CME: Responding to the COOL decision, lower corn yield estimates

click image to zoom A little bit about a lot of things. Sorry, but none of them are good for livestock and poultry producers:

• Soybean meal futures hit a new all-time high today with the nearby July contract hitting $457.50 per ton (a record-high high) before closing at a record-high close of $454.10. The weekly continuation chart appears at right. Both figures broke records set the week of July 11, 2008. For what it’s worth, that July contract went off the board three weeks later at $388.30, over $65/ton lower. The nearby contract was down by $100 by August 4, 2008 and went below $300/ton by the end of September 2008. None of this means this will happen in 2012 — but it underscores that things can change in a hurry if the right conditions prevail.

• Continued dry, hot weather has a number of analysts dropping their corn yield estimates rapidly. A poll conducted and published by Reuters this week pegs the 2012 yield at 153.4 bushels per acre, down 3.9 bushels or 2.5 percent in just the last week. Even more sobering, Allendale Inc. research director Rich Nelson says current July weather forecasts will push the national yield down to nearly 145 bushels per acre. That would be over 2 bushels lower than LAST year. This all comes on the heals of last week’s 8% drop in the proportion of acres rated in either good or excellent conditions. Last week’s 48% is the lowest rating for week 26 since 1988, the last widespread, severe drought in the U.S. Cornbelt.

• The United States’ lost its appeal of the World Trade Organization’s (WTO) finding that mandatory country of origin labeling (MCOOL) violates WTO trade rules. That is no surprise to many industry observers, ourselves included. The WTO Appellate Body said MCOOL provides “less favorable treatment to imported Canadian cattle and hogs than to like domestic cattle and hogs.” Specifically, the Body pointed out that MCOOL imposes recordkeeping and verification requirements that cause a disproportionate burden on upstream producers and processors of livestock relative to the information conveyed to consumers or retail meat products.

Both the National Pork Producers Council and the National Cattlemen’s Beef Association issued tactfully worded statements to the effect of “We told you so a long time ago!” Both groups fought MCOOL from its inception in the 1990s because they believed MCOOL would put our trade relationships with Canada and Mexico in jeopardy. Those fears may now be realized.

Mexico and Canada ranked 2nd and 4th, respectively, among U.S. pork export markets in terms of volume in 2011. They ranked 2nd and 3rd, respectively, in terms of pork export value. They were the top two markets, again respectively, for both volume and value for U.S. beef in 2011.

The great irony is, or course, that the owners of the vast majority of cattle and hogs in the U.S. opposed MCOOL from the -go but now face the possibility of retaliatory tariffs on their exported products. Note that we said “the owners of the vast majority of the cattle and hogs” not the majority of owners. MCOOL was a popular idea among many small producers of both species and was especially supported by many northern beef cow operators. If put to a “person” vote, the results might be interesting.

The U.S. has 15 months to get into compliance. One quandary is what to do about MCOOL relative to the WTO ruling. The best solution would be to re-write the MCOOL rules to address the issues raised by the WTO. But whether that can be done and still meet the requirements of the MCOOL enabling legislation is a matter of debate. At least one Canadian group has called for a return to the concept of substantial transformation to determine a product’s country of origin. That was the principle applied before MCOOL came along and it resulted in products derived from imported feeder and slaughter animals being considered product of the U.S.

• The Thomson Reuters/University of Michigan Index of Consumer Sentiment fell 6.1 points to 73.2 in June, its lowest level since December. To be fair, we must note that the May index of 79.3 was the HIGHEST index level since October 2007 so this decline, though large, is from a relatively high level. The Consumer Expectations and Current Conditions indexes fell by 6.5 and 5.7 points, respectively, in May meaning both contributed about equally to the decline of the overall index. Lower expectations of financial improvement among households with incomes of $75,000 or more was a primary negative factor.

1. A conversation with Dr. Jim Marsden about the safety of beef
2. Traders evening up positions ahead of the weekend Friday
3. Nearly 1,000 emaciated cattle found on N.M. ranch
4. Ag groups assisting cattle operations affected by tornado
5. NOAA: Get ready for a busy hurricane season
6. NCBA Op-Ed: ADUFA/AGDUFA reauthorization advances in the House

1. Former Eastern Livestock CEO, CFO sentenced for federal crimes
2. Post-tornado composting a solution for disposal of dead livestock
3. TSCRA works with sale barns to catch Houston cattle thief
4. Michigan hay buyers should plan purchases early
5. More beef cows in worst drought regions than a year ago
6. New animal identification rules aid disease traceability

1. Commentary: In praise of animal foods
2. Meat industry associations quick to attack the new MCOOL rule
3. Seven jobs more dangerous than farming
4. What’s on America’s grill this weekend?
5. NASA backs 3D food printer to feed growing population
6. White House urges Senate to cut crop insurance in farm bill