24 October 2007

5 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday. The DEC’07LC contract finished at $97.575/cwt, up $0.275/cwt. The FEB’08LC contract closed at $99.100/cwt, up $0.125/cwt. Short covering and hedge lifting provide support as fund buying extended gains. Cash cattle traded higher last week and traders expect more of the same this week. USDA reported the 5-area average price up $1.25/cwt-$2.00/cwt between $93.00/cwt and $93.50/cwt. Last week, the southern Plains markets were between $94.00/cwt and $94.50/cwt. Larger-than-expected placements put pressure on prices, running 109% of last year. On-feed supplies showed at 96% of last year despite the larger placements. On Monday, USDA put the choice boxed beef cutout at $143.72/cwt, down $0.88/cwt. Even though packer’s margins are still negative, they kept up their kill pace with USDA estimating Monday’s cattle slaughter at 129,000 head compared to 130,000 last week at the time and 122,000 a year ago. According to HedgersEdge.com, the average beef plant margin for Monday was estimated at a negative $25.00/head, $1.20/head worse than last Friday but $8.75/head better than a week ago. Cash sellers should hold sales until cattle are ready. It might be a good idea to price some near-term corn inputs if you can.

FEEDER CATTLE contracts at the CME were up on Monday with the exception of the October contract. OCT’07FC futures closed at $111.450/cwt, $0.050/cwt lower than last Friday. The NOV’07FC contract finished at $111.625/cwt, up $0.325/cwt but $1.600/cwt lower than last week. Lower corn futures and higher live cattle futures countered short covering. The latest CME Feeder Cattle Index for October 18 was put at $112.32/cwt, down $0.230/cwt. If you have grass it would be a good idea to hold onto those feeders for a little bit.

CORN on the Chicago Board of Trade (CBOT) closed off on Monday. The DEC’07 contract finished at $3.644/bu, off 5.6¢/bu but 2.4¢/bu higher than last Monday. MAR’08 futures finished down 5.0¢/bu at $3.810/bu but also higher than a week ago … by 2.8¢/bu. The DEC’08 contract finished at $4.112/bu, 4.0¢/bu lower than last Friday but 2.8¢/bu higher than a week ago. Profit taking, a continued harvest pace, sliding crude oil, and declining prices in other grains caused the bears to run. When the dollar is stronger, exports are usually subdued, causing grains and oilseed prices to decline. USDA said on Monday that 39.345 million bu of corn, compared to expectations for between 40-45 million, were inspected for exports. USDA reported the U.S. corn crop 60% was harvested, 5 points ahead of the five-year average. Cash corn in the U.S. Midwest was steady to firm although harvest sales were slow. Cash corn in the U.S. Mid-Atlantic States was 5¢/bu – 10¢/bu lower across the board on Monday. Funds sold almost 3,000 corn futures amid a light volume of 126,888 contracts. The CFTC Commitment of Traders report as of October 16 showed large speculators increasing net bullish positions by over 5,000 lots to 101,400 contracts. Producers having sold 60%-70% of this year’s crop are in good shape as this market continues to trade sideways. If you have any ’07 corn left un-priced, now would be a really good time to consider locking it in.

SOYBEAN futures on the Chicago Board of Trade (CBOT) slid a range of 4.0¢/bu – 9.0¢/bu on Monday. NOV’07 futures closed at $9.764/bu, off 6.6¢/bu from Friday. The JAN’08 contract finished at $9.936/bu down 4.4¢/bu. NOV’08 soybean futures ended at $9.644/bu, off 7.0¢/bu. Like corn, soybean exports were pressured by a stronger U.S. dollar and the promise of more stocks as harvest approaches. Brazil’s crop got much needed good weather. Argentina’s Mato Grosso and Parana areas were mostly dry over the weekend, contributing to a stepped up planting pace. A rally in wheat was also supportive late in the day. Traders worked on expectations that USDA would report the soybean crop between 75%-80% harvested. USDA reported the crop 72% was harvested, 3% behind the 5-year average. USDA reported 27.171 million bu inspected for export amid expectations for between 30-35 million bu. Funds sold 2,500 lots. The CFTC Commitment of Traders report showed large speculators in bullish positions unchanged at 114,700 lots for the week ended October 16. Cash soybeans in the U.S. Midwest were firm amid strong export demand. Soybean bids in the U.S. Mid-Atlantic States were 6¢/bu – 13¢/bu lower on Monday. If you haven’t sold the ’07 crop yet, now would be a very good time to consider doing so. It would still be wise to think about pricing up to 25% of the 2008 now.

WHEAT futures in Chicago (CBOT) rebounded nicely on Monday. DEC’07 wheat futures closed 15.4¢/bu higher at $8.710/bu and 37.6¢/bu higher than last Monday. The JULY’08 contract closed at $6.950/bu, up 2.2¢/bu and 24.0¢/bu higher than a week ago. Speculation that Russia will impose an import tariff on wheat bounced prices higher today and last Friday as global stocks remain tight. USDA said that 26.749 million bu of wheat were inspected for export vs. expectations for between 30-35 million bu. Year-to-date export inspections are about 64% ahead of last year. Rain is needed both in the U.S. wheat belt and in Australia. Open interest increased 6,000 contracts on Friday on a combination of fund and speculative buying. Even though funds bought 2,000 lots, the CFTC Commitment of Traders report from last Friday had large speculator’s positions mainly unchanged at about 9,300 lots, net short. Producers should have sold all wheat stocks by now and ought to consider pricing up to 50% of the ’08 crop at this time.