Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 6 February 2007
clock icon 7 minute read
LIVE CATTLE in Chicago (CME) bounded higher on Monday. The FEB’07LC closed at $91.650/cwt, up $0.600/cwt and up $1.050/cwt over last Monday’s close. The APR’07LC closed up $0.850/cwt at $95.325/cwt and higher by $1.925/cwt over last Monday’s close. Late session profit-taking put a lid on gains as fund buying and higher live cattle prices supported the market. Cold weather has stalled weight gains and feedlot operators are not willing to sell light, discounted livestock. The Five-Area Average cattle prices showed $1/cwt - $1.50/cwt higher on Monday trading at $87.50/cwt - $88.00/cwt. Cash cattle look like they could trade up another $1.00/cwt - $1.50/cwt this week. That is possible if these temperatures hold and packers get more edgy about supplies. USDA put choice boxed beef on Monday at $14.91/cwt, up $0.69/cwt. Packer margins were in the red on Friday. According to HedgersEdge.com, the average beef plant margin for Monday was estimated at a negative $20.90/head, up $6.50/head from a negative $27.20/head on Friday but down $23.85/head from a positive $2.95/head last week at this time. Cash sellers are still encouraged to sell cattle at the right weights. It is still wise to consider protecting a portion of 3rd quarter, ’07 marketings at this time. Corn users should hold off pricing corn inputs now having priced some at good prices last week.

FEEDER CATTLE at the CME closed higher again this Monday. The MAR’07FC contract finished at $97.200/cwt, up $1.575/cwt and up $1.800/cwt over last Monday. The APR’07FC contract closed up $1.675/cwt at $99.425/cwt. SEP’07FC futures were the biggest gainer on the day closing up $1.700/cwt at $101.500/cwt. This bitter cold supported the market as it pushed feeders already affected by winter storms back. Cash feeders are expected to stay strong through next week offering more pricing opportunities for feeder cattle sellers. Friday’s U.S. Cattle on Feed report showed numbers decreasing. The largest adjustments came in the 2006 calf production and in cattle weighing under 500 lbs. This may be a sign of that anticipated gap in production this column has been expecting. Feeders are also expected to stay on pasture longer in the spring due to improved pasture conditions from winter moisture and higher expected feed costs. The CME Feeder Cattle Index for Friday, Feb. 2 was $94.43/cwt, up $0.01/cwt. Cash sellers should think about finishing those feeder calves in proper fashion to take advantage of these prices. Hedgers may be wise to consider protecting a portion of 1st quarter ’07 and 2nd quarter ’07 marketings. Corn users should hold off pricing corn inputs now having priced some at good prices last week.

LEAN HOGS on the CME closed off on Monday. FEB’07LH futures closed at $64.675/cwt, off $0.675/cwt but still $0.600/cwt higher than last Monday. The APR’07LH closed off $0.725/cwt at $67.575/cwt. Profit taking by technical traders was egged on by recent contract highs and concerns that more hog sales will be held up by the extreme winter. Liquidation ahead of deliveries was also noted on the FEB’07LH contract and amid expectations of ramped-up deliveries of hogs starting once the cold weather breaks. Higher feed costs seem to be cutting hog herd expansion. These expectations are supporting back months at this time. USDA put the pork carcass cutout at $64.70/cwt, up $0.87/cwt on Friday. The CME reported the latest lean hog index at $63.12/cwt, up $0.47/cwt. The average port plant margin for Monday was estimated up $1.50/head from Friday’s report at a negative $.595/head on Friday but down $6.30/head from one week ago, according to HedgersEdge.com. Cash sellers should continue to push hogs off the feeding floors as soon as they can. Hedgers should consider positions that will protect 1st quarter ‘07 and 2nd quarter ’07 pork production. Corn users should hold off pricing corn inputs now having priced some at good prices last week.

