12 September 2007

5 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were up on Monday except for the nearby October contract. The OCT’07LC contract settled at $95.700/cwt, off $0.400/cwt and $2.05/cwt lower than two weeks amid profit taking. DEC’07LC futures traded higher $0.300/cwt finishing at $99.750/cwt and $1.00/cwt lower than two weeks ago. Funds rolling positions and short covering were supportive of later months. Floor sources said that index funds rolled around 8,000 long positions from October into the December with the majority being moved near the close. Support was seen coming from expectations of tighter fat cattle supplies in the near-term but packers slowing slaughter rates provided downward pressure. Tyson Foods did not operate three of its eight U.S. beef plants on Monday due to poor margins. According to HedgersEdge.com, the average beef packer cutout margin for Monday was a negative $1.31/head, $10.09/head better than Friday and $8.79/head better than last week. Lower choice boxed beef last week and steady cash prices sparked the lower kill rates. USDA on Monday morning put choice boxed beef cutout up $0.59/cwt at $148.25/cwt. Fat cattle traded at $95/cwt in the Plains last Friday while USDA’s 5-area price registered at $94.48/cwt - $94.58/cwt the same day. Cash sellers are still looking at decent prices. It might be okay to hold off pricing near-term corn inputs until after USDA’s WASDE report is issued on Wednesday.

FEEDER CATTLE contracts at the CME closed up on Monday. The AUG’08FC contract was the only one that finished off. SEPT’07FC futures finished at $118.875/cwt, up $0.075/cwt. The October’07FC contract finished at $118.450/cwt, up $0.125/cwt. Gains on the day held on lower CBOT corn futures and good cash markets. Cash feeders remained strong. November/October spreading limited gains in the October as Index funds continued to roll long October positions into November. About 500 spreads were done very late in the day according to floor sources. The latest CME Feeder Cattle Index for September 6 was placed at $118.64/cwt, up $0.42/cwt. This is the highest it’s been since almost one year ago. It is now a very good idea to aggressively sell cash feeders getting them off pastures. Hold off pricing corn supplies at least until after Wednesday.

CORN on the Chicago Board of Trade (CBOT) ended down on Monday. The SEPT’07 contract finished at $3.296/bu, off 1.4¢/bu from Friday. The DEC’07 contract finished lower at $3.460/bu, also off 1.4¢/bu. Harvest pressure continues to apply amid expectations that USDA will raise its U.S. corn crop forecast. USDA has already forecast a record 13.054 billion bu crop. Floor sources said the market was trading expectations that USDA would show the harvest at 4%-7% complete. USDA reported late on Monday that the U.S. corn crop was 8% complete at this time. Corn inspected for export was placed by USDA above estimates for 34-39 million bu at 43.958 million bu. Deliveries on the September corn contract were heavy at 1,610 lots. Funds sold 1,000-2,000 contracts. The CFTC Commitment of Traders report as of September 4 showed large speculators cutting net bull positions in CBOT corn by 18,000 contracts to 99,723 lots. Cash sellers having priced up to 50%-60% of this year’s production are okay. It might not be a bad idea to price a little more before Wednesday, ahead of USDA’s World Agriculture Supply Demand Estimate (WASDE) report due out by 8:30 a.m. that day. This year’s prices will most likely continue to decline somewhat toward harvest.

SOYBEAN futures on the Chicago Board of Trade (CBOT) ended up on Monday. The SEPT’07 contract closed at $9.034/bu, up 12.4¢/bu. NOV’07 futures closed at $9.180/bu, up 12.6¢/bu. Strong technical buying amid a falling dollar strengthened the soybean complex. However, resistance was provided by expectations that USDA would raise its U.S. soybean crop estimates on Wednesday, September 12. South American farmers are being watched now that some traders are thinking they may plant fewer soybean acres this season. It was also said today that China may cut its’07 crop forecast by 9.8% to 14.4 million tonnes (529 million bu) because of drought and more acres being planted to corn. Deliveries on the September contract were heavy at 1,539 lots. Soybeans inspected for export were down to 5.823 million bu, lower than the expected 8-13 million bu. Funds bought 3,000 soybean contracts. The CFTC Commitment of Traders report as of September 4 placed large bullish speculators at 91,300 contracts, up 6,500 lots. Cash soybeans were stronger in the U.S. Mid-Atlantic States in opening bids. You are in good shape if 70% of your ‘07 beans are priced at this time. You might consider pricing a little more before Wednesday. Pricing up to 25% of the 2008 crop at this time is still considered a good idea.

WHEAT futures in Chicago (CBOT) finished strong on Monday. SEPT’07 wheat futures closed at $8.490/bu, up 9.0¢/bu and a whopping $1.268/bu higher than two weeks ago. The JULY’08 contract finished at $5.920/bu, off 1.4¢/bu and near even with two weeks ago. Short-term demand is strong! Gains might have been higher in the September contract had profit-taking not occurred. Good export demand and closing world supplies were very supportive. Australia’s wheat crop may get cut without immediate and timely rains. USDA placed wheat inspected for export at 28.874 million bu, below estimates of between 31-36 million bu. September deliveries were light as farmers expect higher prices tomorrow. Funds bought 3,000 contracts while the CFTC Commitment of Traders report as of September 4 placed large speculators in long positions at 9,425 lots, up 1,300 contracts. Cash wheat in the Mid- Atlantic States was stronger on Monday. Opening bids ranged from 16.0¢/bu-18.0¢/bu higher amid slow farmer sales. Producers should still consider pricing up to 25% of the ’08 crop.