last week at 105 and moved to 113 late in the week with some premiums being added by packers to support the cattle economy. For hedgers, trading cash cattle or pricing committed cattle has become challenging with futures moving limit higher and leaving little opportunity to lift paper. Producers were able to spread out of hedges or utilize options to offset today with synthetic settle ending up at 109.500 for Apr20 and 98.250 for Jun20. This week’s outlook is no doubt higher and some 185 dressed bids have already surfaced in the northern regions. Futures are set to open sharply higher tomorrow and arguably will lock limit to start the day. The extremely strong Apr20 LC basis will likely force more upside throughout the week. Short-term beef action could cool off as much of the quick ship business is likely done after the initial panic surrounding global health. Longer-term, refilling the supply line could very much support the beef markets. Potential pent up demand for late spring and early summer is hard to quantify but certainly has the potential to impress as folks, globally, get out and about for the first time in a while. The market will continue to carry a fair amount of risk going forward and volatility surrounding markets broadly is not gone. Continue to make wise business-centered decisions for yourself and your operations. Trey Warnock – Amarillo Brokerage Company

Tyson Foods is offering a one-time premium to cattle producers for all fed cattle harvested this week. In a statement, the company said it will provide cattle feeders a payment of $5 per cwt live and $7.94 per cwt dressed. R-CALF CEO Bill Bullard says this is an unprecedented move. “I don’t think this has ever happened before in our industry,” he says. “Where a packer just comes forth voluntarily and says they are going to make an adjustment in prices and pay more for cattle than they actually bid for and obtained the cattle for.” But, he tells Brownfield this doesn’t fix the larger issue. “It doesn’t make the producers whole,” he says. “Because right now, at $110 cwt, is about $10/cwt below the cost of production.  So Tyson essentially is cut the losses to producers in half.” There have been no indications if other packers will follow Tyson’s lead. Tyson Fresh Meats says without the pipeline of high-quality cattle it would not be able to meet the needs of customers and consumers and it’s imperative during this national state of emergency to support customers, but also cattle supply partners by ensuring the long-term sustainability of the beef business.

Commodity trader Louis Dreyfus Company (LDC) reported a sharp drop in 2019 profits, confirming tough conditions on agricultural markets last year while saying it had not yet seen a major impact on its business from the coronavirus crisis. Louis Dreyfus said on Monday that group net income for 2019 had fallen to $230 million from restated 2018 income of $364 million, bringing its bottom line close to a decade low of $211 million recorded in 2015. The company cited low prices along with the continuing effects of a U.S.-Chinese trade war and the swine fever epidemic in China as a drag on its results, while pointing to resilient overall performance helped by strong earnings in cotton and freight. The group said in a separate annual report that the coronavirus pandemic had not had a significant impact on its activities or performance as of March 20, but it was too early to anticipate effects on its future performance. (Source: Reuters)

Today we celebrate “National Ag Day”… I thought it was very fitting considering our current predicament and battle against coronavirus. It was back in 1973 when the Agriculture Council of American (ACA) created this day to increase the public’s awareness of the vital role of the farmer. It’s amazing when we look back at just how far we have come. I’ve included below a few interesting facts comparing the past and present. I hope you enjoy the information and I hope it spreads to those who know little about our farms but have big opinions about our lives! Keep making it happen my friends, the world needs us more than ever! (Source: Farm Bureau; John Deere Journal; USDA) 

-Massive Jump in Bushels Per Acre: Since the first National Ag Day in 1973 corn yields in the U.S. have almost doubled from 91.3 bpa to last years 176.6 bpa in 2017/18. Total U.S. corn yield (tons per acre) has increased more than +360% since 1950. Soybeans nearly doubled as well from 27.8 bpa to 50.6 bpa in 2017/18.
-Major Advances in Equipment: In the early 1900s, farm power was still animal power. Then, new machines began to displace draught animals and release vast land resources from feed production. In 1915, there were 25.5 million horses and mules on farms and some 39 million acres were devoted to oats for feed. In contrast, the horse population today is mostly for recreation and oat plantings are barely two million acres. An entirely new farm machinery industry emerged and energy sources completely changed, as well. The increases in efficiency were enormous, greatly increasing the area and output that one farmer could manage.
-Large Planting Changes: In 1950, U.S. corn acreage totaled about 82 million. That figure dropped to 59 million in the late 60s but is again around 90 million. Soybean acreage has increased from 18 million in 1950 to almost 90 million this past year. In 1950, farmers planted from 4,000 to 5,000 plants per acre. Now, that’s up to 30,000. Total corn production in 1950 totaled 2.7 billion bushels from those 82 billion acres. We are now talking about U.S. corn production reaching nearly 15 billion bushels. Soybean acreage increased from 15 million in the 1950s to almost 90 million in 2018.
-Less Feed Needed for Livestock: The pounds of feed (grain, forage, etc.) a dairy cow needs to eat to produce 100 pounds of milk has decreased by more than -40% on average in the last 40 years.
-Losing Our Farming Roots: Over 200 years ago, 90% of the U.S. population lived on farms and produced their own food to eat. But today, only 2% of the population produces food for the world to consume. The good news, of the 2.1 million farms still operating in America’s rural landscape, about 99% are operated by families – individuals, family partnerships or family corporations. Interestingly, more than 20% of all farmers are now considered beginning or early-stage farmers (those in business less than 10 -years). Women make up roughly 30% (969,672) of the total number of U.S. farm operators.
-Receiving a Smaller Percentage: U.S. farmers receive less than 15% of what U.S. consumers spend for domestically produced food, compared with 41% they were receiving back in 1950.
-Need More Help: At the moment about 10% of Americans are involved in traditional agriculture. From what I understand, each year there will be an estimated +100,000 job openings in the sector for food and agriculture science.
-Feeding the World: Each American farmer is personally responsible for feeding at least 165 people each year, compared to 1940, when one farmer could feed only 19 people.   


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