31 October 2007

5 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday with the exception of the OCT’07LC contract. The OCT’07LC contract finished at $92.025/cwt, off $0.350/cwt. DEC’07LC futures finished up $0.225/cwt at $95.350/cwt. The FEB’08LC contract closed at $97.675/cwt, up $0.350/cwt. Short covering and tight supplies provided support. The October contract expires on Wednesday. Cash cattle in the U.S. Plains traded $1/cwt lower to $93-$93.50/cwt leaving some cattle unsold and carried over to this week’s lots. The USDA 5-area average was $92.50-$93/cwt. The market was supported by expectations that lower prices would initiate greater beef demand improving boxed beef which had declined recently to lower levels not seen in three months. USDA on Monday put the choice boxed beef cutout at $141.07/cwt, lower than it’s been since July 27. On the other hand, packers may not get into beef bidding just yet due to very negative profit margins. Packers are not expected to bid up cattle until margins improve. According to HedgersEdge.com, the average beef plant margin for Monday was estimated at a negative $72.15/head, $15.25/head worse than last Friday and $47.15/head worse off than this time last week. Cash sellers should try to hold sales until cattle are ready.

FEEDER CATTLE contracts at the CME were up on Monday. NOV’07FC futures closed at $109.250/cwt, $0.200/cwt higher than last Friday. The JAN’08FC contract finished at $108.900/cwt, up $0.700/cwt. Feeders started out in sympathy to lower cash feeders. However, they were supported by expectations that Canada will subsidize feeder cattle to the U.S. This would promote feeder retention in Canada lowering feeder supply in the U.S. and easing wheat pasture pressure. The November contract’s 9-day Relative Strength Index (RSI) closed at 22. Anything at or below 30 is considered oversold. The latest CME Feeder Cattle Index for October 25 was $110.38/cwt, down $0.23/cwt and the lowest it’s been since early July. If you have grass it could be a good idea to hold onto those feeders for a little bit.

LEAN HOGS on the CME closed mixed on Monday with nearby contracts losing ground and deferreds gaining. DEC’07LH futures closed down $0.050/cwt at $54.475/cwt. FEB’08LH futures were down $0.275/cwt at $61.200/cwt. Weak fundamentals, short covering, and buy stops pressured prices early. Higher grain prices didn’t help. The 14-day RSI closed at 21.09 in oversold territory. There is a lot of pork in the system. However, futures found some support in spreading to later months. Cash hogs were steady to lower in the U.S. Midwest due to plentiful hog supplies. USDA on Friday put the pork carcass cutout value at $59.25/cwt, down $0.52/cwt, the lowest it’s been in over 6 months. On the other hand, packers continue to keep the kill-rate up on good margins. The average pork plant margin for Monday was placed at $6.85/head, $1.80/head lower than last Friday and $2.15/head worse off than this time last week. The latest CME Lean Hog Index was down $0.51/cwt at $56.30/cwt on Monday. Cash sellers should push hogs sales this week.

CORN on the Chicago Board of Trade (CBOT) closed up on Monday. The DEC’07 contract finished at $3.760/bu, up 4.0¢/bu and 11.6¢/bu higher than last Monday. MAR’08 futures finished up 4.2¢/bu at $3.930/bu and also higher than a week ago by 12.0¢/bu. The DEC’08 contract finished at $4.224/bu, 2.6¢/bu higher than last Friday and 11.2¢/bu higher than a week ago. A rally in crude oil and wheat, along with a weak dollar fueled prices. Demand for corn is strong despite record production. Japan bought 167,640 tonnes (6.6 mi bu) of U.S. corn while Israel also looked into buying 56,000 tonnes (2.2 mi bu) of U.S. corn. Total yearly corn export sales are running above a year ago. USDA said on Monday that 43.8 mi bu of corn were inspected for export vs. industry expectations for between 37-42 mi bu. Harvest weather cooperated in most places as USDA put the corn harvest at 73% complete. The CFTC Commitments of Traders report showed large speculators in bullish positions up 4,521 contracts at 205,834 lots as of last Tuesday. Large speculators in bearish positions were down 1,682 contracts at 98,212 lots. Funds bought about 5,000 lots. It might be a good time to price some of the rest of the corn crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were solidly up on Monday with all contracts up to NOV’08 futures closing above $10.00/bu. NOV’07 futures closed at $10.110/bu, up 15.4¢/bu from Friday. The JAN’08 contract finished at $10.280/bu also up 15.4¢/bu. NOV’08 soybean futures ended at $9.802/bu, up 9.2¢/bu. Seems like soybeans are trying to find some acres for next year. Prices were also spurred by a rise in soyoil to near 33-year highs and surging crude oil. A weaker dollar brought new money to the pits. Demand is high and farmers are slow to sell. However, a damper was found. Good weather and prospects for an expanding soybean crop in South America were bearish for prices. According to USDA late on Monday, the U.S. soybean crop is 84% harvested. USDA on Monday put soybeans inspected for export at 32.2 mi bu. This was within expectations for between 25-35 mi bu. The CFTC Commitments of traders report for last Tuesday showed large speculators in bullish positions up 3,513 lots to 140,760 contracts. Funds bought 6,000 lots. The ’07 crop should be sold now. Hold off on pricing any more of the 2008 crop for now.

WHEAT futures in Chicago (CBOT) closed up on Monday. DEC’07 wheat futures closed 28.4¢/bu higher at $8.284/bu but still lower than last Monday. The JULY’08 contract closed at $6.912/bu, up 14.2¢/bu and not quite as high as a week ago. Wheat strengthened corn and soybeans amid surging oil and a weak U.S. dollar. Australian wheat yields are disappointing while wheat plantings in the U.S. Plains needed rain. USDA placed wheat inspected for export at 31.240 mi bu vs. 26-31 mi bu expected. It was reported that South Korea wanted 22,000 tonnes (800,000 bu) of U.S. wheat. The CFTC Commitment of Traders report had large bear speculators cutting CBOT wheat positions by 1,000 contracts to 8,318 lots. Producers should have sold all wheat stocks by now and ought to consider pricing up to 50% of the ’08 crop at this time.

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