12 October 2010

5 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday except for two nearby contracts; the October 2010 and the December 2010. The OCT’10LC contract closed at $95.350/cwt; off $0.850/cwt but $0.25/cwt up from last Monday. The DEC’10LC contract closed down $0.125/cwt at $98.750/cwt but $1.450/cwt over last report. The APR’11LC contract closed at $104.325/cwt, up $0.250/cwt and $4.925/cwt over last week at this time. The October and December contracts were pressured by profit taking, weak packer demand, and thin fund buying. Soaring corn prices kept the lid on live cattle futures. USDA put the 5-area price at $95.91/cwt; $0.36/cwt lower than last report. USDA early Monday put choice boxed beef at $153.16/cwt; up $1.35/cwt from Friday and $0.63/cwt over last report. Surveys of several feed lots indicate that buyers are under pressure from higher corn costs. Cattle finishers said they would be cutting back on their buying and selling cattle on hand as soon as possible. One lot operator said she would be willing to sell cattle a little lower rather than feed them for the rest of the week. The break even for her was Thursday on over 1500 head. Exports were supportive. According to HedgersEdge.com, the average packer margin was unchanged from a week ago being placed at a negative $24.25/hd based on the average buy of $95.50/cwt vs. the average breakeven of $93.58/cwt. Hopefully several month’s feed were priced around October 4th on the downtick in corn futures. There is strong evidence that corn futures are bound for higher ground. A good risk management strategy to put a floor on prices should be in place.

FEEDER CATTLE at the CME closed mixed on Monday. The OCT’10FC contract finished down $0.575/cwt at $107.150/cwt and $2.250/cwt lower than last week at this time. The NOV’10FC contract finished at $107.125/cwt, down $0.525/cwt and $2.650/cwt off from last report. APR’11FC futures finished at $109.700/cwt; up $0.40/cwt. Higher corn futures and mixed prices from fat cattle pressured feeder futures. Late spreading into deferreds supported some contracts. The Oklahoma City National stockyards showed moderate demand for feeders with estimated receipts placed at 8,300 head vs. 7,407 head last Monday and 11,254 head a year ago. Feeder steers and heifers were $2-$3/cwt lower and steer and heifer calves were $5-$8/cwt lower. Calf buyers were being very selective for age and flesh conditions as cooler weather approached. The CME feeder cattle index was placed at 109.78/lb; down 0.37.0/lb lower from last Friday and 0.25/lb under last report.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. DEC’10 corn futures closed up 27.5¢/bu at $5.556/bu; 84.25¢/bu higher than last report. The MAR’11 contract closed at $5.650/bu; up 27.25¢/bu and 82.0¢/bu higher than last Monday. The DEC’11 contract closed at $5.140/bu; up 2.75¢/bu and 47.75¢/bu over last Monday. The rally continued for the third straight day near two-year highs. An estimated 536,284 lots traded hands; just under the record of 556,034 contracts. The trade continued to focus on USDA’s report from last Friday that sharply cut this year’s US corn crop outlook. USDA lowered this year’s production estimate from last year’s record of 13.1 bi bu to 12.7 bi bu on an estimated yield/ac of 155.8 bu. Last year’s production finished at164.7 bu/ac. At the same time, high consumption levels and demand for corn exports are taking US corn supplies to their lowest levels in 14 years. The stocks-to-use ratio is at the lowest level in 15 years. Prospects that the Chinese grain harvest will exceed last year’s crop kept the lid on prices. Cash corn bids were steady-to-firm as farmers have sold most of the crop already are waiting on higher prices. Many analysts are saying $6/bu corn is not out of the question now.

SOYBEAN futures on the Chicago Board of Trade (CBOT) finished up on Monday. NOV’10 futures closed at $11.524/bu, up 17.5¢/bu and 98.5¢/bu higher than last report. The MAR’11 contract closed at $11.722/bu; up 19.0¢/bu and 99.75¢/bu over a week ago. NOV’11 soybean futures closed up 1.5¢/bu at $11.314/bu; 84.25¢/bu higher than last week at this time. The USDA report last Friday was also bullish for soybeans and the rally in CBOT corn futures was supportive. Trading volume was estimated at a record 316,996 lots; 22,896 contracts more than the previous record of 294,100 lots. Tight global supply outlook, trimmed US production, and ending stocks cut in Friday’s USDA crop report provided the catalyst for limit price moves last Friday. To date, Brazilian producers have sold just over 20 per cent of the 2010/11 soybean crop. Higher price levels have not slowed China’s year-to-year increases in imports. China is the global leader in soybean imports and the number one buyer of US supplies. Cash soybeans were steady-to-weaker amid brisk farmer harvest selling. Having sold most of the 2010 crop it is not necessary to sell more as soybeans are showing more upside potential.

WHEAT futures in Chicago (CBOT) finished down on Monday. The DEC’10 wheat contract closed at $7.092/bu; down 10.0¢/bu but 62.0¢/bu over last Monday. JULY’11 futures finished off 6.75¢/bu at $7.582/bu but 61.75¢/bu higher than a week ago. Profit taking weighed on prices. News that the Ukraine harvest is down 93 per cent from the sown acreage was supportive. An estimated 87,432 contracts traded vs. the 30-day average of 72,189 lots. Fresh fundamental news is needed to push prices higher. Wheat futures soared during the summer on supply fears amid fears that a historic Russian drought would threaten global supply. Hopefully sales of 2011 wheat were advanced to 85 per cent last week.