14 February 2007

6 minute read

North America

LIVE CATTLE in Chicago (CME) bounded higher on Monday. The FEB’07LC closed at $93.700/cwt, up $0.500/cwt and up $2.150/cwt over last Monday’s close. The APR’07LC closed up $0.475/cwt at $95.275/cwt. Worries for more winter weather, support from higher cash markets, and lower feed costs lifted prices. Cash cattle traded $2/cwt - $2.50/cwt higher as choice supplies were limited. The Five- Area-Weekly-Weighted average price was posted at $90.52/cwt. Recent winter storms are seen as being so hard on cattle, the market may continue to show optimism if demand remains steady. USDA put the choice boxed beef cutout up $3.56/cwt from Friday at $148.73/cwt. Beef plant margins were estimated at a positive $2.05/head, up $3.65/head from last Friday and up $22.95/head from a week ago, according to HedgersEdge.com. Corn users should consider pricing corn inputs now.

FEEDER CATTLE at the CME closed stronger on Monday. The MAR’07FC contract finished at $99.500/cwt, up $0.725/cwt. The APR’07FC contract closed up $1.825/cwt at $101.100/cwt. Feeders found support in a solid cash-feeder market and general fund buying. Higher live cattle futures, lower feed costs, and a higher CME feeder cattle index supported feeders the entire time. Feeders held through these hard winter months to proper weights are drawing a premium. Rising live cattle prices are expected to improve feeder prospects. April/March spreading by funds supported the April contract. The CME Feeder Cattle Index for February 8 was placed at $97.57/cwt, up $1.04/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 price corn inputs now.

LEAN HOGS on the CME closed up on Monday. FEB’07LH futures closed at $67.050/cwt, up $0.775/cwt. The APR’07LH closed up $0.675/cwt at $67.525/cwt. Good demand amid strong cash markets and fresh worries over more hard weather drove prices. Forecasts for more snow throughout the central U.S. beginning late Monday supported lean hogs. These conditions are seen as limiting hog deliveries even as a very ample supply was processed on Monday. The CME Lean Hog Index was placed at $66.35/cwt, up $0.33/cwt. USDA put the pork carcass cutout at $70.53/cwt, up $0.21/cwt and the highest since Sept. 19, 2006. The average pork plant margin was estimated at a positive $3.90/head, down $0.40/head from last Friday but up $9.85 from a negative $5.95/head last week at this time, according to HedgersEdge.com. Cash sellers should continue to push hogs off the feeding floors as soon as they can. Corn users should price corn inputs now.

U.S. supply, use, and stocks projections for 2006/07 corn are unchanged this month. U.S. corn production remains at 10.5 billion bu, beginning stocks at 1.967 billion bu, total use at 11.8 billion bu, putting ending stocks at 752 million bu. Projections for new-crop corn, season-average farm prices are unchanged at $3.00/bu - $3.40/bu. Corn production for Argentina was raised 2 million tons (78.7 million bu) to 21 million tons (826.7 million bu). Brazilian corn production was raised 4 million tons (15.7 million bu) to 46 million tons (1.8 billion bu). Both increases are based on good growing weather. Brazil also is forecasted to have an excellent chance at double crop corn due to good weather and higher corn prices.

U.S. Soybean production remained at 3.2 billion bu, beginning stocks at 449 million bu, total use was revised downward 20 million bu to 3.05 billion bu, and ending stocks were placed at a record 595 million bu. Exports for 2006/07 were revised downward 20 million bu from last month to 1.1 billion bu based on increased South America supply prospects and reduced global import demand. China’s projected soybean imports are revised downward to 31 million tons (1.13 billion bu) showing a slow start to the 06/07 marketing year. Soybean crush estimates were unchanged. Projections for new-crop soybean seasonaverage farm prices are up 25.0¢/bu on the low end to $5.90/bu and up 5.0¢/bu on the high end to $6.50/bu compared to $5.75/bu - $6.45/bu last month.

U.S. wheat supply, use, and stocks projections for the 06/07 crop are unchanged this month. The seasonaverage farm price is raised 5.0¢/bu on the low end to $4.20/bu but revised downward 15.0¢/bu on the high end to $4.30/bu compared to last month’s $4.15/bu - $4.45/bu. The decrease in farm price is due mainly to expectations for more production and lower consumption on the world market.

CORN on the Chicago Board of Trade (CBOT) finished lower on Monday due to fund selling and a crude oil price skid. The MAR’07 contract finished at $4.016/bu, down 1.4¢/bu. The DEC’07 contract finished at $3.984/bu, off 0.6¢/bu. DEC’08 futures finished down 1.4¢/bu at $3.764/bu. The $2.00+ / barrel decline in crude oil price weighed heavily on corn prices. Corn prices remain very volatile amid fund gains after a crude oil rally last Friday. Limiting losses in corn were strong exports and increased demand in livestock and ethanol markets. Limiting gains are expectations for a very large 2007 U.S. corn crop. The crop could jump as much as 12 million additional acres. Export prospects remain good. Cash bids in the Midwest were firm amid light producer selling. Cash prices were steady to lower for both new crop and old crop corn in the Mid-Atlantic States with old-crop corn bidding a range of $3.95/bu - $4.06/bu and new-crop bidding a range of $3.69/bu - $3/79/bu. The CFTC Commitments of Traders report for futures/options combined showed large speculators in long positions down 4,247 contracts at 364,759 contracts. Those in short positions were placed at 63,219 contracts, up 7,572 lots. Long funds were down 5,420 lots at 358,900 contracts and short funds were placed at 15,342 lots, up 1,031 contracts. Corn producers should have considered selling up to 40%-50% of the ’07 crop by now.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed lower on Monday. Soybeans felt the same downward pressure as corn from the decline in crude oil. The MAR’07 contract finished at $7.452/bu, down 4.0¢/bu. NOV’07 futures also closed off 3.2¢/bu at $7.976/bu. Corrections are much overdue after rising to multi-year highs on Friday. Funds sold 2,000 – 3,000 lots. Exports were reported under trade estimates. USDA reported that 25,8 million bu of soybeans were inspected for export last week compared to expectations for between 32 - 38 million. Cash bids for soybeans remained steady on Monday in the Midwest but were under pressure due to ample supply and the rising ending stocks forecast. Cash bids in the Mid-Atlantic States lost ground on Monday. The CFTC’s Commitment of Traders report on Friday showed large speculators expanding net long positions for the week ended February 6 at about 13,000 contracts for soybean futures/options combined. Cash sellers should have considered pricing up to 50%-60% of the ’07 crop.

WHEAT in Chicago (CBOT) ended down on Monday. MAR’07 futures closed at $4.556, down 4.4¢/bu. JULY’07 wheat finished off 4.2¢/bu at $4.786/bu. Funds sold over 2,000 contracts, according to floor sources. Spreading boosted volume as March positions were rolled forward. Market activity was still considered subdued. USDA reported 13.1 million bu of wheat were inspected for export amid trade expectations of between 18 – 22 million bu. Iraq considered 100,000 tonnes (3.7 million bu) of Syrian wheat, India’s wheat crop received much needed rain, Kazakhstan exported more than 4 million tonnes (147 million bu) and is expected to export another 3.5 million tonnes (128.6 million bu). The U.S. winter wheat crop is receiving good moisture. Cash wheat bids in the Mid-Atlantic States were weaker. It is a good idea to have up to 60% of the ‘07 crop forward priced at this time.