28 February 2007

4 minute read

North America

LIVE CATTLE in Chicago (CME) soared on Monday. The FEB’07LC closed at $94.975/cwt, up $0.800/cwt. The APR’07LC closed up $1.125/cwt at $97.300/cwt. All months set new contract highs. The latest USDA Cattle on Feed report encouraged the market showing lower numbers than last year. Friday’s USDA report was very bullish. USDA placed January placements 23% lower than last year at this time. Marketings were 2% higher than last year but lower than expected by the market. This is the fifth month placements have run behind last year but the first time in almost a year and a half that supplies on feed were lower than last year at this time. Technical buying sped up gains with some rolling long positions in the April into June by funds. “As usual, funds were relentless buyers,” one floor source was quoted. The February gains surprised everyone two days ahead of its expiration. USDA early on Monday put the choice boxed beef cutout at $149.80/cwt, up $0.41/cwt. According to HedgersEdge.com, the average beef plant margin for Monday was estimated at $2.80/head, down $9.75/head from Friday and $44.75/head from a week ago. Cash sellers should push cattle off the feeding floor as soon as they are ready. Corn users should not price corn at this time trying to catch it on the down tick.

FEEDER CATTLE at the CME closed up on Monday. The MAR’07FC contract finished at $101.050/cwt, up $1.725/cwt. The APR’07FC contract closed up $1.875/cwt at $103.800/cwt. Both contracts were up near $2.00/cwt from two weeks ago. The October through the January 2008 placed fresh highs. Feeders rallied on buy-stops and active fund buying when commercial selling fell through early on. Floor sources said fund buying dominated everything. Live cattle proved supportive even after weak cash sales last week. Feeder cattle rallied on technical strength showing what looks like a break out on the charts. Friday’s cattle-on-feed report was supportive improving interest in feeders due to slack feedlot supplies. The CME Feeder Cattle Index for Feb. 22 was $98.17/cwt, down $0.26/cwt. Cash sellers should think about finishing those feeder calves in proper fashion to take advantage of these prices. Corn users should not price corn at this time trying to catch it on the down tick.

CORN on the Chicago Board of Trade (CBOT) finished lower again on Monday due to fund selling and profit taking into sell-stops. The MAR’07 contract finished at $4.254/bu, down 4.6¢/bu. The DEC’07 contract finished at $4.180/bu, off 2.6¢/bu but over 9.0¢/bu higher than two weeks ago. DEC’08 futures finished down 1.2¢/bu at $3.916/bu. The market is technically overbought with the 14-day Relative Strength Index for DEC’07 corn futures at 71.45. An RSI over 70 is considered an overbought market. This left corn in a position susceptible to wild price swings and some profit taking. A very large volume was registered on Monday with 329,049 futures and 93,877 options compared to 273,171 futures and 89,915 options traded last Friday. The nearby contract changed positions by as much as 12.0¢/bu on Monday at times as weather put a damper on spring planting expectations amid strong demand in the livestock, ethanol, and energy sectors. These prices have U.S. farmers getting ready to plant a lot of corn as any little worry to the corn crop bounces the corn market around amid the current uptrend in crude oil. Corn producers who haven’t considered selling up to 40%-50% of the ’07 crop by now should do so. There should be no old crop corn in the bins.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed a little better on Monday. Soybeans felt some downward pressure as corn declined. The MAR’07 contract finished at $7.786/bu, up 0.4¢/bu. NOV’07 futures also closed up 1.2¢/bu at $8.320/bu. Soy oil soared as crude made gains. Profit-taking in corn limited gains in soybeans. Some are thinking that soybean plantings may be limited due to wet weather. Commodity funds were strong buyers of soybeans buying 1,000 contracts. Weekly export inspections were lower than the expected 32-37 million. Fridays CFTC Commitments of Traders report showed large speculators growing net long positions in soybean futures but decreasing net long positions in options for February 20. Cash soybeans were steady on Monday in the Midwest to 5.0¢/bu lower in the Mid-Atlantic States. Cash sellers should have considered pricing up to 50%-60% of the ’07 crop.

WHEAT in Chicago (CBOT) ended lower on Monday amid profit taking and spillover from the corn markets. MAR’07 futures closed at $4.830, down 1.2¢/bu. JULY’07 wheat finished off 2.4¢/bu at $5.062/bu after pegging a new contract high at $5.18/bu. Funds were net even in trading. Soybeans lost ground due to huge holdings in long positions in CBOT corn futures by large speculators and hedge funds leaving this market vulnerable to price swings. Even as Egypt refused to buy U.S. wheat over the weekend USDA lists export data that is supportive. Export inspections for U.S. wheat were placed at 23.1 million bu, more than the 18-22 million expected. All wheat exports were down in other countries. Weather continued to be a friend to U.S. wheat. 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.