17 October 2007

6 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday with the exceptions of the JUNE’08LC contract which lost $0.025/cwt. The OCT’07LC contract closed at $95.150/cwt, up $0.700/cwt and up $1.455/cwt from last week. DEC’07LC futures finished at $97.975/cwt, up $0.750/cwt and $1.725/cwt higher than a week ago. Short covering and hedge release activity were supportive. Good cash prices for cattle pushed futures with USDA’s 5-area pricing at $91.50/cwt-$92.00/cwt, up $0.50/cwt. Cash prices are expected to advance further this week. USDA raised the choice boxed beef cutout $1.64/cwt to $145.13/cwt. Early estimates for Friday’s Cattle on Feed report for October 1 ranged from 95%-97% of last year. Placements ranged from 105% - 112.3% of last year while marketings are expected to range from 95.5% - 97% of a year ago. The estimated average beef plant margin for Monday, according to HedgersEdge.com, was placed at a negative $33.75/head, $.80/head better than last Friday and $33.65/head better than last Monday. Cash sellers should hold sales until after Friday’s report. It might be a good idea to hold off pricing near-term corn inputs if you can. There is still downside price left in corn.

FEEDER CATTLE contracts at the CME with mixed on Monday with most deferreds finishing up. OCT’07FC futures closed at $113.100/cwt, $0.275/cwt lower than last Friday and $0.750/cwt lower than a week ago. The NOV’07FC contract finished at $113.225/cwt, off $0.250/cwt and $0.675/cwt lower than last week. Higher corn prices and weaker cash feeder prices were noted by the market. Cash cattle were not supportive in the nearbys. A lower CME Feeder Cattle Index didn’t help. The latest CME Feeder Cattle Index for October 11 was placed at $113.51/cwt, off $0.110/cwt. Since wheat pastures are stressed and corn inputs are showing some strength, it might be a good idea to sell feeders now while holding off corn purchases for a week or two.

CORN on the Chicago Board of Trade (CBOT) closed up Monday even though USDA’s World Agricultural Supple Demand Estimate report published bigger numbers this past Friday. The DEC’07 contract finished at $3.620/bu, up 11.0¢/bu and 22.4¢/bu higher than last Monday. MAR’08 futures finished up 10.4¢/bu at $3.782/bu and 22.0¢/bu higher than a week ago. The DEC’08 contract finished at $4.084/bu, 8.2¢/bu higher than last Friday. U.S. ending stocks for corn were raised 322 million bu to 1.997 billion bu; production was increased 10 million bu to 13.318 billion bu; feed and residual use were lowered 150 million bu; ethanol use was lowered another 100 million bu; and exports were raised 100 million bu, the largest amount of U.S. corn exported in 18 years. The season average farm price was raised 10.0¢/bu on both ends to $2.90/bu-$3.50/bu. Buying was spurred by the lower-than-expected USDA forecast and news that the European Union may lift a trade ban on four GMO products next week. Strength in soybeans, gold, crude oil, and wheat didn’t hurt. Exports did well. USDA said early Monday that South Korea bought 242,000 tonnes (9.5 million bu) while 40.527 million bu of corn (the low side of expectations of between 40-45 million) were inspected for export. Wet weather in the U.S. Midwest did not slow corn harvest which was placed at 53%, well over the 41% average for this time of year. Cash corn in the U.S. Midwest was mostly steady while corn bids in the U.S. Mid-Atlantic States were 7.0¢/bu – 13.0¢/bu higher on Monday. Funds bought over 6,000 lots. The CFTC Commitment of Traders report placed large speculators in net bull positions by about 36,000 contracts for the week ended October 9. Producers having sold 60%-70% of this year’s crop are in good shape as this market trades sideways. If you have any corn left un-priced, now would be a good time to consider locking it in.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. NOV’07 futures closed at $9.870/bu, up 10.2¢/bu from Friday and 61.6¢/bu higher than this time last week. This contract has almost gained back everything from two weeks ago. The JAN’08 contract finished at $10.056/bu up 10.4¢/bu but only 5.0¢/bu higher than a week ago. NOV’08 soybean futures ended at $9.764/bu, up 15.4¢/bu and 60.2¢/bu over last week. Spillover from gold and crude oil were supportive. USDA’s World Agriculture Supply Demand Estimate (WASDE) also helped. Soybean production was lowered 21 million bu to 2.598 billion bu because of a reduction in acres. Planted and harvested acres were reduced 0.4 million acres. Ending stocks were left unchanged from last month with reduced production offset by increased beginning stocks. Average farm price was raised 50.0¢/bu on both ends to $7.85/bu - $8.85/bu. Offsetting some of this good news for price was Brazil’s announcement that the primary soybean growing region has been receiving much need rain, increasing expectations for a record crop to 62.8 million bu. Underpinning the market were reports that soybeans used for crushing were above estimates. The market traded harvest expectations of 65%-70%. USDA placed that figure at 66% late on Monday. USDA reported 35.730 million bu of soybeans were inspected for export last week amid estimates for between 15-20 million bu. Cash soybeans in the U.S. Midwest were weaker at river locations while cash beans in the U.S. Mid-Atlantic States were steady in opening bids on Monday. Funds bought over 5,000 lots. The CFTC Commitment of Traders report placed large speculators in bullish positions at 114,000 lots, up about 7,100 contracts. The ‘07 crop has probably been priced at good money now. It would still be wise to get 25% of the 2008 crop priced at this time.

WHEAT futures in Chicago (CBOT) closed down on Monday. DEC’07 wheat futures settled 24.0¢/bu lower at $8.334/bu and 26.6¢/bu lower than last Monday. The JULY’08 contract closed at $6.710/bu, off 9.4¢/bu but 13.8¢/bu higher than a week ago. USDA lowered ending stocks 55 million bu to 307 million bu; lowered production; raised exports 50 million bu; and raised average farm price 30.0¢/bu on both ends to $5.80/bu-$6.40/bu. Unwinding of old-crop/new-crop spreads took a toll as traders made profits. Weather news was supportive amid reports of hot weather in the U.S. Plains and Australia’s wheat belt. USDA had 73% of the U.S. wheat crop planted as of late Monday. Traders expected 65% during trading hours. Exports were supportive with USDA reporting 34.445 million bu of wheat inspected for export amid expectations for between 30-35 million bu. Funds sold just fewer than 4,000 lots while the CFTC Commitment of Traders report showed large speculators net short about 9,000 lots for October 9 vs. 4,400 lots October 5. Good cash bids for wheat were to be found in the U.S. Mid-Atlantic States on Monday. Producers should have sold all wheat stocks by now and ought to consider pricing more of the ’08 crop on this rally.