20 August 2008

5 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were up on Monday. The AUG’08LC contract closed at $101.925/cwt, up $0.250/cwt from Friday but $0.375/cwt lower than this time last week. The August contract will expire on August 28. OCT’08LC futures were up $0.100/cwt at $105.950/cwt but $0.875/cwt lower than last Monday. High feed prices and long liquidation pressured prices. Large speculators got back on the “buy” wagon near the end of Monday’s session providing some support. The USDA 5-area price for Monday ranged between $99.70/cwt-$99.76/cwt vs. expectations o $102.00/cwt. USDA placed the boxed beef cutout at $163.90/cwt, off $0.43/cwt. Volume was light ahead of the USDA Cattle on Feed report due out on Friday. According to HedgersEdge.com, the estimated average packer margin was off $16.40/head placed at a positive $22.50/head based on the average buy of $99.89/cwt vs. a breakeven of $101.63/cwt. Corn and soybeans remain very volatile in technical selling and buying as the market doesn’t believe the most recent USDA report. It is a good idea to price short term feed needs on down ticks in the market.

FEEDER CATTLE at the CME closed down on Monday. AUG’08FC futures were off $0.250/cwt at $113.650/cwt; $1.325/cwt lower than last Monday. The SEPT’08 contract finished the day at $113.575/cwt, off $0.825/cwt from Friday’s close and $1.150/cwt lower than last Monday. Higher corn futures pressured feeder cattle after an initial short-covering run up in prices. Cash feeders in Oklahoma City were up $1.50- $2.00/cwt. The latest CME Feeder Cattle Index for August 14 was placed at $112.97/cwt, off $0.04/cwt. The feed markets are volatile and will remain so for the coming weeks.

LEAN HOGS on the CME closed up on Monday in light trading volume. The OCT’08LH contract closed at $75.800/cwt, up $0.250/cwt and $7.725/cwt higher than a week ago. DEC’08 futures closed up $0.150/cwt at $75.000/cwt. The FEB’09 contract closed up $0.275/cwt at $80.575/cwt. Short covering and October/December spreading were supportive. Cash hogs were noted higher by as much as $3.000/cwt in many places. USDA raised the pork cutout by $0.52/cwt to $94.41/cwt. The latest packer margin was raised $8.10/head over last Monday to $10.35/head based on the average buy of $63.96/cwt vs. an average breakeven of $67.99/cwt, according to HedgersEdge.com. It may be a good idea to push hogs off the feeding floor. Feed grain markets will remain very volatile.

CORN futures on the Chicago Board of Trade (CBOT) finished up on Monday. The SEPT’08 contract finished at $5.530/bu, up 23.2¢/bu from Friday and 55.8¢/bu cents higher than a week ago. The DEC’08 contract closed at $5.726/bu, also up 23.2¢/bu from Friday and 55.6¢/bu higher than this time last week. Corn futures were supported by heavy speculative fund buying and strength in the soybean and wheat markets. This time last week corn futures were on the ropes but large speculators jumped in and traded the oversold technicals adding much to this synthetic price. Some support was seen in a weaker U.S. dollar amid ideas that the sell-off on Friday was a bit much. Several floor sources today said the general feeling in the corn market is that USDA has missed the crop-estimate mark and the 2008 Pro Farmer Midwest Crop Tour will reveal corn crop yield numbers closer to the 150 bu/acre mark. USDA placed the yield estimate near 155bu/ac in its last report. We’ll see. One thing for sure, this tremendous uncertainty adds fuel to an already very volatile corn market. Strong end user demand for corn at or near the $5.00/bu mark was supportive. USDA put corninspected- for-export at 36.7 mi bu vs. expectations for between 32-36 mi bu. Funds were net buyers of over 6,000 contracts on Monday after slashing net bull positions by 15,300 lots to 61,981 contracts as of August 12. Cash corn in the U.S. Midwest was steady to weak while cash bids for corn in the U.S. Mid-Atlantic States ranged 18.0¢/bu – 25.0¢/bu higher. Those who have up to 70% of the ’08 crop priced today are in good shape. Speculate with the rest.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were up on Monday. The AUG’08 contract finished at $12.790/bu, up 67.4¢/bu from Friday’s close and 64.0¢/bu higher than a week ago. NOV’08 soybean futures closed at $12.890/bu, up 70.0¢/bu and 93.0¢/bu higher than last Monday. The resumption of the Argentinean farmer strike, a weaker U.S. dollar, short-covering, and drier weather were supportive. USDA put soybeans-inspected-for-export at 4.5 mi bu vs. expectations for between 7.0-11.0 mi bu. China has suspended imports until after the Olympic Games. Funds bought right at 4,000 lots after cutting net bull positions by 11,600 lots to 38,822 contracts as of August 12. Cash soybeans in the U.S. Midwest were steady while cash beans in the U.S. Mid-Atlantic States were bid between up 55.0¢/bu -70.0¢/bu. Hopefully between 60%-70% of the 08 crop is sold at this time leaving the rest for speculation.

WHEAT futures in Chicago (CBOT) were up on Monday. The SEPT’08 contract closed at $8.596/bu, up 35.4¢/bu from Friday and 6.0¢/bu higher than a week ago. JULY’09 wheat futures closed up 35.0¢/bu at $9.336/bu; 65.0¢/bu higher than this time last week. Wheat futures rallied from the sell off last Friday. Rising corn and soybean prices, a weaker U.S. dollar, pretty good export numbers, adverse wheat growing weather in Argentina, and short-covering on chart buying were supportive. USDA reported wheat-inspected-for-export at 36.278 mi bu vs. expectations for between 28.33 mi bu. Funds decreased net bear positions by 2,707 lots resulting in total net short contract positions at 22,830 contracts. It might be a good idea to get another 10% of the ’09 crop priced bringing it up to 60% priced.