8 October 2008

5 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were off again Monday amid long liquidation and tight credit fears. OCT’08LC futures were down $3.000/cwt at $92.600/cwt; $5.450/cwt lower than a week ago and $9.950/cwt (10.15%) lower than two weeks ago. The DEC’08LC contract closed at $94.775/cwt off $3.00/cwt and $5.100/cwt lower than last Monday. It is feared that exports will suffer due to the global economic crunch. Just as in other commodity markets, investment funds liquidated commodity positions to raise needed cash. Packers bid up cash prices to as much as $99.00/cwt in places on Monday trying to fill processing lines. This is seen as a one-time event for this week as cash cattle prices are viewed as decreasing in the short run. USDA raised the choice cutout $4.28/cwt to $156.70/cwt. The USDA 5-area price for cash cattle on Monday was placed at $96.05/cwt; down $1.94/cwt from last week. Packer margins were lowered $7.20/head from last Monday to a negative $28.70/head, according to HedgersEdge.com. This was based on the average buy of $97.05/cwt vs. the average breakeven of $94.86/cwt. It is probably a very good idea to sell cattle when ready while looking for feed pricing opportunities on volatile downside grain market swings.

FEEDER CATTLE at the CME closed off on Monday. OCT’08FC futures closed at $97.675/cwt, off $3.000/cwt and $5.125/cwt lower than a week ago. The NOV’08FC contract finished down $3.000/cwt at $97.800/cwt; $4.775/cwt lower than a week ago. Live cattle took feeders lower with them. Tight credit is really hurting feeder buyers. Lower corn prices were supportive but not enough. The latest CME Feeder Cattle index was off $0.68/cwt to $104.94/cwt. Corn inputs got better again but for how long?

LEAN HOGS on the CME closed down on Monday except for the OCT’08LH futures. The OCT’08LH contract closed at $66.475/cwt, up $0.050/cwt but $2.075/cwt lower than last Monday. DEC’08 futures closed down $1.050/cwt at $59.825/cwt; off $1.050cwt from a week ago and $5.225/cwt lower than this time last week. The discount of October futures to cash prices held losses in check. As with other markets, funds were liquidating commodity futures positions to raise cash. USDA on Friday put the pork carcass cutout at $72.87/cwt, off $0.27/cwt. The CME Lean Hog index was placed at $72.63/cwt; up $1.05/cwt from a week ago. According to HedgersEdge.com, the average pork plant margin was raised $3.85/head to a positive $4.40/head based on an average buy of $50.38/cwt vs. the average breakeven of $52.05/cwt. Feed input pricing opportunities may be present on volatile downward swings until the economic crisis is passed.

CORN futures on the Chicago Board of Trade (CBOT) finished limit again down on Monday due to continued instability in the financial markets. This is fast becoming a global crisis. The DEC’08 contract closed at $4.240/bu, down 30.0 ^¢ /bu from Friday; 89.0 ^¢ /bu (17.3%) lower than a week ago and a $1.345/bu (24.1%) lower than two weeks ago. MAR’09 corn futures closed at $4.420/bu; off 30.0 ^¢ /bu and 89.0 ^¢ /bu lower than this time last Monday. Trading limits will be raised to 45.0 ^¢ /bu for Tuesday’s trading. Contracts held just under the trading limit until the just before the close. Long liquidation and a worsening global economic crisis that raised export demand fears for U.S. commodities pressured prices. Open interest continued to decline as traders exit the December contract. Corn-inspected-for-export was placed at 33.528 mi bu vs. estimates of between 33-37 mi bu. Late Monday USDA showed the U.S. corn crop harvest 14% complete vs. 9% last week. Traders expected 14%-17% completion. Weather is seen as slowing harvest last week and viewed as supportive. The supplement to Friday’s CFTC Commitment of Traders report had large speculators cutting net bull positions by 22,000 contracts to 40,913 lots. Index funds also decreased net bull positions 12,000 lots to 305,830 contracts. Farmer selling in the U.S. Midwest was sluggish while producer sales in U.S. Mid-Atlantic states were brisk Monday amid a positive 10 ^¢ /bu -30 ^¢ /bu basis. Those who have up to 70% of the ’08 crop priced today are in good shape.

SOYBEAN futures on the Chicago Board of Trade (CBOT) finished limit down as well on Monday. NOV’08 soybean futures closed at $9.220/bu, off 70.0 ^¢ /bu; $1.72/bu lower than last Monday and $2.83/bu (23.5%) lower than two weeks ago. The JAN’09 soybean contract closed at $9.384/bu; off 70.0 ^¢ /bu and $1.7175/bu lower than a week ago. For the second straight Tuesday trading limits will expand to $1.05/bu. Soybeans are suffering the same fate as the corn markets, long liquidation and a stronger U.S. dollar imposing limits on exports amid a worsening global economic meltdown. Supportive news for futures was that Argentina’s soybean-grower strike was paralyzing grain markets in that country. USDA placed soybeans-inspected-for-export at 12.174 mi bu vs. estimates for between 9-14 mi bu. The supplement to Friday’s CFTC Commitment of Traders report had large speculators decreasing net bull positions by 9,200 lots to 13,138 contracts. USDA late on Monday put the U.S. soybean harvest at 20-23 % complete vs. trader expectations of between 20-23%. Cash soybeans in the U.S. Midwest were steady to higher at river ports while cash bean bids in the U.S. Mid-Atlantic States ranged 47.0 ^¢ /bu -63.0 ^¢ /bu lower while remaining basis-positive 10.0 ^¢ /bu – 30.0 ^¢ /bu. With these volatile prices it is good if you have priced 60%-70% of the ’08 crop already.

WHEAT futures in Chicago (CBOT) closed down on Monday. The DEC’08 contract closed at $5.952/bu, off 45.0 ^¢ /bu from last Friday and 73.0 ^¢ /bu lower than a week ago. JULY’09 wheat futures were down 46.75 ^¢ /bu at $6.420/bu and 74.0 ^¢ /bu lower than this time last week. Wheat followed pressured soybeans and corn to new 15-month lows. USDA placed wheat-inspected-for-export at 25.921 mi bu vs. expectations for between 20-25 mi bu. Wet weather was seen as supportive for the new crop. The supplement to Friday’s CFTC Commitment of Trader report placed large speculators in wider net short positions by as much as 1,861 contracts to 37,602 lots. Index funds cut net bull positions by 3,000 contracts to 162,264 lots. Cash wheat bids ranged 4.0 /bu -8.0 /bu higher in the U.S. Mid-Atlantic States. Hopefully 10%-20% of the ’09 wheat crop was priced last week.