CORN on the Chicago Board of Trade (CBOT) finished on the lean side amid profit taking by speculators after strong gains on Friday. The MAR’07 contract finished even at $4.02/bu. The DEC’07 contract finished at $3.950/bu, off 2.2¢/bu but nearly even with last Monday’s close. DEC’08 futures finished down 1.4¢/bu at $3.776/bu but up 0.46¢/bu from last Monday. Weighing the market down were expectations of a bigger 2007 corn crop. The ProFarmer survey shows an increase of up to 12 million more acres of corn being planted this spring. With not much else going on in the market corn futures seem to be merging ahead of planting season. Corn inspected for export for the week ended Feb. 1 totaled 32 million bu amid an expected range of between 35-40 million bu. Expectations that South Korea and Taiwan will not be placing any orders this week due to rising corn and soybean prices didn’t help either. Ethanol fever is still fueling demand and increasing livestock and grain end-user stress levels. So much so that on Friday USDA Secretary Mike Johanns told U.S. cattle producers the government will try its best to encourage other ways of making ethanol. Crop weather is on track for good crop production in both South America and the United States. Cash corn was steady in the Midwest due to farmers holding back on sales. Sales were brisk in the Mid-Atlantic States as elevators increased local bids to $3.92/bu- $4.44/bu. Monday’s volume on the CBOT was estimated at 121,822 contacts. The CFTC Commitments of Traders report for futures/options combined on Friday showed large speculators in long positions decreasing by 4,613 lots ending up at 369,006 contracts. Large speculators in short positions were up 157 lots at 55,647 contracts. Index funds in long positions also decreased positions to 364,320 contracts, down 5,770 lots from the previous week. Funds in short positions were up 407 contracts at 14,311 lots. Ethanol futures ended higher, with the February ending $0.06/gal higher at $2.085/gal. Corn producers should consider selling up to 40%-50% of the ’07 crop. On Monday, buying a July $4.20/bu Put option cost 31.5¢/bu to establish a $3.86/bu floor. It may be worth considering protecting any contracted corn’s down side. That statement is just for the must-have-an-option folks. This market is so volatile right now it could go anywhere from here. With no fresh fundamental news it will most likely remain in this choppy, sideways pattern.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed higher on Monday amid expectations of plunging U.S. soybean acres. The MAR’07 finished at $7.400/bu, up 3.2¢/bu and higher by 30.6¢/bu over last Monday’s close. The NOV’07 also closed 3.2¢/bu at $7.930/bu and 30.0¢/bu higher than last week at this time. The ProFarmer survey released last Friday expects 2007 U.S. soybean acres losing as much as 9.5 million acres to corn. South American soybean acre reports are showing some signs of dropping acres as well. Market volatility turned strong by noon. USDA placed U.S. soybeans inspected for exports at 35.6 million bu, higher than expectations of 26-31 million bu. Cash offerings for soybeans in the Midwest early Monday were weaker as farmers held beans not wanting to get out in this cold weather. Cash soybeans in the Mid-Atlantic States were very strong, bidding at a range of $6.87/bu - $7.37/bu for old crop beans and between $7.50/bu - $7.90/bu for new crop soybeans. For the week ended January 30, the CFTC Commitments of Traders report showed large speculators expanding net long positions slightly but funds culling net long positions by 161 contracts to 133,886 lots. Cash sellers should consider pricing up to 50%-60% of the ’07 crop. Hedgers are still keeping a watchful eye on this market for any bearish signals. An $8.00/bu, NOV’07 Put traded for $0.686/bu on Monday. It might be wise to establish a price floor against any contracts.

WHEAT in Chicago (CBOT) ended down a range of 2.0¢/bu – 5.0¢/bu on Monday. MAR’07 futures closed at $4.584, down 2.6¢/bu from the last closing and off 2.0¢/bu from last Monday’s close. JULY’07 wheat also finished off 2.6¢/bu at $4.804/bu but 2.0¢/bu higher than last week at this time. Today’s trading is viewed is a subdued chart-based setback from last Friday’s action. Fund positions stayed even from last Friday. Potential for extreme cold to kill late-planted or shallow-planted winter wheat lent support to the market. However, most reports show production specialists doubting crop-damaging potential for right now. USDA export inspections were supportive with USDA placing wheat inspected for export at 23 million bu, higher than the expected 17-21 million bu. Iraq was scheduled for 1.8 million bu. After the markets closed on Monday USDA estimated that U.S. wheat harvested acres for the 2007 crop would come in at 60 million acres, 2.7 million acres more than the 2006 crop. USDA placed U.S. wheat production at 2.170 billion bu for the 2007 crop. This is 35.8 million bu higher than the 2006 crop. Last Friday’s CFTC’s Commitments of Traders report for the week ended January 30 had large speculators cutting net long positions in CBOT wheat futures/options to 7.488 lots. Index Funds expanded net long positions in CBOT wheat to 191,428 contracts, up 908 lots. Cash wheat bids in the Mid-Atlantic States were firm at a range of $3.98/bu to $4.33/bu. It is a good idea to have up to 60% of the ‘07 crop forward priced at this time. A $4.80/bu Put option on JULY’07 futures cost 27.2¢/bu on Monday. A July Put option may be worth a look at this time.

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