Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 26 November 2008
clock icon 6 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 ranging from $1.30/cwt – $2.425/cwt higher The DEC’08LC contract closed at $86.650/cwt up $1.750/cwt but $6.000/cwt lower than Monday before last. FEB’09LC futures closed up $2.100/cwt at $87.600/cwt; $6.550/cwt lower than two weeks ago. The same outside markets supporting other commodities, Friday’s Cattle on Feed report, and buying on a technically oversold market helped the livestock sector. USDA reported a six–year low on November 1 in the on–feed supply with October placements below the average. Feedlot supplies were reported at 93% of a year ago compared to estimates of 93.9% of a year ago. October placements were placed at 89% of a year ago while marketings came in at 97% of last year at this time. The market traded estimates of 91.5% October placements and 95.5% marketings. USDA on Monday put Choice Boxed Beef at $155.62/cwt, down $4.48/cwt but $4.83/cwt higher than week before last. USDA put the 5–area price at $87.26/cwt, off $2.83/cwt from Monday before last. Packer demand was light on Monday while processors are seen as picking up buying to fill Tuesday and Wednesday lines. According to HedgersEdge.com, the average packer margin was raised $4.90/head over week before last to a positive $10.20/head based on the average buy of $90.69/cwt vs. the average breakeven of $91.49/cwt. The U.S. economic instability will contribute to volatile feed prices. Consider corn gluten as an alternative or buying out-of-the-money corn call options.

FEEDER CATTLE at the CME followed live cattle and the other commodity markets higher on Monday. JAN’09FC futures finished at $91.400/cwt, up $2.00/cwt from Friday but $7.375/cwt lower than two weeks ago. The MAR’09FC contract settled at $92.250/cwt, up $2.10/cwt. A technically oversold market featuring short covering, buy-stops along with last Friday’s USDA Cattle on Feed report and a discount to the CME Feeder Cattle Index fueled higher feeder prices. The latest CME Feeder Cattle Index settled at $94.46/cwt, off $1.05/cwt from last posting and $1.99/cwt lower than Monday before last. It might be a good idea to price short–term feed needs on downticks in feed prices amid these volatile economic times.

LEAN HOGS on the CME closed up a range of $0.50/cwt – $1.70/cwt on Monday. DEC’08 futures closed up $0.500/cwt at $57.375/cwt and $2.375/cwt higher than two weeks ago. The APR’09LH contract closed at $71.600/cwt; up $1.075/cwt and $2.65/cwt over Monday before last. The JUNE’09LH contract gained $1.700/cwt to $81.550/cwt ending $1.20/cwt higher than this time two weeks ago. The two-session surge in the U.S. stock market and short-covering on chart signals provided support. Last Friday USDA put the Pork Carcass Cutout at $56.49/cwt; down $0.18/cwt. The latest CME Lean Hog Index was placed at $52.25/cwt, down $0.27/cwt and $3.22/cwt lower than week before last. Packers are expected to increase cash bids for hogs as they try and fill processing lines for Friday and Saturday runs. According to HedgersEdge.com, the average pork plant margin was placed at a positive $6.95/head; $1.45/head higher than Monday before last. This was based on the average buy of $37.31/cwt vs. the average breakeven of $39.93/cwt.

CORN futures on the Chicago Board of Trade (CBOT) finished up after a shaky start on Monday. The DEC’08 contract closed at $3.544/bu; up 16.0¢/bu from Friday but 29.0¢/bu lower than two weeks ago. MAR’09 corn futures closed at $3.710/bu; also up 16.75¢/bu but 30.5¢/bu lower than Monday before last. Gains in crude oil and stock markets, oversold corn market chart signals, and poor near-term demand for corn had traders thinking this corn market is due for an uptick. Exports were supportive as USDA put corn-inspected-for-export at 28.7 mi bu vs. expectations between 24–28 mi bu while a major U.S. hog feeder imported wheat from Britain and Brazil due to the high cost of corn. Brazil offered significant corn discounts to slow overflow of local silos ahead of the new-crop harvest which will begin in January. Weather forecasts were favorable for wrapping up the U.S. corn harvest. Late Monday USDA placed the U.S. corn harvest at 89% complete as the market traded 84–88% completion. Ethanol profits in the U.S. looked grim but were seen as looking up on lower corn prices. Funds remained in net-short positions amid buying activity of over 7,000 lots supporting corn/wheat spreading in nearby months. Cash corn bids in the U.S. Midwest were steady early Monday amid slow farmer selling. Cash corn in the U.S. Mid-Atlantic States was stronger with bids ranging from 16.0¢/bu – 21.0¢/bu higher. Be wary of the downside to this market in these troubled times while trying to catch an uptick to price any un-sold corn. A put option is not out of the question.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JAN’09 soybean contract closed at $8.840/bu; up 44.0¢/bu but 64.0¢/bu lower than two weeks ago. MAR’09 soybean futures closed at $8.916/bu; up 44.5¢/bu while the August’09 contract finished at $9.114/bu. Most contracts filled the chart-gap from last Thursday on a technical bounce as traders look for a market bottom. Reports of Chinese proffering for a significant amount of U.S. soybeans and strength in outside markets of crude and U.S. financial markets were supportive. The DOW climbed over 900 points during the last two trading sessions on the U.S. government’s announcement it will inject $20 billion in the second-largest U.S. bank to prevent its collapse USDA put soybeans-inspected-for-export at 36.3 mi bu vs. estimates for between 34–38 mi bu. Funds increased net bull positions by 856 contracts to 9,885 lots while buying over 4,000 contracts. Cash soybeans in the U.S. Midwest were steady to firm trying to move beans out of tight farmer hands Cash soybeans in the U.S Mid-Atlantic States were very good ranging from 44.0¢/bu – 52.0¢/bu higher. The 2008 crop should be 60–65% sold. Wait to price more. A success story report: A soybean grower came into my office today to cheerfully announce that his final production was 17,000 bu short of what he had contracted. He then told me that he remembered that I am constantly saying that there is always someone who has not priced their crop. His neighbor had not priced any soybeans at all so they made a deal. My friend bought 17,000 bu from his neighbor for $9.00/bu and filled his contract for $14.82/bu. He made my day when he told me my advice to him this year has netted him an additional $69,000.00+. He said his neighbor is happy and so is he. Sounds like the proverbial good deal my grandfather taught me about ... when both the seller and buyer are happy. At the risk of sounding like someone else, “That my friends is what my job is all about ... helping producers make more money so they can remain in agriculture!”

WHEAT futures in Chicago (CBOT) were up on Monday. The DEC’08 contract closed at $5.374/bu, up 38.5¢/bu and 17.5¢/bu higher than Monday before last. JULY’09 wheat futures were up 38.0¢/bu at $5.836/bu and 14.0¢/bu higher than two weeks ago. Buying on a technically oversold market wiped out almost all of last week’s losses. Strength in outside markets, Australia’s rain-delayed harvest, and fresh demand from Iraq, Iran and U.S hog feeders and were supportive. USDA on Monday placed wheat-inspected-for-export at 22.3 mi bu compared to estimates of 13–17 mi bu. Funds remained in net bear positions, down almost 7,000 contracts even though they bought between 3,000–4,000 lots. Hopefully 30%–40% of the new crop has been priced on previous advice. Look for more pricing opportunities amid a weaker U.S. dollar and falling global stocks.

 

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