7 March 2007

5 minute read

North America

LIVE CATTLE in Chicago (CME) soared on Monday. The APR’07LC closed at $97.350/cwt, off $0.300/cwt. The JUNE’07LC closed off $0.075/cwt at $95.425/cwt. A record open interest of 284,221 contracts was posted last Friday. Lower live cattle futures were the result of profit taking after last Friday’s run up. July/April spreading was particularly active near the close and was the cause of much of the volume on the day. Floor sources expect this spread to increase later in the week as more longs are moved from April into June. Lower corn prices encouraged the idea that feedlots would place more cattle. After a slow start, the 5-Area-Weekly-Weighted-Cattle price showed cash-cattle mostly $3/cwt higher on Monday. Prices were supported partly by the powerful snowstorm in Nebraska and Iowa last week which slowed cattle to packing plants in Texas, Kansas, and Oklahoma, according to some floor sources. Even though higher cash beef prices were supportive they couldn’t hold the whole day. USDA reported the choice beef cutout at $150.82/cwt on Monday, up $1.95/cwt from last Friday. The average beef plant margin for Monday was estimated at a negative $10.25/head, up $0.30/head from last Friday but down $13.05/head last week at this time, according to HedgersEdge.com. Cash sellers should sell cattle at the right weights waiting on this market to uptick. Now would be a good time for corn users to price some corn.

FEEDER CATTLE at the CME closed down on Monday. The MAR’07FC contract finished at $103.775/cwt, off $0.125/cwt but still $2.725/cwt higher than last Monday. The APR’07FC contract closed off $0.200/cwt at $105.325/cwt but $1.525/cwt higher than last week at this time. Feeders traded opposite CBOT corn most of the day finishing lower when corn gained at the end. Lower live cattle also weighed on CME feeders even as a rising CME Feeder Cattle Index provided support to futures. The latest CME Feeder Cattle Index for March 1 was $99.29/cwt, up $0.59/cwt. Cash sellers should think about taking feeders a little heavier, even to ‘8 weights, while pricing a portion of feed inputs at this time.

CORN on the Chicago Board of Trade (CBOT) finished up on Monday on the back of early speculative sales and short coverings amid commercial buying late in the day. The MAR’07 contract finished at $4.172/bu, up 6.2¢/bu. The DEC’07 contract finished at $4.086/bu, up 2.0¢/bu. DEC’08 futures finished up 0.2¢/bu at $3.794/bu and lower by 12.2¢/bu from this time last week. End user buying, U.S. stock market stabilization, and the steam running out of long liquidations allowed futures to recover. U.S. corn inspected for export for the week ended March 1 came in at 51.630 million bu compared to the estimated export range of between 42-47 million bu. This was good news as exports were 40+% more than last week. Corn inspections for the 06/07 marketing year are up almost 17% from this time last year at 926.182 million bu. Meanwhile, China’s state-owned grains bureau said late Monday that it most likely would not be importing any corn this year due to a record Chinese harvest of 144 million tonnes (5.6 billion bu). Large speculators bought 5,800 December ‘07 contracts while 1,300 May corn contracts and 1,200 December corn contracts ended up on the sold side. Something interesting now influencing floor trading is the e-CBOT platform. Day session volume for the venue was 141,246 lots … tremendous! The CFTC’s Commitments of Traders report issued last Friday showed, as of last Tuesday, large speculators in bull positions were at 403,744 contracts, down 5,906 lots while those in bear positions were down 5,187 lots at 57,696 contracts. Index funds in long positions were placed at 371,204 lots, up 2,951 contracts while those in short positions were down 5,700 lots at 9,484 contracts. Cash corn in the Midwest was steady to firm amid strong demand while Mid-Atlantic cash corn was higher on good elevator demand. Weather is beginning to concern some traders as they look at a potentially wet spring delaying corn plantings. Ethanol futures ended steady to higher. The MAR’07 ethanol contract finished at $2.320/gal, 0.025¢/gal higher while APR’07 ethanol futures ended unchanged at $2.200/gal. Corn producers should sit tight on this technical correction in the market. This market shows some promise of upward movement yet.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed lower on Monday. Soybeans were pressured lower on weakness in global stock markets and falling gold and crude oil prices. The MAR’07 contract finished at $7.356/bu, down 3.2¢/bu and 43.0¢/bu lower than this time last week. NOV’07 futures also closed off 3.4¢/bu at $7.876/bu and 44.4¢/bu lower than a week ago. Long positions were liquidated by funds across the soy complex. Things calmed down after the U.S. stock markets stabilized. Prices plunged when China’s main stock market index fell 9% last week. Funds sold between 2,000-3,000 soybean futures. Volume was not considered large. USDA reported export inspections at 24.8 million bu compared to range estimates of between 20-25 million bu. Large March deliveries remind us of bearish weakness in this market. There were over 900 deliveries of March soybeans. CFTC’s Commitment of Traders report last Friday showed large speculators expanding net longs in soybeans and soyoil but cutting long positions in soymeal. The South American soybean harvest is going very well with strong yields. Cash soybeans in the Midwest were steady with Mid-Atlantic State soybeans bids weaker in this weak futures market. Cash sellers with 50%-60% of the ’07 crop priced are in good shape. Buying a put option against those contracts may provide some protection against the downside.

WHEAT in Chicago (CBOT) rebounded well on Monday with MAR’07 futures closing at $4.680/bu, up 8.4¢/bu. JULY’07 wheat finished up 6.2¢/bu at $4.914/bu. This wheat market on Monday shrugged off weakness from outside commodity markets on short coverings. Funds were net longs today buying 2,000 contracts. USDA reported inspecting 18.4 million bu compared to expectations of between 20-25 million bu. Compared to this time last year, wheat inspections are down about 15% at 653.7 million bu. Friday’s CFTC Commitments of Traders report showed funds shifting to net long positions in CBOT wheat at 1,347 lots for the week ended February 27. Index funds grew net long positions from the previous week by 2,089 lots to 194,427 contracts. Deliveries in CBOT March wheat were heavy at times finishing at 2,433 lots as weather remains mostly favorably for U.S. winter wheat. Producers with up to 60% of the ‘07 crop forward priced at this time are in good shape.