13 August 2008

6 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were up on Monday with. The AUG’08LC contract closed at $102.300/cwt, up $0.825/cwt from Friday and $2.125/cwt higher than this time last week. This contract has gained over $5.00/cwt in two weeks. OCT’08LC futures were up $0.375/cwt at $106.825/cwt but $0.675/cwt lower than last Monday. Higher cash prices and anticipated tighter supplies led the buying in the nearby months. The USDA 5-area price on Monday was $99.78-$99.82/cwt vs. $94.78/cwt a week ago. Short covering was also seen as supportive. Feedlot managers bought back, covering short positions on higher prices. Six floor sources stated that the recall of 1.2 mi lbs of beef for E.coli did not seem to be a trading influence today. Beef exports are expected to remain strong on thinking that foreign buying will pick up on the weak U.S. weak dollar. USDA on Monday put the choice boxed beef cutout at $162.89/cwt, up $0.67/cwt. According to HedgersEdge.com, the estimated average packer margin was up $0.45/head at a positive $38.90/head based on the average buy of $97.55/cwt vs. a breakeven of $100.59/cwt. Corn and soybeans are going to get cheaper as we near harvest. However each will have its technical bounces. It might be a good idea to price some longer term needs after the USDA WASDE report comes out.

FEEDER CATTLE at the CME closed mostly up on Monday. AUG’08FC futures were up $0.350/cwt at $114.975/cwt; $0.450/cwt lower than last Monday. The SEPT’08 contract finished the day at $116.725/cwt, up $0.175/cwt from Friday’s close but $1.100/cwt lower than last Monday. Interest in buying nearby needs supported nearby contracts. Outlook for tighter supplies in the coming months was supportive. Cash feeder sales in Oklahoma City’s feeder auction brought $1-$3/cwt higher prices. October/September spreading slowed September gains. The latest CME Feeder Cattle index for August 7 was placed at $111.62/cwt, up $0.41/cwt. Corn and soybeans don’t seem to have found a bottom yet.

LEAN HOGS on the CME closed up on Monday with the exception of the October ’08 contract. The AUG’08LH contract closed at $89.975/cwt, up $1.000/cwt and $7.725/cwt higher than a week ago. This contract is also $11.475/cwt higher than Monday before last. The FEB’09 contract closed up $0.850/cwt at $82.400/cwt; $7.450/cwt higher than last week at this time regaining all but $0.05/cwt from two weeks ago. The October ’08 contract lost $1.000/cwt on seasonal expectations for less demand. December/October and February/October spreading pressured the October contract with a double technical whammy. High cash hog prices were very supportive. USDA raised the pork cutout for the 7th straight day to $92.32/cwt, up $0.36/cwt. The latest CME Lean Hog Index was placed at $85.14/cwt, up $1.01/cwt. According to HedgersEdge.com, the latest packer margin was lowered $7.25/head to $2.25/head based on the average buy of $65.66/cwt vs. an average breakeven of $66.44/cwt. It is a good idea to hold hogs that are almost ready to harvest to heavier weights as long as packers are chasing cash hogs. Watch for opportunities to price feed later in the week.

CORN futures on the Chicago Board of Trade (CBOT) were weaker on Monday. The SEPT’08 contract finished at $4.972/bu, down 1.2¢/bu from Friday and 38.2¢/bu cents lower than a week ago. The DEC’08 contract closed at $5.170/bu, also off 1.2¢/bu from Friday and 38.4¢/bu lower than this time last week. Good crop growing weather, weak exports, lower crude oil futures, expectations for a bigger U.S. corn crop ahead of USDA’s Tuesday WASDE report, and technical selling pressured the corn market. Short covering on technicals was supportive. USDA reported that 35.8 mi bu of corn was inspected for export vs. estimates for between 35-40 mi bu. USDA announced late Monday that 67% of the U.S. corn crop was in good-to-excellent condition. That was no surprise to the market. The CFTC Commitment of Traders report showed large speculators cutting net long positions in CBOT corn by 27,000 lots to 77,316 contracts. Many were positioning ahead of the USDA report. The December ’08 corn contract is technically oversold with a 14-day Relative Strength Index (RSI) of 24.91. A contract is said to be oversold with an RSI at or below 30 and overbought when the RSI is at or above 70. Cash corn in the U.S. Mid-Atlantic states was steady with prices ranging from even to 5.0¢/bu higher. Those who have up to 70% of the ’08 crop priced today are in good shape. This market does not seem to have found a bottom yet.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were up on Monday on a technical bounce. The AUG’08 contract finished at $12.150/bu, up 16.0¢/bu from Friday’s close but 72.0¢/bu lower than a week ago. NOV’08 soybean futures closed at $11.960/bu, up 15.4¢/bu but 99.0¢/bu lower than last Monday. Support was noted on expectations for tighter supplies, chart signals as the market tried to come back and fill the downward gap created last Friday, and short covering ahead of USDA’s WASDE report. However, good growing weather and boring export reports weighed on the market. Soybeans, like corn, are experiencing better-thanexpected growing weather. The USDA WASDE report is expected to show no change in soybean production news. USDA placed soybeans-inspected-for-export at 10.1 mi bu vs. expectations for between 8.0-12.0 mi bu. Late on Monday USDA placed the U.S. soybean crop rating of good-to-excellent condition at 63%; unchanged from last week. The CFTC Commitment of Traders report had large speculators cutting net bull positions in CBOT soybeans by over 4,000 lots to 50,479 contracts. The November ’08 contract was in oversold status with the 14-day RSI at 25.02. It would be a very good consideration to get to 60%-70% sold at this time.

WHEAT futures in Chicago (CBOT) were gainers on Monday. The SEPT’08 contract closed at $7.936/bu, up 28.4¢/bu from Friday and 35.0¢/bu higher than a week ago. JULY’09 wheat futures closed up 25.6¢/bu at $8.686/bu; 35.0¢/bu higher than this time last week. Short covering on chart signals on an oversold market and exports were supportive while large global stocks weighed on prices. USDA reported 30.8 mi bu of wheat inspected for export vs. expectations for between 22-25 mi bu. Hot weather and drought suppressing the U.S. spring wheat crop supported prices. USDA’s WASDE report is expected to show no change in U.S. wheat production numbers but ending stocks are expected to be down. This proved supportive on the day. The CFTC Commitment of Traders report showed large speculators cutting net bear positions in CBOT wheat by almost 4,000 contracts to 25,059 lots. Cash bids for wheat in the U.S. Mid-Atlantic States were 25.0¢/bu- 50.0¢/bu cents higher. It might be a good idea to get up to 50% of the ’09 crop priced.