12 November 2008

5 minute read

North America

The November 10, 2008 USDA World Agriculture Supply Demand Estimate (WASDE) report held no surprises. The news was mostly neutral for corn and soybeans and bearish for wheat.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were up Monday except for the December contract.  The DEC’08LC contract closed at $92.650/cwt off $0.150/cwt and $0.675/cwt lower than last Monday.  FEB’09LC futures closed up $0.60/cwt at $94.150/cwt; even with a week ago.  Heavy spreading in the February/December contracts by the funds pressured December futures and is expected to do so through the end of the week.  Floor sources said that higher corn gave way to thoughts of lower beef placements.  Right or wrong that is how the pit thought today.  USDA on Monday put the Choice Boxed Beef at $150.79/cwt, up $0.54/cwt.  USDA put the 5-area price at $90.09/cwt, off $0.37/cwt from last Monday.  According to HedgersEdge.com, the average packer margin was raised $51.35/head from this time last week to a positive $5.30/head based on the average buy of $91.01/cwt vs. the average breakeven of $91.40/cwt.  Corn is still expected to have found a bottom except for volatile range swings.

FEEDER CATTLE at the CME were mixed on Monday.  The NOV’08FC contract finished at $99.000/cwt, up $0.050/cwt but $0.700/cwt lower than this time last week.  JAN’09FC futures finished at $98.875/cwt, off $0.35/cwt and $0.30/cwt lower than a week ago.  Higher corn prices pressured feeders.  Cash feeders in Oklahoma City were up as much as $3.00/cwt on good demand.  The CME Feeder Cattle Index was placed at $96.45/cwt, off $0.14/cwt from the last quote but $0.39/cwt higher than a week ago.

LEAN HOGS on the CME closed up on Monday with the exception of the December contract.  DEC’08 futures closed off $0.400/cwt at $55.000/cwt but $0.600/cwt higher than a week ago.  The APR’09LH contract closed at $67.500/cwt; up $0.25/cwt but down $2.65/cwt from last Monday.  The JUNE’09LH contract gained $0.475/cwt to $80.350/cwt and $0.35/cwt higher than this time last week.  Active fund spreading in the February/December contracts, sluggish exports, and lower cash hog prices pressured the nearby December contract.  USDA’s Pork Carcass Cutout was placed at $56.27/cwt; down $0.53/cwt.  The latest CME Lean Hog Index was placed at $55.47/cwt, off $1.03/cwt and $3.43/cwt lower than a week ago.  According to HedgersEdge.com, the average pork plant margin was placed at a positive $5.50/head; $4.40/head lower than this time last week.  This was based on the average buy of $37.70/cwt vs. the average breakeven of $39.76/cwt.

CORN futures on the Chicago Board of Trade (CBOT) were up on Monday. The DEC’08 contract closed at $3.834/bu; up 8.0¢/bu from Friday but 19.75¢/bu lower than this time last week.  MAR’09 corn futures closed at $4.014/bu; also up 8.0¢/bu but 19.25¢/bu lower than last Monday.  Corn generally was neutral to USDA’s WASDE report.  U.S. corn production was lowered 13 mi bu to 12.020 bi bu based on a 153.8 bu/ac yield, 0.10 bu/ac lower than the last report.  Exports were lowered another 50 mi bu from USDA’s revised report to 1.9 bi bu.  As a result ending stocks were increased 36 mi bu to 1.124 bi bu.  Lower-than-expected exports were reported by USDA placing corn-inspected-for-export at 24.748 mi bu vs. estimates for 26-32 mi bu.  The CFTC Commitment of Traders report had large speculators increasing net bear positions by 3,000 lots to 22,539 contracts.  Cash corn bids in the U.S. Mid-Atlantic States were weaker by 2.0¢/bu – 5.0¢/bu.  Hopefully up to 60% of the ’08 crop was priced.  It is still likely pay to store what’s not priced.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday.  NOV’08 soybean futures closed at $9.400/bu; up 28.2¢/bu and 11.75¢/bu higher than a week ago.  The JAN’09 soybean contract closed at $9.480/bu; up 27.0¢/bu and 2.75¢/bu higher than last Monday.  As with corn, the USDA WASDE report was generally neutral for soybeans.  U.S. soybean production was placed at 2.921 bi bu based on an average yield of 39.3 bu/ac, a 0.2 bu/ac decrease.  Ending stocks were placed at 205 mi bu, unchanged from the last report.  News that China would offer an economic stimulus plan buoyed hopes for more exports.  However, USDA reported U.S. soybeans-inspected-for-export at 33.822 mi bu vs. expectations for between 35-40 mi bu.  The CFTC Commitment of Traders report had large speculators increasing net bull positions by 10,000 contracts to 17,682 lots.  Cash prices in the U.S. Mid-Atlantic were stronger ranging between 11.0¢/bu -15.0¢/bu higher.  The 2008 crop should be 60-65% sold.  Wait to price more.

WHEAT futures in Chicago (CBOT) were off on Monday.  The DEC’08 contract closed at $5.200/bu, down 1.0¢/bu and 42.0¢/bu lower than a week ago.  JULY’09 wheat futures were down 0.25¢/bu at $5.696/bu and 40.0¢/bu lower than this time last week.  USDA raised ending stocks by 2 mi bu while lowering seed needs by that same amount.  Other estimates were left unchanged.  Increasing global stocks are pressuring prices.  USDA placed wheat-inspected-for-export at 12.8 mi bu vs. expectations for between 18-22 mi bu.  The CFTC Commitment of Traders report had large speculators decreasing net bear positions by almost 10,000 contracts to 28,979 lots.  Cash wheat bids in the U.S. Mid-Atlantic States ranged 1.0¢/bu -3.0¢/bu weaker.  Very few elevators were forward pricing any more wheat at prices that could cover variable costs as DAP is now priced at over $1,000.00/ton.  Buying a Put option may be a good idea.  Hopefully 30-40% of the new crop has been priced on previous advice.