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Weekly Roberts Report

24 November 2010

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

US - The December 2010LC contract closed up $0.825/cwt at $99.225/cwt and $0.825/cwt over last report, reports Mike Roberts.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished up on Monday. The DEC’ 10LC contract closed up $0.825/cwt at $99.225/cwt and $0.825/cwt over last report. The APR’ 11LC contract closed at $106.375/cwt, up $1.125/cwt and $0.10/cwt higher than a week ago. Fat cattle rebounded from Friday’s sharp declines. Higher boxed beef activated some buy stops. Show lists in Nebraska were larger than expected and cash cattle reports showed sales in the $98-$98.50/cwt range. USDA put the 5-area price at $98/cwt; up $0.36/cwt from last report. USDA early Monday put the choice boxed beef price at $158.19/cwt; up $0.96/cwt and $1.25/cwt lower than this time last week. Exports were supportive even though there were some concerns regarding South Korea’s future export commitment. USDA put September’s beef exports to South Korea 243 per cent over this time last year and total US. beef exports to all countries were up 14.2 per cent over last year. Beef exports to China and Hong Kong were up over last year 232.7 per cent and 172.4 per cent respectively. Beef imports during September declined 11.8 per cent from a year ago to 156.4 mi lbs. According to HedgersEdge.com, the average packer margin slid $4.35/head to a negative $3.55/head based on the average buy of $97.62/cwt vs. the average breakeven of $97.36/cwt.

FEEDER CATTLE at the CME finished up somewhat on Monday. The NOV’10FC contract finished at $112.400/cwt, even with last Friday’s close but $1.150/cwt over last report. APR’11FC futures finished at $116.325/cwt; up $0.500/cwt and $2.450/cwt higher than last week at this time. Feeders traded mostly higher on spillover from live cattle. Gains were limited by the rally in corn futures but the general recovery in commodities amid tight feeder numbers and firm cash prices were supportive. Feeder demand at the Oklahoma City feeder auction was steady to $2/cwt higher to near $111.50/cwt. Estimated receipts were put at 9,500 head vs. last Monday’s receipts at 11,814 head and 11,444 head a year ago. The CME feeder cattle index was placed at 111.46/lb; up 0.16/lb but 0.19/lb lower than last report.

CORN futures on the Chicago Board of Trade (CBOT) were gainers Monday. DEC’10 corn futures closed up 21.5 ¢ /bu at $5.443/bu; but 28.75 ¢ /bu lower than last report. The MAR’11 contract closed at $5.569; up 21.0 ¢ /bu but 35.5 ¢ /bu cents lower than last week at this time. The DEC’11 contract closed at $5.190; up 9.75 ¢ /bu but 34.0 ¢ /bu lower than a week ago. Technical conditions from Friday and news boosting hopes of US. corn going to China were supportive. Hedge funds bought over 15,000 lots while managed funds cut net long positions. USDA put corn-inspected-for-export at 25.904 mi bu vs. expectations for 29-31 mi bu. News late in the day that China was in export negotiations with Argentina and US. export sales of 281,000 tonnes (11.06 mi bu) and 120,000 tonnes (4.72 mi bu) to South Korea and Egypt respectively fueled buying. Chinese and Argentinean agriculture ministers held discussions over the possibilities of China buying several million tonnes of corn from Argentinean. Any large sales of Argentinean corn to China would open the door for US. corn to make it into markets normally supplied by Argentina. Strength in the US. dollar kept prices in check. A strong dollar normally pressures US. commodity prices, since it makes US. corn more expensive to other countries. Strong fundamentals are still in place to support corn prices. It would be a good idea to price up to 50 per cent of the 2011 crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) finished up on Monday. JAN’11 futures closed at $12.864/bu, up 17.5 ¢ /bu. The MAR’11 contract closed at $12.936/bu; up 16.75 ¢ /bu and 10.5 ¢ /bu over last report. NOV’11 soybean futures closed up 17.0 ¢ /bu at $11.940/bu but 20.75 ¢ /bu under last report. Soybeans rebounded on a chart signals after being overbought last Friday. Funds bought over 7,000 lots. Exports were neutral with USDA putting soybeans-inspected-for-export at 55.532 mi bu vs. expectations of 56-60 mi bu. Good weather forecasts for soybean growing areas of Brazil and Argentina kept prices in check. It would be a good idea to hold at 50 per cent sold in the 2011 crop. If not there already it would be a good idea to get there.

WHEAT futures in Chicago (CBOT) finished up on Monday. The DEC’10 wheat contract closed at $6.726/bu; up 3.5 ¢ /bu but 63.75 ¢ /bu lower than a week ago. JULY’11 futures finished up 3.75 ¢ /bu at $7.484/bu; 62.0 ¢ /bu lower than last report. Late Monday USDA put the US. wheat crop in good-to- excellent shape at 46 per cent, the lowest mid-November rating since 2001. Spillover support from corn and soybeans; a technical bounce off Friday’s trade; and persistently dry conditions in the US. Plains and Australia were supportive. Funds sold an estimated 4,000 lots. Exports were steady-to-weak with USDA putting wheat inspected-for-export at 15.320 mi bu vs. expectations for 18-20 mi bu. Floor sources said the wheat market is trying to find technical direction. Opportunities to price the 2011 and 2012 crops persist. It would be a good idea to take advantage of these opportunities.

LEAN HOGS on the CME finished up on Monday. DEC’10LH futures finished at $69.625/cwt; up $0.650cwt and $2.475/cwt over a week ago. The FEB’11LH contract closed up $0.450/cwt at $75.025/cwt and $0.85/cwt higher than last report. The APR’11LH contract closed at $78.450/cwt; up $0.500/cwt but $0.70/cwt lower than this time last week. Hogs followed higher despite early pressure from the premium of futures to cash and weak cash hog markets. December futures were supported by unwinding bear spreads. Traders were buying December futures and selling February and April. USDA’s average pork cash price was placed at $76.78/cwt; up $0.61/cwt and $0.39/cwt over last report. Russia’s announcement that it would limit its ban on frozen poultry rather than implement a total ban was supportive. Russia is a major importer of US. meat. Higher corn prices pressured prices somewhat. According to HedgersEdge.com, the average packer margin was lowered $7.40/head to a positive $21.05/hd based on the average buy of $57.33/cwt vs. the average breakeven of $54.94/cwt. The CME lean hog index was placed at 63.59 ¢ /lb; up 0.49 ¢ /lb and 1.66/lb higher than this time last week.

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