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Weekly Roberts Market Report

07 June 2011

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

US - Open positions in the December live cattle contract have doubled in less than three months.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed. The JUNE’11DA contract finished at $19.01/cwt; down $0.06/cwt. JULY’11DA futures finished at $20.17/cwt; up $0.17/cwt. Buyers were eager for cheese taking blocks up to $2.11, the highest in three years. Barrels were bid $2.05. Blocks have increased 16 straight days now. Class III futures settled at new highs. Spot butter declined for the 2nd day in a row.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday. The JUNE’11LC contract closed at $102.400/cwt, down $1.775/cwt. AUG’11LC futures closed at $103.325/cwt; down $1.775/cwt. The DEC’11LC contract closed at $113.700/cwt; down $1.275/cwt. The stronger US dollar was a major driver of weak prices. Floor sources said that declines in futures were LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday. The JUNE’11LC contract closed at $102.400/cwt, down $1.775/cwt. AUG’11LC futures closed at $103.325/cwt; down $1.775/cwt. The DEC’11LC contract closed at $113.700/cwt; down $1.275/cwt. The stronger US dollar was a major driver of weak prices. Floor sources said that declines in futures were driven by traders thinking that Friday’s 1.5 per cent price jump was too large. Lower grain futures and crude oil prices also pressured prices. Open positions in the December contract have doubled in less than three months. Overall open interest in all months has fallen near 15 per cent since an all-time high in April. Investors have liquidated positions after a 10-month rally. An increase in December positions indicates traders are squaring off and betting demand will be dented by high gas prices while others are betting on tight supplies as the rush to move cattle to feedlots tapers off after increases in eight of the last nine months. USDA on Monday put choice beef prices at $176.93/cwt; down $0.55/cwt. USDA put the 5-area-average at $104.72/cwt. According to HedgersEdge.com, the average packer margin was raised $68.40/head from 2 weeks ago to a positive $99.10/head based on the average buy of $105.09/cwt vs. the average breakeven of $112.97/cwt.

FEEDER CATTLE at the CME closed down on Monday. The AUG’11FC contract settled at $124.100/cwt, down $0.150/cwt. The NOV’11FC contract settled at $127.350/cwt, down $0.500/cwt. The August contract high for the day was $126.120/cwt. There is a larger supply of feeders due to high prices and drought-damaged pastures in the southwest, both of which had ranchers selling young cattle for fattening rather than breeding. Estimated receipts in Oklahoma City were put at 6,300 head vs. 12,751 a year ago. Last Monday there was no sale due to the holiday. Compared to two weeks ago steers were $2-$5 higher while heifers were steady to $2 higher. Calves were steady. Demand was consider moderate-to-good for all classes. The latest CME feeder cattle index was placed at $124.33; up $0.19.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The JULY’11 contract closed at $7.320/bu; down 22.0¢/bu. The DEC’11 contract closed at $6.670/bu; down 19.25¢/bu. Better planting weather, a firm US dollar, and falling crude oil weighed on prices. Exports were neutral with USDA putting corn-inspected-for-export at 34.142 mi bu vs. expectations for 32-35 mi bu. Hot, dry weather helped farmers get the crop in the ground. USDA put the US corn crop at 94 per cent seeded vs. the five-year average of 98 per cent and 99 per cent this time last year. More warm weather is forecast for the US Midwest and will likely give farmers a good window of opportunity t o plant the rest of the crop. Funds increased bullish positions in CBOT corn for the 2nd straight week. USDA is scheduled to release its World Agriculture Supply Demand Estimates (WASDE) report Thursday morning. Estimates for ending US corn ending stocks range from 0.565-0.780 mi bu vs. 1.708 mi bu this time last year. UDSA’s May ending stocks report was 0.73 mi bu. Weather markets will prevail soon. Now would be a good time to advance sales on 2011 corn.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The JULY’11 contract closed at $13.832/bu; down 31.25¢/bu. NOV’11 soybean futures closed 24.25¢/bu lower at $13.726/bu. Funds provided some support increasing net bull positions. Analyst ending stock estimates for US soybeans ranged from 0.142-0.195 mi bu vs. 0.170 in May and 0.151 this time last year. Monday snapped a three-day rally on improved planting weather and trader profit taking. USDA put the crop at 68 per cent planted vs. 82 per cent five-year average and 83 per cent this time last year. Declining crude oil futures and a firmer US dollar also pressured prices. Soybeans tend to follow crude prices while a strong US dollar discourages exports. Exports were bearish with USDA putting soybeans-inspected-for-export at 3.404 mi bu vs. 10.822 mi bu last week and estimates for 6-11 mi bu this week. It would be a very good idea to advance sales in the 2011 crop at this time.

WHEAT futures in Chicago (CBOT) closed down on Monday. JULY’11 futures finished 29.75¢/bu lower at $7.440/bu. The DEC’12 contract closed at $8.430/bu; off 28.0¢/bu. Volume was heavy. Expectations for lower US wheat production forecast supported prices while improved weather in Europe and the US weighed on prices. USDA’sWASDE report due for release Thursday morning is expected to show ending stocks for US wheat pegged at 0.842 mi bu. Estimates ranged from 0.824-0.868 while last May USDA put US ending stocks at 0.839 vs. 0.976 mi bu this time last year. Exports were steady-to-weak with USDA putting wheat-inspected-for-export at 22.364 mi bu vs. expectations for 22-27 mi bu. US government crop insurance payments for hard red winter wheat rose to $106 million through June 6, or nearly 80 per cent of total 2010 claims for the largest US wheat variety. Indemnity payments almost doubled from three weeks ago vs. a total of $133 million paid during 2010 for HRW. It would be good to consider holding off prices sales until next week.

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