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Weekly Roberts Report

04 July 2008

Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were up on Monday. The JUNE’08LC contract closed at $96.725/cwt, up $1.150/cwt. AUG’08LC futures were up $1.175/cwt at $103.450/cwt.

LIVE CATTLE - June <2LCM8> off 0.375 cent at 100.600 cents per lb and August <2LCQ8> off 1.675 at 103.425 cents. June set a contract high of 101.500. August set a 1-1/2 week low.

  • The June contract expired at noon CDT (1700 GMT).
  • Profit taking after recent gains, some of it end-of-month and end-of-quarter book squaring, dragged live cattle lower.
  • Funds were sellers in the August.
  • Additional pressure from the sharply lower lean hog futures also cited.
  • Cattle futures set contract highs and an all-time record high recently in reaction to higher cash beef and cattle prices. However, traders said the gains appeared overdone.
  • Cash beef prices continued to move higher and traders expect steady-to-higher cash cattle prices this week.
  • Cattle actively traded as high as $99 per cwt in the U.S. Plains feedlot markets last week, up $3 to $5 from the previous week. Cash cattle could trade steady to $1 higher this week, some analysts said.
  • Early on Monday, USDA quoted the choice boxed beef cutout at $168.25 per cwt, up $1.39 from Friday and the highest in more than a year. The select cutout was $161.82, up $1.55.
  • USDA on Thursday reported beef export sales last week at 14,700 tonnes, with Mexico, Japan, Russia, and Canada the top buyers.
  • South Koreans continue to protest a deal to restart imports of U.S. beef. A Korean beef importer said sales of U.S. beef will resume this week.

CHICAGO (Dow Jones)--Chicago Mercantile Exchange live cattle closed sharply lower Monday on profit taking, fund liquidation and Chicago Board of Trade corn's limit tumble.

Lean hogs and pork bellies also lost ground during the session while feeder cattle finished up slightly.

Except periodic spot-June live cattle spikes driven by still robust wholesale beef demand, other beef contracts buckled under profit-taking pressure. Uneasiness about nearby-August's premium compared with spot-June, which expired at 1 p.m. EDT, deterred potential August buyers.

Also, August and October's overbought Relative Strength Index conditions hastened selling that accelerated after August slipped beneath 10-day moving average support.

Speculative longs are waiting to see if futures can regain their composure after Monday, the last trading day of the quarter. Fundamentally, cash cattle buyers and cattle owners are evaluating this week's show lists during this July 4th holiday-shortened workweek.

Live-basis fed cattle last week fetched $97 to $99.50 per hundredweight versus $94 to $96 the week before.

Weighing in cattle feeders' favor are boxed beef cutouts that continue to reflect solid retail demand just days before the upcoming holiday - a time when meat buyers typically purchase product hand-to-mouth as they pad on-hand inventories.

USDA's midday boxed beef wire on Monday showed choice beef cuts up $1.39 per hundredweight and select items rose $1.25.

Feeder cattle settled firm on short covering, CBOT corn's limit-down move and board premiums' to the CME feeder cattle index.

Spot-June live cattle settled down 37 points at 100.60 cents a pound. August closed 167 points lower at 103.42 cents.

August feeders closed up 15 points at 111.87 cents, and September ended up 27 points at 113.55 cents.

Speculative buying and expectations for a bullish Cattle-on-Feed report this Friday were supportive enough to overcome higher corn prices. Cash cattle were off Monday as USDA reported the 5-area price at $93.18/cwt, off $0.78/cwt from last week. USDA put the choice beef cutout at $157.05/cwt, up $0.62/cwt. Increased exports to other countries have taken up the slack of the South Korean markets. According to HedgersEdge.com, the average packer margin was $50.80/head vs. $37.70/head last Monday. Cash sellers should consider holding cattle until they are ready.

FEEDER CATTLE at the CME closed higher on Monday. AUG’08FC futures were up $0.500/cwt at $109.650/cwt. The SEPT’08 contract finished the day at $111.500/cwt, off $0.250/cwt.

FEEDER CATTLE - August <2FCQ8> up 0.150 cent at 111.875 cents per lb and September <2FCU8> up 0.275 at 113.550.

  • Sharply lower CBOT corn fueled buying in feeder cattle, although lower live cattle futures and the premium of feeder cattle futures to the feeder cattle index limited the advance.
  • Funds were early buyers in the October.
  • CBOT corn futures were down 30 to 35-3/4 cents per bushel late on Monday in reaction to USDA increasing its planted acreage for U.S. corn and to a bigger-than-expected grain stocks figure.
  • CME feeder cattle index for June 26 was up 45 cents at $109.53 per cwt.

Despite higher corn prices, higher live cattle futures and higher cash feeders were supportive. The CME Feeder Cattle index for June 12 was placed at $109.82/cwt, up $0.150/cwt. It might be a good idea to hold feeders if you have good pasture.

