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| Corn Corn prices remain range-bound in the $2.60s. The supply side of the equation is quite impressive, with a 2.4 billion-bushel ending stocks figure. Also, Argentina looks to be producing a good crop this spring. The demand side, however, is what is most uncertain. While USDA has pegged an ever-increasing consumption figure of 1.6 billion bushels in for the booming ethanol industry, feed demand looks a bit uncertain globally as the market tries to figure out how the avian flu will impact usage. Each new case in Asia and Europe seems to frighten the market, but strong buying by hedge funds has supported prices thus far. And it is unlikely that the funds will exit their long positions any time soon, as they generally allocate a certain percentage of their portfolio into commodities and don’t appear to be interested in selling off their positions. Attention is already turning to U.S. weather, as the south and west have been fairly dry. With minimal subsoil moisture reserves, good spring rains will be needed to get the new crop out of the ground in good shape. Local supplies remain fairly plentiful, and as a result, the basis remains under the historical average. However, replacement rail corn is still running higher than it should due to increased fuel and freight rates.
The soy market was fairly quiet during February. The dominant news item of course is the South American crop, which at this point looks good, coming in a bit larger than last year’s crop. Some analysts expect their output will eventually come in lower than expected, but continued good rains are helping finish it off in good shape. Harvest is already about 25% complete. Also weighing on prices is the fear of how avian flu could hurt soy demand. As with corn, the market will watch developments closely. A significant cull overseas could have a significant impact on prices. But for now, the market will focus on the South American harvest and the upcoming U.S. planting season.
Large markets in February started at $.68 and ended at $0.72, a 4 cent increase. The average price for February decreased to $.6495, a loss of over 16 cents from January. The breaker market Hi-side started at $.28 and fell to $.26, which gave a $.2680 breaker average for the month. The large-medium spread more than doubled in February going from a 7 cent spread in the beginning to a 15 cent spread at the end of the month. This was a difficult month to move eggs, especially in the first half of the month. The market fell fast in the beginning losing 5 cents very quickly and then gradually increasing due to end of the month features. Brown eggs continue to be long with eggs moving into breaker markets. The brown market has lost 1/3 of its value since the beginning of the year, going from a $1.12 market January 1st to a $.70 market at the end of February.
Broiler chicks hatched during January 2006 were up 1% from January 2005. The chicken market continues flat with neither seller nor buyer pushed to make a move. Orders are extremely slow with buyers tending to be picky closing out the month. Supplies in general are adequate. Lower asking levels were recorded in a wide range of discounts in the latest market quotations. For the month, 3 lb. and up N.E. yellow whole birds averaged almost 54 cents, the same as January 06 prices. Boneless-skinless breasts averaged $1.20 in February over 6 cents above January 06 prices.
Poults placed during January 2006 were up a big 11% from the number placed during the same month a year ago. For now, the breast meat complex is showing more strength than expected. Product is fairly well cleared. Along with continued low freezer stocks, processor confidence is reasonable high. Steady well supported prices are reflected in the market. Both 12 pound hens and 24 pound toms averaged 66 cents in February, both down 2.38 cents from January 06. 14-16 pound breast meat held steady at $1.70.
Hog markets in February increased for most of the month with a slight decline at the end. The market started at $.4034 and finished at $.4586 with a monthly average of $.4437, about 4 cents above January’s average. The futures also had modest gains for all the months quoted. According to Informa Economics, so far this year we have seen two distinct markets, a January market characterized by larger-than-expected supplies and weak demand for pork products, followed by a February market characterized by tight supplies, good product interest and higher prices. They also noted that the market increases in February produce more questions than answers as far as the outlook for the remainder of 2006.
Updated March 13, 2006
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