Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 6 June 2007
clock icon 6 minute read

LIVE CATTLE on the Chicago Mercantile Exchange (CME) finished up on Monday in an increasingly tighter trading pattern. The JUNE’07LC contract closed at $91.125/cwt, up $0.325/cwt but $2.475/cwt lower than two weeks ago. The AUG’07LC contract continued very volatile and was the most active on Monday closing at $90.675/cwt. This was even with last Friday’s close but $2.725/cwt lower than two weeks ago. Gains early in the day were seen as feedlots covered short hedges after last Friday’s lively cash markets. By the end of trading on Monday floor activity slowed to a crawl, according to two Chicago floor sources. Spreading in the June/August was noted. USDA reported the 5-area-weeklyweighted price for live cattle at 92.89cwt, down $1.65/cwt from last week but $12.15/cwt higher than last year at this time.

5 Area Weekly Live Steer price

Cash cattle in the US Plains on Friday were $1/cwt-$2/cwt lower at $93/cwt-$93.50/cwt. USDA on Monday put the choice beef cutout at $155.76/cwt, up $0.90/cwt. Problems with exports to South Korea were noted. South Korea said it will return 66.4 tonnes of US Beef because of a discovery of some US beef not approved for export to that country. It also issued a statement temporarily banning imports from two plants owned by Tyson and two plants owned by Cargill. Both companies put the blame on customers who wrongly shipped the beef to South Korea. According to HedgersEdge.com, the average beef plant margin for Monday was $13.25/head, up $4.80/head from Friday. Cash sellers are strongly encouraged to get cattle sold again this week on what looks like a near-term rally. Try to catch a downturn in the corn market to price near term grain needs.

FEEDER CATTLE contracts at the CME finished up on Monday bucking corn prices supported by momentum in live-cattle. The AUG’07 contract closed at $111.025/cwt, up $0.775/cwt but $2.675/cwt lower than two weeks ago. Short covering in this market also helped feeders. August found support above $110.00/cwt which several floor-trading sources viewed as a technical support signal. The market pretty much ignored higher corn prices. The CME Feeder Cattle Index for May 31 was unchanged at $107.82/cwt. It still looks like it will pay off to sell heavier feeders in the short run. The corn market is not offering a chance to buy more short-run corn needs at this time but try to catch an off-day in grains to do so. Grains are expected to remain very volatile in these weather markets.

LEAN HOGS on the CME closed mixed on Monday. The JUNE’07LH contract finished at $74.55/cwt, off $0.325/cwt and $0.775/cwt lower than two weeks ago. JULY’07LH futures was the most actively traded. It closed at $75.375/cwt, up $0.225/cwt and $1.05/cwt higher than two weeks ago. Weighing on cash hog prices were poor pork plant margins from last week. These are seen as slowing down hog slaughter. Bullish funds pushed the rest of the 2007 contracts higher amid talk of seasonal strength expected later in the summer. The CME Lean Hog Index was reported at $74.94/cwt, down $0.42/cwt. The average pork plant margin for Monday was estimated at $0.65/head, up $2.35/head from Friday, according to HedgersEdge.com. Cash sellers should keep hog sales current. Hog feeders should try to price grain inputs on the low points of this volatile grain market.

CORN on the Chicago Board of Trade (CBOT) closed mostly higher on Monday. The July’07 contract was the most active finishing at $3.836/bu, off 3.0¢/bu but 2.6¢/bu higher than two weeks ago. The DEC’07 and DEC’08 contracts both finished even with last Friday’s closing bell. The DEC’07 contract finished at $3.830/bu, up 2.7¢/bu from week before last. The DEC’08 contract finished at $3.984/bu. Trading was choppy and range-bound compared to last week’s rally. What can I say but … weather, weather, weather! These front months lost ground because of fund-spread unwinding and good growing weather in the US Midwest. There were statements this morning that the technicals were pointing toward an overbought status but frankly I don’t see it. Contrary to trader’s early expectations of a 0%-4% poorer crop rating, USDA placed the crop condition on Monday afternoon at 78% good-to-excellent. This, and profit taking could lead to lower corn prices the rest of the week. USDA placed US corn inspected for export last week at 37.242 million bu, below estimates of between 39-44 million bu and lower than last week export numbers by over 6 million bu. Cash corn on Monday was steady to firm in the US Midwest while somewhat weaker in the US Mid-Atlantic States. Local (Virginia) corn basis was 3¢/bu– 5¢/bu weaker on Monday. Ethanol futures were off a range of 1¢/gal-2.7¢/gal at the close on Monday however, stronger crude oil, gasoline prices, and soybean prices were supportive of corn near the end of trading. CFTC’s Commitment of Traders report issued last Friday shows large speculators as of May 29 cutting net bullish positions by almost 14,000 contracts to 105,595 lots. Cash sellers should have considered pricing up to 40%-50% of next year’s production on previous advice keeping the rest to speculate with. It’s still not too late to get to that level.

SOYBEAN futures on the Chicago Board of Trade (CBOT) ended mostly lower on Monday. The JULY’07 contract closed at $8.156/bu, off 1.6¢/bu from Friday but 15.2¢/bu higher than last week at this time. NOV’07 futures also closed off 1.0¢/bu from Friday at $8.462/bu but higher by 17.0¢/bu from two weeks ago. The large amount of speculative activity indicates that current fundamentals of large global stocks may be overcome by speculators. As with corn and wheat, weather is playing its role. Good growing weather has been forecast for the US Midwest and Southeast for the next 10-14 days. China is experiencing drought conditions over much of its soybean acreage. USDA on Monday placed the US soybean crop at 71% good-to-excellent, about the same as this time last year. Also on Monday, USDA put soybeans inspected for export at 5.4 million bu, well below expectations for between 10-16 million bu. Cash soybeans were steady to mixed in the US Midwest early Monday while holding their own in the US Mid-Atlantic States. Most all bean contracts were nearing overbought status with the NOV’07 contract showing a 68.14, nine-day Relative Strength Index (RSI). A contract is said to be overbought at or above a 70 RSI and oversold at or below an RSI of 30. The CFTC Commitment of Traders report had large speculators increasing net long positions in soybeans by about 3,000 lots to 101,710 contracts as of May 29. If you have not priced up to 60% of the 2007 crop by now you might want to think about doing so … quickly.

WHEAT futures in Chicago (CBOT) closed mixed on Monday with deferreds up. JULY’07 wheat futures finished off 0.4¢/bu at $5.202/bu. This is 40.8¢/bu higher than two weeks ago! Bullish corn, lower global stocks, and weather concerns are seen as confusing this market. Wet weather in the US Plains is seen as promoting disease problems while dry weather in both the Ukraine and Russia are jeopardizing those country’s yields. Ukraine ordered a ban on grain exports due to drought but gave no specific dates. Egypt bought 240,000 tonnes (8.8 million bu) of which 180,000 tonnes (6.6 million bu) were soft red winter wheat. India is reportedly seeking 212,000 tonnes (7.9 million bu) of wheat. USDA on Monday said that 15.9 million bu of US wheat were inspected for export last week amid trade estimates for 17-24 million bu. The CFTC Commitment of Traders report placed large speculators in 6,000 fewer short positions at 15,799 contracts. This is a very good opportunity for producers who have not priced between 60%-80% of the ‘07 crop to do so.

July 2007 Wheat, June 4, 2007

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