CORN on the Chicago Board of Trade (CBOT) finished limit down on Monday in response to larger-thanexpected USDA acreage report. As a result, CBOT corn futures limits will expand to the 45.0¢/bu limit for Tuesday’s trading. The JULY’08 contract finished at $7.246/bu, off 30.0¢/bu but 92.2¢/bu higher than two weeks ago. The DEC’08 contract closed at $7.570/bu, off 30.0¢/bu and 8.0¢/bu lower than Monday before last. USDA’s acreage report was bearish for corn. The report showed that U.S. farmers expected to harvest nearly 78.9 mi ac of corn from 87.3 mi planted acres, off 9% from last year but still the second largest harvest on record since 1944. USDA March estimates for corn seedings were 86.014 mi acres. Big difference! These figures will most likely undergo some adjustment because the survey was taken during the first two weeks of June before most of the flooding in the Midwest. USDA said it intends to re-survey over 9,000 affected producers during the middle of July so they can allow time for flooded fields to dry somewhat (if no more rain falls) and for producers to more fully take stock of their situation and remaining cropping options. This will give a better picture of the corn situation. In addition, it was announced today that NASS will increase the number of corn and soybean fields selected for objective field measurements. This will allow the NASS August 12 Crop Production report to contain more accurate measurements of corn and soybean yield and production. Even though corn futures were limit down, believe it or not soaring outside crude oil markets and speculative influences that did not believe the USDA report was reflective of the impact of the worst flooding in 15 years were supportive. After trading ceased on Monday, USDA put the U.S. corn crop at 61% good-toexcellent condition, up from 59% last week. USDA placed corn crop silking 6% behind the 5-year average pace of 9%. Funds sold 10,000 lots! Volume for Monday was estimated at 302,156 futures and 105,222 options. CFTC trade data issued late last Friday had large speculators cutting net bull positions for the week ended June 24. It is still a good idea to have up to 60% of the ’08 crop priced and speculate with the rest of the crop. After this bearish news there is still plenty of upside potential. Trading will most likely be very volatile as the market waits to see if the U.S. corn crop will be cut short in the next USDA assessment after the floods.

SOYBEAN futures on the Chicago Board of Trade (CBOT) surged upward on Monday based on fears that soybean stocks will fall to near record lows on USDA’s harvested acreage forecasts. USDA reported on Monday that despite recent flooding, U.S. farmers expected to harvest more than 72 mi ac vs. 74.5 mi ac planted. This is the third largest on record and up 17% from last year. Keep in mind the USDA reassessment that will take place the middle of July as stated earlier in the corn section. The JULY’08 contract finished at $16.050/bu, up 23.4¢/bu from last week and 71.0¢/bu more than two weeks ago. NOV’08 soybean futures closed at $15.74/bu, up 14.4¢/bu. Even though planted acres were up, the USDA report shows stocks at 663 mi bu vs. 676 mi bu in the June 1 report and 429 mi bu on hand one year ago. End-of-quarter positioning by large commodity funds were also supportive. Late on Monday USDA reported that U.S. soybean crop 58% in good-to-excellent condition. The market expected and received a 2% rating improvement. Volume was heavy at times with an estimated 168,250 futures and 23,186 options registered in trading. CFTC Commitment of Traders report last Friday had large speculators decreasing net bull positions in soybeans while expanding net bull positions in both soyoil and soybean meal for the week ended June 24. This action was supported by surging crude oil prices. Having up to 60% of the ’08 crop priced is still a good idea. Looks like higher soybean prices are in the offing for both the 2008 and 2009 crop. However, if the USDA survey work of July shows the soybean crop in better condition look for profit taking and lower soybean prices.

WHEAT futures in Chicago (CBOT) closed down on Monday on news of better global supplies. The JULY’08 contract closed at $8.764…434/bu, off 52.0¢/bu and 33.0¢/bu lower than Monday before last. JULY’09 wheat futures closed off 4.4¢/bu at $9.504/bu but 63.0¢/bu higher than this time last week.

CHICAGO, June 30 (Reuters) - U.S. wheat futures plunged on Monday, with Chicago Board of Trade wheat down nearly 6 percent on bearish stocks data from the U.S. Department of Agriculture coupled with harvest pressure, traders said.

