19 September 2007

4 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were down on Monday while the ’08 October and December deferreds were up. The OCT’07LC contract settled at $94.975/cwt, off $0.275/cwt. DEC’07LC futures finished at $98.550/cwt, off $0.60/cwt. Short covering slowed losses amid thinking that packers were in control of prices. However, USDA put the number of cattle slaughtered on Monday at 128,000 head, nicely above early estimates between 100,000 – 110,000 processed animals. Many feedlots wanted $94/cwt for cash cattle last week but bids went only to $93.50/cwt after trading at $95.00/cwt the week before. Some support is still garnered from expectations of tight cattle supplies. Early estimates on the cattle-on-feed report expect that on September 1, feedlots with 1,000 head or more were at 93%-94% of last year’s count. August placement estimates are running from 89%-94.8% of the previous year while August marketing estimates range from 96%-101.6% of last year. USDA put the choice boxed beef cutout at $146.31/cwt, up $0.91/cwt. According to HedgersEdge.com, the average beef packer cutout margin for Monday was a negative $43.00/head, $4.75/head worse off than last Friday and $26.15/head worse than a week ago. Cash sellers should consider holding onto cattle waiting on a rally. It would be a good idea to hold off pricing near-term corn inputs if you can.

CORN on the Chicago Board of Trade (CBOT) ended up on Monday on strong wheat and soybean markets. The DEC’07 contract finished at $3.522/bu, up 3.2¢/bu. MAR’08 futures finished up 3.0¢/bu at $3.690/bu. MAY’08 finished the day at $3.796/bu, up 3.4¢/bu. It may pay to store … if you have the storage capacity. As the weather cooperates, USDA reported late Monday that the U.S. corn crop is 14% harvested. The market had anticipated from 14%-20% harvest progress. It is no longer news that a record corn crop over 13 billion bu overhangs this market. The interesting thing is that these prices moved higher despite reports of higher-than-expected yields coming from combines working their way through the Corn Belt. Some traders stated Monday that there is talk that USDA will raise supply estimates over the 13.308 billion bu currently projected. Cash bids showed some weakening in the U.S. Midwest as corn begins to move out of the fields. In the U.S. Mid-Atlantic States that was not the case. Cash corn firmed up from 3¢/bu – 5¢/bu on Monday. USDA reported corn-inspected-for-export last week at 30.856 million bu, lower than the expected 35-40 million bu. The CFTC Commitment of Traders report had large speculators expanding bullish positions to 103,300 lots, up 2,600 contracts as of September 11. Today’s rally shows a sideways, declining trend that should continue through harvest interrupted by minor upside moves. I still think this year’s prices will most likely continue to decline somewhat as harvest continues and more record yields are registered. Producers having sold 50% or more of this year’s crop are in good condition. A put option might not be a bad idea.

SOYBEAN futures on the Chicago Board of Trade (CBOT) rose to three-year highs on Monday. NOV’07 futures closed at $9.684/bu, up 13.6¢/bu from Friday and 50.4¢/bu higher than this time last week. The JAN’08 contract finished up 14.2¢/bu at $9.834/bu. NOV’08 soybean futures ended just below $10.00/bu at $9.984/bu. The market was surprised by a weekend freeze in the U.S. Midwest then contemplated yield loss among late-maturing beans. The freeze and/or light frost was almost three weeks earlier than usual. However, damage might be suspect since the crop was already ahead of normal development. In any case, weather views and firm crude oil markets amid prospects for lower soy oil production rallied soybeans in Chicago. Fund buying was estimated at 3,000 lots. CFTC’s Commitment of Traders report showed large speculators growing bullish positions by 2,800 lots to 94,100 contracts as of September 11. Cash soybeans in the U.S. Midwest showed strength on this rising market amid slow farmer sales. Opening bids on Monday for cash soybeans in the U.S. Mid-Atlantic States were 14¢/bu – 18¢/bu higher. You might consider holding off more pricing at this time. Pricing up to 25% of the 2008 crop at this time is still considered a very good idea.

WHEAT futures in Chicago (CBOT) finished strong on Monday. DEC’07 wheat futures settled 29.0¢/bu higher at $8.750/bu after opening limit up. The JULY’08 contract finished at $5.960/bu, up 8.4¢/bu and 4.0¢/bu higher than this time last week. News of lower Australian and French crop estimates and expectations that Pakistan will import 1 million tonnes (36.7 million bu) of wheat was very supportive of the market on Monday. Taiwan and South Korea were expected to tender offers of 88,000 tonnes (3.2 million bu) and 47,700 tonnes (1.8 million bu) respectively for U.S. wheat. On Monday, USDA placed wheat-inspected-for-export numbers at 29.650 million bu, below expectations of between 30-35 million bu. The CFTC Commitment of Traders report for the week ended September 11 showed large speculators in net short positions by 2,200 contracts. Several floor sources said this fueled speculative buying. Funds increased bullish positions in CBOT wheat while large commercial traders stayed net short. Cash wheat in the Mid-Atlantic States was very strong on Monday, ranging from 29.0¢/bu – 37.0¢/bu higher. Producers should still consider pricing up to 25% of the ’08 crop.