Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 27 September 2007
clock icon 5 minute read

Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were up on Monday. The OCT’07LC contract settled at $97.650/cwt, up $0.950/cwt and $2.675/cwt higher than last Monday’s close. DEC’07LC futures finished at $100.775/cwt, up $0.60/cwt and $2.225/cwt higher than a week ago. Some deferreds set fresh highs. Funds were noted buyers as cash cattle rose on Friday amid a bullish USDA report. October/December spreading was noted. USDA reported on Friday a 6% decline in cattle on feed and 100% of August marketing numbers over this time last year. Tight supplies in Texas and Oklahoma were especially noted. Cash prices were better than estimated late last week and helped push futures higher late in trading. Prices are expected to trend higher amid tight supplies. Packers will have to pay more for cattle despite negative margins. On Monday USDA put the choice boxed beef cutout at $146.26/cwt, up $1.19/cwt. The average cutout margin for Monday, according to HedgersEdge.com, was a negative $34.25/head, $2.35/head better than last Friday and $8.75/head better off than one week ago Monday. Cash sellers should consider selling heavy weights to maximize profits. It might be a good idea to price some near-term corn inputs if you can.

FEEDER CATTLE contracts at the CME closed up on Monday with the exception of the SEPT’07FC contract which finished at $116.150/cwt, off $0.250/cwt but $0.475/cwt higher than last Monday. The SEPT’07FC contract expires on Thursday. OCT’07FC futures closed $0.050/cwt higher at $116.250/cwt and $0.75/cwt higher than last week at this time. A weaker corn market and a bullish USDA report showing a 7% decline in August placements over a year ago were supportive. Cash feeders traded to $1.00/cwt higher. The latest CME Feeder Cattle Index for September 20 was placed at $116.34/cwt, down $0.13/cwt. It might be a good idea to price some feeder sales and buy some near-term corn inputs at this time.

CORN on the Chicago Board of Trade (CBOT) ended off on Monday. The DEC’07 contract finished at $3.734/bu, off 3.0¢/bu but 21.2¢/bu higher than last week. MAR’08 futures also finished off 3.0¢/bu at $3.890/bu but 20.0 cents higher than a week ago. Pressure of what could be a record harvest was offset by a frail dollar. Deferreds traded 2.0¢/bu – 4.0¢/bu lower. Some complex trading amid buying December Calls for $3.60 and selling December Puts for $4.00 occurred as funds sold near 4,000 lots. Estimated volume on the day for corn was noted around 166,779 futures and 47,831 options. Cash corn in the U.S. Midwest weakened amid harvest activity. Cash prices for corn in the U.S. Mid-Atlantic States were off by as much as 4.0¢/bu – 9.0¢/bu in many areas amid ideal harvest weather. USDA reported late on Monday that the U.S. corn crop is about 22% harvested, ahead of the five-year average of 14% but behind trade estimates between 25-30%. Export demand was strong as USDA reported 200,000 tonnes (7.9 million bu) sold on Monday. USDA also noted that 45.354 million bu of corn were inspected for export amid trade expectations for between 35-40 million bu. CFTC’s Commitment of Traders report had large speculators expanding net bullish positions by 15,000 contracts. Producers having sold 50% or more of this year’s crop are in good condition. If you have the storage, it might pay to store some of the crop that is not sold for future delivery.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were mixed on Monday. NOV’07 futures closed at $9.786/bu, up 0.2¢/bu from Friday but 10.2¢/bu higher than this time last week. The JAN’08 contract finished even with last Friday at $9.994/bu but higher than last Monday’s close by 15.0¢/bu. NOV’08 soybean futures ended at $9.414/bu, down 1.0¢/bu and 57.0¢/bu lower than a week ago. Bullish fundamentals were negated by overbought conditions and weakness in crude oil ($81.62/barrel vs. $82.00+) and metals. This took some inflationary heat out of the market encouraging funds to withdraw some money from long positions. The 14-day Relative Strength Index (RSI) for NOV’07 soybeans finished at 76.05. A contract is said to be overbought when the RSI is at or above 70 and oversold at or below 30. USDA placed soybeans inspected for export at 16.722 million bu amid expectations for between 7-15 million bu. This was about 44% higher than last week. China bought 120,000 tonnes (4.4 million bu) that it wants delivered in the 2007-2008 marketing year. USDA placed the U.S. soybean crop as 12% harvested amid expectations of between 8-12%. Cash soybean bids in the U.S. Midwest were weaker but held steady in the Mid-Atlantic States as farmers harvested in one area and not the other. You might consider pricing any of the remaining crop at this time. However, there is still a chance that soybeans could rally as more reports come in regarding yields and acreage. Pricing up to 25% of the 2008 crop at this time is still considered a very good idea.

WHEAT futures in Chicago (CBOT) finished well again this week. DEC’07 wheat futures settled 3.6¢/bu higher at $8.776/bu but only 0.76¢/bu higher than a week ago. The JULY’08 contract finished very strong at $6.374/bu, up 8.4¢/bu and 41.4¢/bu higher than this time last week. Fears over the world wheat situation are on everyone’s mind. The Australia wheat crop is suffering under intense drought conditions that might just bring the harvest below the 15.5 million tonne (569.5 million bu) forecast reported by the Australian government last week. Offsetting this news was the fact that Kazakhstan is reporting a bumper crop again this year. Kazakhstan reported a harvest so far of 21 million tonnes (771.6 million bu), 7 million tonnes (257.2 million bu) more than last year. Again, a weak U.S. dollar helped exports and sales. Iraq placed a new tender for 50,000 tonnes (1.8 million bu) after just buying 700,000 tonnes (25.7 million bu) of U.S. wheat last week. USDA reported wheat-inspected-for-export at 41.387 million bu, higher than trade expectations of between 28-32 million bu. Funds bought 2,000 lots amid an estimated CBOT volume of 52,130 futures contracts and 12,000 options contracts. The CFTC Commitment of Traders report for last Friday had large speculators expanding net bear positions in CBOT wheat by 1,100 lots to 3,359 contracts. Cash wheat in the Mid-Atlantic States was firm on Monday, ranging from 2.0¢/bu – 4.0¢/bu higher. Producers should still consider pricing up to 25% of the ’08 crop.

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