29 August 2007

5 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were mixed on Monday. The AUG’07LC contract closed at $94.20/cwt, off $0.175/cwt but $2.250/cwt higher than last Monday. This contract is set to expire on Friday. The OCT’07LC contract settled at $97.750/cwt, off $0.075/cwt but $2.10/cwt higher than last week at this time. DEC’07LC futures traded higher $0.025/cwt finishing at $100.750/cwt. Support was seen from lower corn and wheat prices, expectations for renewed South Korean and Japan imports, and stronger cash prices. For the week ended August 25, USDA reported cash cattle $2.00/cwt - $2.50/cwt higher than the previous week at $92.61/cwt for steers and $92.76/cwt for heifers. Cash cattle are expected to go $1-$1.50/cwt higher this week. This time last year steers were reported at $87.54/cwt while heifers were running $87.64/cwt. Weighing on the market were profit taking and spreading after the market gapped up last Friday. On Monday, USDA raised the choice boxed beef cutout by $1.07/cwt to $144.22/cwt. According to HedgersEdge.com, the average beef packer cutout margin for Monday was at a negative $29.95/head, $21.50/head worse than last Friday and $26.45/head worse than last Monday. Cash sellers are still looking at good prices. It might be wise to hold off pricing near-term corn inputs another week or two.

FEEDER CATTLE contracts at the CME were firm on Monday with three distant deferreds down somewhat. The AUG’07FC contract closed at $117.775/cwt, up $0.200/cwt and $1.325/cwt higher than last Monday. SEPT’07FC futures finished at $118.575/cwt, up $0.525/cwt and $1.200/cwt higher than a week ago. These contracts set fresh highs. Feeders were supported all day by lower grains, strong technicals and firm cash markets. Cash feeders also showed strength in Oklahoma City where USDA reported sales there $1-$2/cwt higher in spite of large numbers to be sold. The latest CME Feeder Cattle Index for August 24 was placed at $117.50/cwt, up $1.19/cwt and the highest it’s been since September 19, 2006. It is now a very good idea to aggressively sell cash feeders getting them off pastures. Hold off pricing corn supplies for another two weeks.

CORN on the Chicago Board of Trade (CBOT) ended down on Monday. The SEPT’07 contract finished at $3.356/bu, off 5.6¢/bu from Friday but 0.4¢/bu higher than a week ago. The DEC’07 contract gapped lower finishing at $3.530/bu, also off 5.6¢/bu from Friday but up 4.4¢/bu over last Monday. The corn market, supported by better feed demand felt pressure from forecast for a larger U.S. corn crop and prospects for better weather. The market expected the good-to-excellent crop rating to hold at 58%. USDA placed that rating up one point at 59% late in the day. USDA placed corn inspected for export at 33.538 million bu, below expectations of between 37-43 million bu. Several floor sources said they expect Brazil’s corn exports to reach a record 10 million tonnes (393.7 million bu) to meet demand in Europe. USDA reported the sale of 120,000 tonnes (4.7 million bu) of U.S. corn to Egypt for deferred delivery. As of August 21, the CFTC Commitment of Traders report showed large speculators in bull positions increasing those positions 2,000 lots to 111,676 contracts. Funds sold 3,000 lots on the day. Last week I expected downward pressure on prices to increase this week … it did. Cash sellers having priced up to 50%-60% of this year’s production are okay.

SOYBEAN futures on the Chicago Board of Trade (CBOT) ended up on Monday after a sputtering start. The SEPT’07 contract closed at $8.564/bu, up 7.4¢/bu and 44.8¢/bu higher than last Monday. NOV’07 futures closed at $8.726/bu, up 7.6¢/bu and 45.4¢/bu higher than a week ago. Dicey weather during these pod filling days buoyed prices. The market expected USDA to put the good-to-excellent rating for the U.S. soybean crop at least 2-3 points below that of last week. However, USDA increased the crop rating by 1 point to 55% good-to-excellent. This will pressure prices on Tuesday. Some analysts are predicting the U.S. soybean crop at 2.658 billion bu from an average yield of 42.0 bu/ac. That estimate is above USDA’s August crop estimate of 2.625 billion bu. USDA reported 11.831 million bu inspected for export last week. This was more than the 7-11 million bu expected. CFTC Commitment of Traders report as of August 21 placed large speculators in bullish positions at 68,770, off about 23,000 contracts. Funds bought 3,000 bean contracts. Cash soybeans in the U.S. Mid-Atlantic States were firmer by as much as 18.0¢/bu – 20.0¢/bu in many places. You are in good shape if 70% of your new crop beans are priced at this time. Pricing up to 25% of the 2008 crop at this time is still considered a good idea.

WHEAT futures in Chicago (CBOT) finished the day mixed on Monday with deferreds on the upside. SEPT’07 wheat futures closed at $7.222/bu, down 3.4¢/bu but 47.2¢/bu higher than a week ago. The JULY’08 contract finished at $5.910/bu, up 0.4¢/bu but 18.6¢/bu higher than last Monday. Corn affected wheat nearby contracts amid prospects for a record large U.S. corn crop. Wheat lost ground on the nearby contracts at all exchanges. USDA placed the U.S. spring wheat harvest at 87% complete, 18% ahead of the five-year average of 69%. Export demand remained strong and supported the market. USDA reported wheat inspected for export at 34.99 million bu, within expectations of between 32-38 million bu. Iraq bought 100,000 tonnes (3.7 million bu) of North American wheat amid a new tender for 50,000 more tonnes (1.85 million bu). Bangladesh announced fresh demand for 162,000 tonnes (5.95 million bu) of wheat while Egypt expressed interest in another 55,000-60,000 tonnes (2.0-2.2 million bu) of global wheat. Reflecting market volatility, CBOT raised wheat futures margins from $1,688.00 to $1,890.00 after Monday’s close. CFTCs Commitment of Traders report for Friday had large speculators in bullish positions trimming contracts to 1,788 lots, off 10,000 lots from a week ago. Funds became net sellers of wheat contracts, selling 1,000 lots. Cash wheat in the Mid-Atlantic States was off on Monday. Opening bids ranged from 4.0¢/bu-8.0¢/bu lower in many places. Producers should still consider pricing up to 25% of the ’08 crop.