20 December 2006

6 minute read

North America

Weekly Purcell Agricultural Commodity Market Report Mike Roberts Agricultural and Applied Economics Virginia Tech

LIVE CATTLE in Chicago (CME) closed up on Monday due to weakness in corn and soybeans and fund buying. The DEC’06LC closed at $86.825, up $0.425/cwt and $0.525/cwt higher than this time last week. The FEB’07LC closed up $0.975/cwt at $90.475/cwt, higher by $1.375/cwt over last Monday. The market found support in ideas that fewer cattle would be coming to market because of light placements in November and speculative fund’s continued trend to buy live cattle. Fund buying also initiated buy stops extending gains late in the session. Forecasts for unforgiving weather in the Plains supported thinking by speculators that cattle marketings could be slowed. USDA will release its Cattle on Feed report on Friday and is expected to show placements lagging behind last year at this time. Cash beef prices on Monday were mixed with the choice cutout off $0.47/cwt at $144.19/cwt. The margin between choice and select cutout narrowed with the select cutout placed at $127.68, up $1.39/cwt. According to HedgersEdge.com, the average beef plant margin on Monday was placed at a negative $7.45/head, better by $4.85/head over last Friday’s data at a negative $12.30/head. The five-area weekly cattle price showed cattle trading $1.00/cwt-$1.50/cwt lower from last week at $85.00/cwt - $86.50/cwt. This was $9.50/cwt lower than last year at this time. Cash sellers are encouraged to push marketings while avoiding weight and quality discounts. It may be wise to consider protecting a portion of 1st quarter ’07 and 2nd quarter ’07 marketings as spring prices are expected to plunge into the low 80’s. Corn users should consider pricing more near-term corn inputs now.

FEEDER CATTLE at the CME closed higher along with live cattle on Monday. The JAN’07FC contract finished at $100.00/cwt, up $1.275/cwt and $0.375/cwt higher than last Monday. The MAR’07FC contract closed up $0.750/cwt at $97.600 but $1.025/cwt lower than last week at this time. Bearish corn and soybeans contributed to support for feeders. The CME Feeder Cattle Index provided support with the latest data placed at $100.71/cwt, off $0.10/cwt. Forecasts for low placements were expected to show up in Friday’s USDA Cattle on Feed report. This too was supportive of feeder cattle prices because traders are thinking that supplies may be tighter than expected. Cash sellers are encouraged push feeder sales. Hedgers may be wise to consider protecting a portion of 1st quarter ’07 and 2nd quarter ’07 marketings as spring prices are expected to plunge into the low 80’s. Corn users should consider pricing more near-term corn inputs now.

CORN on the Chicago Board of Trade (CBOT) closed lower on Monday after rebounding on the days’ lows amid year end consolidating of positions and weak technical signs. The MAR’07 futures contract closed at $3.656/bu, off 3.2¢/bu and down 5.0¢/bu from last week at this time. The DEC’07 contract was one of four contracts finishing on the upside closing at $3.616/bu, up 0.6¢/bu and 10.4¢/bu higher than last Monday. The DEC’08 contract finished up by 0.6¢/bu at $3.450/bu. Funds in weighty long positions left the market susceptible to selling as the CFTC Commitments of Traders report showed funds in heavy net-long positions at 291,875 lots in CBOT corn futures/options combined. This was an increase of 11,598 lots for the week ended December 12. USDA reported export sales of 116,000 tonnes (4.6 million bu). China is reported to have declared that it is not expecting to enter ethanol or biodiesel production. It intends to purchase grain for food only. Weekly export inspection numbers came in within expectations between 37-41 million bu at 40.2 million bu. Argentina’s corn crop was placed at 85% planted as of Friday. This is up 3% from last week but down 1% from a year ago. Cash corn in the Midwest was steady amid slow farmer sales and a full marketing channel slowing export pace. Cash corn in the Mid-Atlantic States was mixed on Monday with basis improving in some areas but weakening in others. The JAN’07 ethanol contract closed at $2.05/gal, even with the last close but off 20.0¢/gal from last Monday. Corn producers selling up to 20%-30% of the ’07 crop last week are in good shape. This market is still very volatile. Buying a put option may be useful.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed off on a technical bounce continuing last week’s setbacks. The JAN’07 soybean contract closed at $6.480/bu, off 9.4¢/bu and 18.0¢/bu lower than this time last week. The NOV’07 closed down 8.2¢/bu at $7.066/bu and 13.4¢/bu lower than last Monday. The market is showing bear signs on the technicals amid overall good growing weather in South America. Argentina’s soybean crop was 77.5% planted as of last Friday, up 7% from a week earlier but 2% behind last year’s seedings. As with corn, funds in heavy long positions are hanging over the market. Weekly export inspection numbers did not meet expectations of 25-29 million bu, coming in at 23.8 million bu. Cash sales of soybeans in the Midwest and Mid-Atlantic states were slow on Monday. The CFTC’s Commitment of Traders report had funds expanding net long positions in CBOT soybean futures for the week ended December 12. After filling the gap-down of December 4 on December 14, the NOV”07 contract looks as though it is trying to confirm the right shoulder of a small head and shoulder formation. The Relative Strength Index on the NOV’07 chart and all key moving averages (MA), except the 20-day MA, have turned down. The NOV’07 contract seems to be headed toward the measuring objective of around $6.815/bu-$6.825/bu. Cash sellers should still consider pricing up to 50% of the ’07 crop. Hedgers who placed short positions near $7.00/bu in the NOV’07 contract last week are in good shape.

WHEAT in Chicago (CBOT) ended off on Monday with MAR’07 futures closing at $4.874/bu, down 6.6¢/bu. JULY’07 wheat finished lower by 7.0¢/bu at $4.840/bu but virtually even with last Monday’s close down only 0.06¢/bu. All other contracts were off 2¢/bu – 6.6¢/bu. Declines in corn and soybeans provided lack-luster trading on the day amid disappointing weekly U.S. export data and bearish weather forecasts for the U.S. Plains. USDA reported export inspections below expected ranges of 14-18 million bu at 11.4 million bu. Australia’s crop seems to be on-the-grow with export estimates now placed at 12.793 million tonnes (470 million bu), up almost 2 million tonnes (73.5 million bu) from the previous forecast. Also affecting export expectations were reports that India has planted 20% more wheat this year than last year and that wheat producers in the Ukraine had increased seedings by 11.8% over last year. The CFTC’s Commitments of Traders report on Friday had funds reducing net long positions in CBOT wheat futures for the week ended December 12. Cash bids for the ’06 crop were weaker in the Mid-Atlantic States. Hopefully cash sellers sold the remainder of the ’06 crop at last week’s prices. It still might be a good idea to forward price up to 30% of the ‘07 crop at this time. Hedgers should consider opportunities around the $4.75/bu range in JULY’07 futures.

TheCattleSite News Desk