6 December 2007

6 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday on technical buying amid oversold conditions and short covering. DEC’07LC futures finished up $0.375/cwt at $94.225/cwt but $2.675/cwt lower than a week ago. The FEB’08LC contract closed at $96.375/cwt, up $0.600/cwt but $2.150/cwt lower than last Monday. Friday’s weak market, an RSI at 26, reports that Russia and the U.S. may be close to a deal on importing U.S. beef, and a lively slaughter rate lent support to the market. Cash markets are expected to firm up this week amid a stepped up slaughter pace. The USDA 5-area price for the week ended 12/1 was nearly unchanged at $95.00/cwt – $95.20/cwt. Boxed beef prices were firmer on Monday as USDA put the choice boxed beef cutout at $150.70/cwt, up $0.49/cwt. According to HedgersEdge.com, the average beef packer margin for Monday was a negative $30.50/head, $5.90/head worse than last Friday and $17.95/head worse than last Monday. Cash sellers should see better prices by the end of the week. It is still a good idea to hold off pricing short term corn supplies.

FEEDER CATTLE contracts at the CME were up on Monday. JAN’08FC futures closed at $108.350/cwt, $0.350/cwt higher than last Friday but $0.310/cwt lower than last Monday. The MAR’08FC contract finished at $108.800/cwt, up $0.500/cwt. Rumors that cash feeders had bottomed out and higher live cattle were supportive, according to a couple of floor sources. The latest CME Feeder Cattle Index for November 29 was placed at $107.98/cwt, up $0.34/cwt. Feeder sellers ought to stay current on cattle sales while holding off pricing immediate feed needs.

LEAN HOGS on the CME closed mostly lower on Monday. DEC’07LH futures closed at $54.7/cwt off $0.20/cwt and $0.900/cwt lower than last Monday. FEB’08LH futures was the biggest skidder of the day, off $1.075/cwt at $61.225/cwt and $1.350/cwt lower than a week ago. The February contract took the largest hit as that month was used as the short leg of most spreads. The large premium of futures to cash was bearish. Exports seem to be doing well. Packers kept up a pace indicative of good demand because of profitable margins. USDA estimated late on Monday that the U.S. kill rate could be a possible record at 431,000 head. Actual daily slaughter set the record on November 13 at 427,639 head. It was estimated that last week’s slaughter total came in at 2.397 mi head. This too would be a record. The average pork plant margin for Monday was estimated at $14.45/head, up $0.50/head from Friday but $3.20/head lower than last Monday on good pork movement. USDA put the pork carcass cutout value at $60.55/cwt, up $0.26/cwt from Friday. The latest CME Lean Hog Index for Monday was up $0.37/cwt at $51.08/cwt. Cash sellers should keep sales current while holding off on pricing short-term feed needs.

CORN on the Chicago Board of Trade (CBOT) recovered early losses to close up on Monday. The DEC’07 contract finished at $3.860/bu, up 1.4¢/bu and nearly even with last Monday. MAR’08 futures finished up 2.0¢/bu at $4.034 also nearly even with a week ago. The DEC’08 contract finished at $4.314/bu, 1.0¢/bu higher than last close. Good export news, frost concerns in Argentina, talk of fresh government support for ethanol production, and expectations that large funds would buy corn while selling beans and wheat to balance portfolios were all mildly supportive. A floor source said on Monday that late spreading in corn and wheat helped corn finish on the positive side by closing. USDA put corn inspected for export at 55.6 mi bu vs. an expected 44-48 mi bu. South Korea bought 45,000 – 55,000 tonnes (1.7 – 2.2 mi bu) of U.S. corn. Deliveries on DEC’07 corn futures limited gains amid some stopping pressuring the market since there was no large commercial stopper. Cash corn in the U.S. Midwest held a weaker tone on steady but slow farmer selling. Some delivery delays were noted due to scattered bins at capacity and mild transportation problems due to snow and freezing rain. Cash corn in the U.S. Mid-Atlantic states found some strength as farmers held out for higher prices. The December ’07 contract is trading above all moving averages with support at $3.825/bu. The nine-day Relative Strength Index (RSI) finished at 55.85. A contract is said to be overbought with an RSI of 70 or more and oversold at or below 30. As of November 27 the CFTC Commitment of Traders report for futures and options combined showed large funds growing net long positions by 7,626 lots to 366,517 contracts. Those in bearish positions increased net short positions by 11,710 lots to 338,144 contracts. It might be a good idea to get the ’07 crop priced out if you haven’t done so by now. Additionally, it might be a good idea to price up to 20% of the ’08 corn crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed mixed on Monday. The JAN’08 contract finished at $10.786/bu up 1.2¢/bu but 25.0¢/bu lower than last Monday. NOV’08 soybean futures ended at $10.154/bu, up 4.6¢/bu but 22.0¢/bu lower than a week ago. Soybeans rebounded from an early sell off amid corn/soybean spreading. Traders are expecting to find support in the next U.S. Energy bill that is likely to include an ethanol component. Also supportive was a rebound in the price of crude oil as the soy markets track closely to energy. In export news, USDA reported soybeans inspected for export at 22.6 mi bu, below expectations for between 25-30 mi bu. China was shipping rather than buying soybeans on the world market. Deliveries were heavy at times with scattered stopping. Cash beans in the U.S. Midwest were steady to firm late on Monday amid slow farmer sales. Soybeans in the U.S. Mid- Atlantic States were firmer as bins needed filling. CFTC Commitment of Traders report showed funds in bullish positions cutting them by about 15,000 contracts to 120,000 lots. Estimated volume in CBOT soybeans was moderate with 128,030 futures and 29,226 options trading. It might be a very good idea to hold off pricing any more of the ’08 crop to see if soybeans have reached a major top or just getting a second wind ready to bid for corn acres next year.

WHEAT futures in Chicago (CBOT) closed down on Monday amid profit taking. DEC’07 wheat futures closed 12.0¢/bu lower at $8.550/bu but 41.0¢/bu higher than a week ago. This contract has gained 98.8¢/bu in just two weeks. The JULY’08 contract closed at $7.570/bu, off 5.0¢/bu but 47.0¢/bu higher than last Monday. Selling came on technical sell signals after recent highs. USDA stated late Monday that 17.032 mi bu of wheat were inspected for export compared to expectations for between 16-22 mi bu. Dry conditions in the southern U.S. Plains were noted. South Korea bought 25,000 (918,000 bu) tonnes of U.S. wheat last weekend while seeking more than 23,000 (845,000 bu) additional tonnes this week. India, although an infrequent buyer of U.S. wheat, reportedly was seeking 630,000 tonnes (23.1 mi bu). The CFTC Commitment of Traders report had large speculators shrinking net short positions by 7,000 lots to 12,736 contracts. It might be a good idea to have up to 40% of the ’08 crop priced at this time on Hedge-to-Arrive contracts.

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