22 October 2008

5 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were down Monday except for the April ’09 and the June ’09 contracts. Both of these finished just out of the red on speculative buying and short covering. OCT’08LC futures were down $0.225/cwt at $90.825/cwt and $0.750/cwt lower than a week ago. The October contract will expire on October 31. The DEC’08LC contract closed at $92.075/cwt off $0.475/cwt and $0.925/cwt lower than last Monday. In reaction to light numbers in feedlots last Friday the market started out on a positive note but lost ground on recession concerns fearing beef retail sales will be hurt more by lower loose change in American pockets. April and June were supported by thinking that there will be fewer cattle to buy by then. Friday’s USDA report showing larger-than-expected placements put the pressure on the December contract. On Friday, USDA reported the October 1 on-feed supply 95% of last year; September placements 94% of last year but marketings at 107% of last year. Cattle feeders are getting cattle out of the lots. USDA put the Choice Boxed Beef price at $145.61/cwt; up $1.12/cwt. The USDA 5-area average cash price was placed at $89.28/cwt, off $2.04/cwt from last week at this time. According to HedgersEdge.com, the average packer margin was lowered $7.50/head to a negative $14.00/head based on the average buy of $89.90/cwt vs. the average breakeven of 88.82/cwt. It is still a good idea to sell cattle when ready. It might be a very good idea to buy up to 20% of the 2009 feed needs on lower corn prices.

FEEDER CATTLE at the CME were mixed on Monday. OCT’08FC futures closed at $98.650/cwt, up $0.250/cwt and $1.700/cwt higher than a week ago. The NOV’08FC contract finished at $98.600/cwt, off $0.050/cwt but $2.425/cwt higher than this time last week. Expectations for higher cash prices in Oklahoma City were supportive. Fears higher feed costs later this year and light volume on profit taking were not supportive. The CME Feeder Cattle Index for October 16 was placed at $97.43/cwt; up $0.11/cwt. Move feeders only when ready. The market may pay more for them later in the week.

LEAN HOGS on the CME closed up on Monday except for the nearby DEC’08LH futures. DEC’08 futures closed up $0.050/cwt at $56.250/cwt but $4.850cwt lower than a week ago. Lower cash markets, oversold status, and the premium of December futures to the CME cash index were not supportive to the nearby contract. Profit taking limited gains. Four floor sources said that higher corn prices were supportive of later months in that these would encourage further herd liquidation. The latest CME Lean Hog Index was placed at $64.59/cwt, off $0.81/cwt. On Friday USDA put the pork carcass cutout at $65.02/cwt, down $0.20/cwt from the previous report. Cash hogs are expected to go lower this week. According to HedgersEdge.com, the average pork plant margin was placed at a positive $5.25/head, a $0.65/head increase over this time last week. This was based on the average buy of $44.24/cwt vs. the average breakeven of $46.24/cwt. It might be a very good idea to price up to 20% of future feed needs at this time. Sell hogs at heavier weights.

CORN futures on the Chicago Board of Trade (CBOT) gained Monday on short covering. The DEC’08 contract closed at $4.184/bu; up 15. 5 ^¢ /bu from Friday and 7.0 ^¢ /bu higher than a week ago. MAR’09 corn futures closed at $4.362/bu; up 15.75 ^¢ /bu and 6.75 ^¢ /bu higher than this time last Monday. Profit taking on light volume near the close took some steam off. According to two floor sources corn prices are set to stage a price rebound. We’ll see. I think that depends on the U.S. economy more than the fundamentals or technical signs right now. Also supportive were strength in soybeans and outside markets while concerns that wet weather may slow down the harvest. USDA put U.S. corn-inspected-for-export at 26.874 mi bu vs. estimates for between 31-36 mi bu. U.S. corn exports for the year are off 77.6 mi bu at 223.9 mi bu compared to last year at this time at 301.5 mi bu. The CFTC supplement for the week ended October 14 had large speculators and funds cutting net bull positions. Funds cut net bull positions to 10,200 contracts, off 6,370 lots from the previous week. Cash corn bids on Monday in the U.S. corn-belt were mixed while local corn prices in the U.S. Mid-Atlantic States were stronger ranging from 16.0 ^¢ /bu – 19.0 ^¢ /bu higher in most places. Those who have up to 70% of the ’08 crop priced today are in good shape. These corn prices may have seen their contract lows if the financial markets get straightened out.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. NOV’08 soybean futures closed at $9.290/bu; up 35.0 ^¢ /bu but only 1.0 ^¢ /bu higher than a week ago. The JAN’09 soybean contract closed at $9.406/bu; up 34.0 ^¢ /bu but 2.75 ^¢ /bu lower than last Monday. Floor traders are suspecting contract lows. It will take more incentive from a recovering financial system to verify that. Good export numbers, overseas market strength, and forecasts for colder weather were supportive. USDA put soybeans-inspected-for-export at 27.854 mi bu vs. estimates for between 15-30 mi bu. Friday’s CFTC Commitment of Traders report had large speculators decreasing net bull positions almost 10,000 lots to 5,908 contracts while funds sold more than 4,000 lots. Cash soybeans in the U.S. Midwest were mixed while those in the U.S. Mid-Atlantic States ranged from 35.0 ^¢ /bu – 50.0 ^¢ /bu higher on Monday. It is good if you have priced 60%-70% of the ’08 crop. Wait to price more.

WHEAT futures in Chicago (CBOT) closed down Monday. The DEC’08 contract closed at $5.634/bu, down 2.5 ^¢ /bu from last Friday and 25.0 ^¢ /bu lower than a week ago. JULY’09 wheat futures were up 4.0 ^¢ /bu at $6.096/bu but 25.0 ^¢ /bu lower than this time last week. Corn and soybeans were somewhat supportive while slowing export demand amid growing global wheat stocks pressured prices. USDA reported U.S. wheat-inspected-for-export at 16.066 mi by vs. expectations for between 20-25 mi bu. The CFTC Commitment of Traders report showed large speculators cutting net bear positions by 900 contracts to 39,689 lots. Funds sold over 1,000 contracts. Hopefully 10%-20% of the ’09 wheat crop has been priced.