Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 25 September 2008
clock icon 5 minute read

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

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were up Monday on short covering. OCT’08LC futures were up $0.900/cwt at $102.450/cwt. However, this was $1.300/cwt lower than last Monday’s close. The DEC’08LC contract closed at $103.900/cwt up $0.650/cwt but $1.455/cwt lower than last Monday. October/December spreading was noted. The market followed through on last Friday’s bullish Cattle-on-Feed report from USDA amid lighter placement weights. U.S. Plain’s cash cattle were steady at $99/cwt while USDA placed the 5-area price average at $98.23/cwt. On Monday USDA put the choice boxed beef cutout at $159.28/cwt, off $0.52/cwt. Meanwhile in export news, Japan relisted Smithfield Beef Group’s Souderton, PA and National Beef’s Brawley, CA plants for exports to that country. They had been banned earlier. According to HedgersEdge.com, the estimated average packer margin was off $7.10/head from last week placed at a positive $12.40/head based on the average buy of $98.39/cwt vs. a breakeven of $99.35/cwt. Fundamentals are supportive while corn prices seem to have put in a seasonal bottom

FEEDER CATTLE at the CME closed up on Monday with the exception of the September contract. SEPT’08FC futures closed at $108.150cwt, off $0.100/cwt. The NOV’08FC contract finished up $1.175/cwt at $106.475/cwt. Gains in Live Cattle, short covering, and a discount to the CME Feeder Cattle index were supportive while higher corn prices put a damper on things. Oversold chart signals helped the bulls. October/Spreading was good for October stymieing the September contract. The latest CME Feeder Cattle index for September 18 was placed at $109.28/cwt. Corn inputs look like they are going to get pricier.

LEAN HOGS on the CME closed up on Monday. The OCT’08LH contract closed at $68.65/cwt, up $0.650/cwt and $1.300/cwt higher than last Monday. DEC’08 futures closed up $1.300/cwt at $67.350/cwt; up $0.800cwt from a week ago and $1.70 higher over the last two weeks. Stronger cash hog prices and talk of a strike by workers at a plant was supportive while higher corn prices kept a lid on things. On Friday USDA put the pork carcass cutout at $76.66/cwt, down $0.29/cwt. The latest CME Lean Hog index was placed at $69.70/cwt, down $0.50/cwt. The latest packer margin was raised $1.90/head from last week to $10.60/head based on the average buy of $50.80/cwt vs. and an average breakeven of $54.85/cwt, according to HedgersEdge.com. Feed inputs looks like they will be getting more expensive.

CORN futures on the Chicago Board of Trade (CBOT) finished up Monday. The DEC’08 contract closed at $5.584/bu, up 16.25¢/bu from Friday but 3.75¢/bu lower than this time last week. MAR’09 corn futures closed at $5.762/bu; up 17.25¢/bu but 4.0¢/bu lower than a week ago. The U.S. government’s $700 bi dollar bail out to the lending division strengthened the market supporting a weak U.S. dollar and building crude oil prices. Many analysts see this as fueling inflation. Weather was good for corn in the U.S. Midwest while exports were supportive. USDA reported 33.139 bu of corn inspected for export vs. market expectations for between 30-35 mi bu. Large funds bought almost 6,000 contracts amid an estimated volume of 173,000 lots. 100,000 of these were noted in spreads. Chart signals are bullish. Open interest fell by some 9,400 after the December chart noted an Elliot 5-way sell signal amid a descending triangle with an upward price breakout. The supplement to CFTC’s Commitment of Traders report had large speculators cutting net bull positions by about 51,000 lots. Large speculators in net bear positions increased those by almost 2,500 lots. Cash corn in the U.S. Midwest was mixed while bids in the U.S. Mid-Atlantic States posted strong gains ranging 15.0¢/bu– 21.0¢/bu higher in most places. Even though there is not much fundamental news to support a bottom for the ’08 corn market one may have been established. Those who have up to 70% of the ’08 crop priced today are in good shape. However, it looks like there may be more pricing opportunities in the near future.

SOYBEAN futures on the Chicago Board of Trade (CBOT) climbed Monday largely on short covering and inflation fears. NOV’08 soybean futures closed at $12.050/bu, up 61.5¢/bu and 26.0¢/bu higher than last Monday. The JAN’09 soybean contract closed at $12.220/bu; off 62.75¢/bu and 27.5¢/bu higher than a week ago. The same economic factors that boosted corn futures also helped soybean futures. More favorable soybean weather provided some resistance. There was some good export news as China reportedly bought 230,000 tonnes (8.5 mi bu) of U.S. soybeans. USDA placed U.S. soybeans inspected for export at 1.204 mi bu vs. expectations for between 7-11 mi bu. Large funds bought between 5,000-6,000 contracts as the CFTC’s Commitment of Traders supplement showed large speculators decreasing net bull positions in CBOT soybeans by 5,400 contracts to 17,707 lots. Cash soybeans in the U.S. Midwest were mixed while cash beans in the U.S. Mid-Atlantic States advanced with prices ranging from 58.0¢/bu–66.0¢/bu higher. Soybean prices are fundamentally supported on tight short-term supplies and the uncertainty of ’08 crop yields on the threat of frost. It looks like there will be a few more opportunities to advance sales.

WHEAT futures in Chicago (CBOT) closed up on Monday. The DEC’08 contract closed at $7.376/bu, up 19.75¢/bu from last Friday and 10.75¢/bu higher than a week ago. JULY’09 wheat futures were up 20.25¢/bu at $7.822/bu. A weaker U.S. dollar and higher outside markets were supportive. Talk of frost damage in Australia and Argentinean crop expectations cut by as much as 25% due to drought also helped futures. Offsetting bullish expectations were India’s announcement it would plant another record crop for 2009. USDA put U.S. wheat-inspected-for-export at 29.175 mi bu vs. expectations for between 20-25 mi bu. Large funds bought just fewer than 3,000 contracts while the CFTC Commitment of Traders report showed large speculators increasing net bear positions by 7,700 lots to 39,760 contracts. Wheat in Kansas City and Minneapolis reached highs not seen in some time. Expect pricing opportunities for the ’09 wheat crop.

2008 December Corn 9/22/08

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