  • A limit-down break in corn lent additional pressure in wheat.
  • At the CBOT, July soft red winter wheat settled down 52 cents, or 5.8 percent, at $8.43-1/2 per bushel, after hitting a two-week low at $8.39. Back months fell 35-1/2 to 53-3/4 cents.
  • Funds were net sellers of 4,000 CBOT wheat contracts. CBOT wheat volume estimated at 92,023 futures, 11,367 options.
  • At the Kansas City Board of Trade, July hard red winter wheat fell 42 cents, or 4.5 percent, to settle at $8.83 a bushel, with back months down 40 to 48-3/4 cents. KCBT volume estimated at 20,763 contracts.
  • At the Minneapolis Grain Exchange, July spring wheat closed down 37 cents at $11.75 per bushel, with most-active September down 51-3/4 at $9.50-1/2 and back months down 35 to 60 cents. MGE volume estimated at 4,839 contracts.
  • USDA reported U.S. June 1 wheat stocks at 306 million bushels, above the average trade estimate of 261 million and USDA's latest wheat ending stocks estimate of 254 million. [ID:nDAT001091]
  • USDA plantings data viewed neutral; USDA pegged 2008 U.S. all-wheat plantings at 63.457 million acres, slightly below March intentions estimate of 63.803 million. [ID:nDAT001088]
  • USDA reported export inspections of U.S. wheat in the latest week at 15.003 million bushels.
  • Drier weather early this week to boost U.S. Plains wheat harvest; wet weather later in week a concern. [ID:nDTN034]
  • After the close, Egypt issued a snap tender seeking 55,000 to 60,000 tonnes of optional-origin wheat for shipment July 23-31 and/or Aug. 1-10. Results expected on Tuesday.
  • Jordan tendered to buy 100,000 tonnes hard wheat [ID:nSP320770]; Bangladesh tendered to import 100,000 tonnes wheat. [ID:nDHA74546]
  • After the close, USDA said the U.S. winter wheat harvest was 36 percent complete by Sunday, up from 22 percent a week earlier but behind the five-year average of 48 percent.
  • USDA said 74 percent of the U.S. spring wheat crop was rated good to excellent, up from 72 percent the previous week.
  • CBOT July deliveries light at 29 lots, well below estimates for 2,000-5,000. [ID:nN30241496] [ID:nN27453075]
  • CFTC's supplement report on Friday showed large speculators cut their net short position in CBOT wheat to 23,304 contracts in the week ended June 24, down 2,800 lots.

WHEAT TENDER: The Egyptian state's main wheat buying agency said on Monday it wanted to buy 55,000 to 60,000 tonnes of optional-origin wheat for shipment July 23-31 and/or Aug. 1-10. Egypt's General Authority for Supply Commodities (GASC) was widening its options due to high prices by adding Ukraine wheat to the origins sought, said U.S. traders. Tenders should reach GASC by 12 p.m. local time (0900 GMT) on Tuesday and the results should come out around 4:30 p.m. local time (1330 GMT) on the same day. Wheat bids should be free-on-board (FOB).

Said el-Hefny, vice chairman of GASC, said the wheat should be U.S. North Pacific soft white wheat, U.S. hard red wheat, U.S. soft red winter wheat, French milling wheat, Australian standard white wheat, Australian hard wheat, German milling wheat, Canadian soft wheat, Argentine bread wheat or Kazakhstan milling wheat.

GASC was also seeking 30,000 to 60,000 tonnes of Russian wheat, UK milling wheat (ukp or uks variety), Syrian wheat or Ukraine milling wheat.

SUNOIL TENDER: Egypt's state-owned Holding Company for Food Industries (HCFI) will retender on Wednesday to buy 10,000 to 15,000 tonnes of optional-origin sunflower seed oil for arrival in the last half of August, U.S. traders said Monday. Bids are due Wednesday noon Cairo time. Egypt's HCFI passed on a tender for the same amount on June 25 with U.S. traders saying they wanted to wait amid declining vegetable oils prices.

WHEAT TENDER: Jordan has tendered to purchase 100,000 tonnes of hard wheat from optional origins, European traders said on Sunday. Half is for shipment in the second half of August and half in the first half of September. Bidding deadline is July 8.

WHEAT TENDER: Bangladesh has issued a tender to import 100,000 tonnes of wheat by September to boost its emergency food stocks, officials said on Monday. The tender, issued by the Food and Disaster Management Ministry, will close on July 14 and will run until August 3, for shipment within 30 days of the date of signing the contract.

The tender price has to be quoted separately for the country's Chittagong and Mongla ports, based on the cost of cargo, insurance and freight including stevedoring on the seller's account, at both ends of shipment. The minimum quantity to be offered is 25,000 tonnes, the officials said.

Profit taking, seasonal harvest pressure and weakening crude oil futures were not supportive of prices while soaring corn encouraged the buying of $8.00/bu wheat for feed. Wheat-inspected-for-export did not meet expectations coming in at 14.655 mi bu vs. estimates for between 15-20 mi bu. Iran will reportedly tender for 50,000 tonnes (1.8 mi bu) while Algeria bought 400,000 tonnes (14.7 mi bu). USDA placed the U.S. winter wheat harvest at 16% complete compared to the 5-year average of 19%. The U.S. winter wheat crop was rated 47% good-to-excellent condition while the U.S. spring wheat crop was placed in 67% good-to-excellent condition vs. a 63% rating last week. Supporting prices was news that Australia wheat is now estimated to harvest 24.3 mi tones (892.9 mi bu) or 3.2% lower than expected. Funds bought over 1,000 lots of CBOT futures amid a somewhat heavy volume of 92,297 futures and 12,212 options. The supplement to Friday’s CFTC Commitment of Traders report had large speculators increasing net bear positions by 2,000 contracts to 30,285 lots. If you haven’t sold the entire 2008 wheat crop by now it is a good idea to get it sold.

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