25 March 2009

6 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished higher Monday. APR’09LC futures closed at $85.950/cwt; up $0.75/cwt. The AUG’09LC contract was up $0.325/cwt at $84.400/cwt and $1.400/cwt over a week ago. USDA’s Cattle on Feed report issued last Friday showed lighter-than-expected February placements and feedlot supplies at their lowest levels in four years. Fund buying on strong DOW performance and rising crude oil prices was supportive. The USDA report put 11.228 mi head in feedlots as of March 1. This was 95% of one-year-ago totals and the smallest supply for this time of year since 2005. Cash cattle strengthened in many markets from $2-$3/cwt as USDA put the 5-area average at $82.90/cwt on Monday. USDA on Monday put Choice Boxed beef at $135.09/cwt; up $1.90/cwt. Packers continue to have a hard time finding profitable margins. There are news reports of slowing processing lines soon. According to HedgersEdge.com average packer margins were placed at a negative $42.55/head based on the average buy of $81.35/cwt vs. the average breakeven of $78.14/cwt. Feed buyers should hold off on purchases at this time as current corn prices have a good chance of deflating.

FEEDER CATTLE at the CME closed up on Monday. The APR’09FC contract closed at $94.000 /cwt; up $0.750cwt and $1.950/cwt over last Monday’s close. AUG’09FC futures finished at $99.175/cwt; up $0.950/cwt. Gains in live cattle, bullish momentum from last Friday’s bullish report, short covering, and technical buy stops were supportive. Spreaders bought May and sold March ahead of the expiry date for that contract on March 26. Action by the federal government lowering interest rates and reports of the toxic-assets support plan encouraged feeder cattle buyers seeking credit for purchases in the cash market. A couple of floor sources reported higher cash prices early Monday in Oklahoma City on top of last week’s gains of $1-$3/cwt. The CME Feeder Cattle Index for March 19 was placed at $92.99/cwt; up $0.28/cwt. Hold off on buying feed for a week or two if you can. If you can’t, buy only very short-term needs.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. MAY’09 corn futures closed at $3.954/bu; off 1.0¢/bu but 3.0+¢/bu higher than this time last week. The JULY’09 contract closed at $4.060/bu; down 1.0¢/bu but 4.25¢/bu higher than last Monday. DEC’09 corn futures finished at $4.272/bu; off 0.75¢/bu but up 5.75¢/bu over a week ago. After reaching highs not seen in over 8 weeks farmer selling picked up and knocked the wind out of the price run up. Federal action continues to affect all markets while sending the U.S. stock market soaring. Exports remain lack luster coming in at 29.984 mi bu vs. 47.727 mi bu this time last year. USDA did confirm the sale of 110,000 tones (4.3 mi bu) of ‘08/’09 U.S. corn to South Korea. Some weather concerns were noted regarding delayed planting due to cool, wet weather slowing fieldwork. Farmer-hedge sales pressured futures to below chart support levels as sell-stops under $4.00/bu in May futures were noted. Higher crude oil prices were supportive. Cash corn bids in the U.S. Midwest were steady to firm on Monday. In the U.S. Mid-Atlantic states cash corn prices were 2.0-5.0¢/bu lower than previous bids. Ethanol margins narrowed on rising corn prices. Funds bought over 2,000 contracts as large speculators turned net bullish for the first time in a while. The market is still very jittery. One floor source said it best, “If we get a big jump this week, people are going to take the money while it lasts. It’s very risky at this time.” The time to get your old crop corn sold is NOW as this sales window is not expected to last. It is a very good idea to get the ’09 crop priced to 45% if you haven’t done so already. Feed purchasers should wait at least another week or two to buy.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were up on Monday on a soaring stock market and higher crude oil prices. Questions remain whether or not the rally is sustainable or merely a blip. MAY’09 soybean futures closed at $9.554/bu; up 3.5¢/bu and 44.5¢/bu over this time last week. The JULY’09 contract was up 3.0¢/bu at $9.520/bu and 44.5+¢/bu over last Monday’s close. The NOV’09 contract closed at $8.594/bu; up 2.5¢/bu and 9.0¢/bu higher than last report. Lower-than-expected exports and brisk farmer-hedge-selling pressured prices while continued political turmoil in Argentina provided some support. The market was pressured enough to come off the day’s 5-week high. Soybeans-inspected-for-export were placed at 20.536 mi bu vs. expectations for between 22-27 mi bu. Chinese shipments accounted for 32% of the reported numbers. Cash soybean bids in the U.S. Midwest weakened at river ports while those in the U.S. Mid-Atlantic States were steady to firm ranging from 5.0-11.0¢/bu cents higher. Funds bought nearly 3,000 contracts while large speculators cut net bear positions for the week ended March 17. If you haven’t done so already it is a good idea to sell all old crop soybeans in the bin and get up to 35% of the ’09 crop priced now. A consensus of sources over the last few days has agreed it is not unreasonable to see loan rate soybeans before this market is done.

WHEAT futures in Chicago (CBOT) closed off on Monday. The MAY’09 contract closed at $5.492 /bu; down 1.0¢/bu but 5.0¢/bu higher than this time last week. JULY’09 wheat futures finished off 0.75¢/bu at $5.616/bu but 6.0¢/bu higher than a week ago. Farmer selling and profit taking on technical buying subdued the market near the close after surging to 5-week highs. Fair export numbers, fears of flooding in the Red River Valley, and a strong performance by the DOW and other outside markets supported wheat prices. USDA placed wheat-inspected-for-export at 22.388 mi bu vs. expectations for between 14-19 mi bu. Large speculators were seen cutting net bear positions for the week ended March 17. Hopefully 25% of the 2009 crop has been sold by now. If not, hold off at this time.

LEAN HOGS on the CME closed down on Monday. The APR’09LH contract closed at $60.65/cwt; off $1.100/cwt and $2.100/cwt lower than a week ago. The JUNE’09LH contract lost $1.150/cwt to $72.625/cwt; $1.450/cwt lower than last Monday’s close. Losses were pared late in the day on sell stops and short covering. USDA’s cold storage report last Friday proved bearish. USDA said that February stocks broke last year’s record of 611.8 mi lbs by 14.71 mi lbs as supply was increased almost 30 mi lbs to a record 626.6 mi lbs. USDA on Friday put the Pork Cutout at $58.73/cwt, down $2.07/cwt. Good news in the DOW did not provide much support for pork prices. The latest CME Lean Hog Index was placed at $58.15/cwt at $0.82/cwt. Pork packer margins were in the black by $2.55/head based on the average buy of $40.62/cwt vs. the average breakeven of $41.59/cwt. Hold off on feed buys for the short term while selling hogs when ready. It won’t pay to put additional weight on at this time.