Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 13 June 2007
clock icon 6 minute read

LIVE CATTLE on the Chicago Mercantile Exchange (CME) finished mixed on Monday in an increasingly tighter trading pattern. The JUNE’07LC contract closed at $90.65/cwt, up $0.925/cwt but $2.950/cwt lower than two weeks ago. The AUG’07LC contract continued to be very volatile and was the most active on Monday closing at $90.000/cwt, up $0.40/cwt. Some short covering was noted in the oversold front-months. A contract is said to be oversold if the Relative Strength Index (RSI) is at 30 or below. An RSI of 70 or above indicates a contract is overbought. Bull spreading out of back months into the June contract was noted as live cattle contracts trailed because of higher corn. The 5-area-weeklyweighted- average cattle price for steers was $1.00/cwt-$1.50/cwt lower than last week but still over $12.00/cwt higher than last year at this time. Some support was found in good clearance of retail beef amid firmer choice-beef prices. USDA early on Monday put the choice-beef cutout at $149.91/cwt, up $0.20/cwt. According to HedgersEdge.com, the average beef plant margin for Monday was a negative $8.75/head, down $5.10/head from Friday and off $18.35/head from last week at this time. Cash sellers are encouraged to sell cattle at the right weights. It looks like we might have more of the same throughout the week. It might be a good idea to hedge grain inputs or hold off pricing near-term needs at the moment.

FEEDER CATTLE contracts at the CME fell on Monday amid higher corn prices and no support from live-cattle. The AUG’07FC contract closed at 107.550/cwt, off $0.650/cwt. SEPT’07FC futures also finished at $107.550/cwt, off $0.625/cwt. Feeders were also under pressure from technical signs after contracts gapped lower in opening trade. Selling took August to a three-month low and September to 10 ½ week lows. Pastures are noted as deteriorating as grass dries up. The CME Feeder Cattle Index for June 7 was down $0.01/cwt at $107.63/lb. It might pay to hold onto feeders if you can find the pasture.

LEAN HOGS on the CME closed mixed on Monday. In light trading ahead of its expiration date the JUNE’07LH contract finished at $72.675/cwt, off $0.200cwt and $1.650/cwt lower than last Monday. JULY’07LH futures was again the most actively traded. It closed at $74.40/cwt, up $0.650/cwt but $0.975/cwt lower than a week ago. Hogs found support amid expectations for better pork sales and prices ahead of the July 4th holiday. On Monday, USDA showed April pork exports decreasing by 14.1% ever as Mexico’s exports were off 65% from a year ago. In addition, April pork imports were up 7.2% with imports from Canada up 13.2% from last year. As of Friday, USDA’s pork-carcass-cutout data was placed at $72.89/cwt, off $0.34/cwt. The CME Lean Hog Index was off $0.39/cwt at $73.39/lb. The average pork plant margin for Monday was a negative $0.50/head, down $0.30/head from Friday and of $1.10/head from last week at this time. Cash sellers should continue to keep hog sales current. Hog feeders should not price grain inputs at this time as you have hopefully priced them on last week’s advice.

CORN on the Chicago Board of Trade (CBOT) closed strong on Monday. The July’07 contract again was the most active finishing at $3.960/bu, up 14.0¢/bu and 12.2¢/bu higher than last week. The DEC’07 contract finished at $4.060/bu, up 13.6¢/bu from Friday and 25.0¢/bu higher than last Monday’s close. The DEC’08 contract finished at $4.164/bu, up 9.6¢/bu from Friday and 19.2¢/bu higher than last week. USDA published the World Agriculture Supple Demand Estimates (WASDE) this morning and is viewed as somewhat bearish for corn. No changes in production or use were noted. Corn yield also remained unchanged at 150.3 bu/ac. Corn ending stocks for are now projected at 997 million, up 50 million from last month because exports were lowered by that same amount. Correspondingly, ending stocks for ‘06/’07 corn were raised 50 million bu. Exports were lowered in large part by more expected competition from larger supplies in Argentina, China expecting to a gradual shift away from corn as the main input for its four authorized ethanol plants, and South Korea’s desire to use only non-genetically modified products. One bright note is that Japan and Taiwan are expected to seek increased grain shipments as freight rates fall. Corn price projection for old-crop corn was lowered 10.0¢/bu on the upper end of the range to $3.00-$3.10/bu. Weather market concerns include outlooks for hot, dry weather in the U.S. crop region and may override any underlying bearish influences. Cash corn in the U.S. Midwest was steady Monday while cash bids for corn in the Mid-Atlantic States were 5.0¢/bu–10.0¢/bu weaker. 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 a very good time to do so … today.

SOYBEAN futures on the Chicago Board of Trade (CBOT) ended mostly lower on Monday. The JULY’07 contract closed at $8.300/bu, up 8.4¢/bu. NOV’07 futures also closed up 9.0¢/bu from Friday at $8.634/bu. Soybean production, trade, and ending stocks projections remain unchanged with ‘07/’08 ending stocks at 320 million bu, down almost 50% from ‘06/’07. Returns to biodiesel production have become less favorable because of higher vegetable oil prices. The U.S. season-average price for soybeans was raised 15.0¢/bu on both ends of the range to $6.65/bu-$7.65/bu. The price range was raised because of higher-than-expected forward pricing opportunities in recent weeks and stronger oil prices. The CBOT lowered initial trading margin for soybeans from $1,350.00/lot to $1,251.00/lot. Additionally, global oilseed production for the ‘07/’08 crop was placed at 399 million tons (14.67 billion bu). If this happens, it would be the first year-to-year decline in global oilseed production since ‘95/’96. Most of the decreased production is from the U.S. Both Brazil and Argentina (despite more corn acres in AR) are expected to produce new record crops on increased acres. Cash bids for soybeans in the U.S. Midwest early on Monday were firm while opening bids for soybeans in the U.S. Mid-Atlantic states were reported 10.0¢/bu–15.0¢/bu lower. It might be a good idea to get up to 60% of the 2007 crop priced.

WHEAT futures in Chicago (CBOT) gapped higher on Monday. JULY’07 wheat futures finished up 28.4¢/bu at $5.556/bu. This is 30.4¢/bu higher than last week and a whopping 71.2¢/bu higher than just three weeks ago! On Monday, USDA released its WASDE report. Viewed as very bullish, USDA lowered ending stocks to 26 million bu because of higher exports and lower production expectations. This will more than compensate for the small increase in carryin. Production was lowered by 6 million bu while carryin was raised 5 million bu. The carryin number was raised primarily because of an increase in imports. However, exports were stronger by 25 million bu because of production shortfalls in major exporting countries. Global ending stocks are projected to be down 8% from ‘06/’07, their lowest levels in 30 years! The ‘07/’08 marketing year average farm price is now projected at $4.50/bu-$5.10/bu, up 15.0¢/bu on each end of the range. The ’06/’07 price forecast was left unchanged at $4.27/bu. Opening bids for wheat in the U.S. Mid-Atlantic States were 3.0¢/bu -5.0¢/bu early on Monday. This week should be a very good opportunity for producers to price up to 50% of the new crop and sell any stored wheat from last year.

October 2007 Feeder Cattle, June 11, 2007

TheCattleSite News Desk

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