5 October 2010

4 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday. The OCT’10LC contract closed at $95.100/cwt; off $0.850/cwt and $2.15/cwt down from last Monday. The DEC’10LC contract closed down $1.050/cwt at $97.300/cwt and $2.000/cwt under last report. The APR’11LC contract closed at $100.850/cwt, off $0.750/cwt and $1.550/cwt lower than last week at this time. Higher corn prices, lower beef prices, a stronger US dollar, and a lower stock market cast a bearish pall over the beef pits. USDA on Monday put the boxed beef price at $152.52/cwt; down $0.67/cwt and $5.02/cwt lower than a week ago. Some “technical” movement was noted in the October contract. Much of that trading involved “refreshing” positions to avoid taking or making delivery. This involves traders selling out of long positions or buying back short positions only to take similar positions later in the session. When this occurs the contract date is “refreshed” in order to lessen the chance of being assigned to make or take a delivery. Cash cattle were weaker with USDA putting the 5-area price at $96.72/cwt; $0.82/cwt lower than a week ago. According to HedgersEdge.com, the average packer margin was lowered $12.75/hd from last week to a negative $24.25/hd based on the average buy of $96.89/cwt vs. the average breakeven of $95.01/cwt. Hopefully feed needs for the next few months has been priced. There may be more pricing opportunities on volatility.

FEEDER CATTLE at the CME followed live cattle higher on Monday. SEP’10FC futures closed at $109.875/cwt; up $0.375/cwt but $0.775/cwt lower than last report. The September contract is due to expire on Thursday. The OCT’10FC contract finished up $0.775/cwt at $109.400/cwt but $1.310/cwt lower than last week at this time. The NOV’10FC contract finished at $109.775/cwt, up $0.675/cwt but $1.175/cwt off from last report. Higher corn and lower fat cattle pressured feeder prices. A couple of floor traders said that declines were excessive on exuberant trading and would most likely correct somewhat to the upside this week. Feeder prices were steady-to-firm in Oklahoma City with estimated receipts at 7,800 head vs. 6,598 last week and 9,640 a year ago. The CME feeder cattle index was placed at 110.03/lb; up 0.23/lb and 0.05/lb higher than last report.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. DEC’10 corn futures closed up 5.75¢/bu at $4.714/bu but 41.25¢/bu lower than last report. The MAR’11 contract closed at $4.830/bu; up 4.75¢/bu but 42.25¢/bu lower than last Monday. The DEC’11 contract closed at $4.662/bu; up 5.5¢/bu but 18.0¢/bu under than last Monday. Hedge fund and end user buying after recent declines were supportive while USDA in the last World Agriculture Supply Demand Estimate (WASDE) report raised corn ending stocks by about 3 bi bu keeping prices from becoming exuberant. Late Monday in the USDA crop report the US corn crop in good-to-excellent condition remained unchanged at 66 per cent while the US corn crop harvest progress was placed at 37 per cent vs. 21 per cent harvested this time last year. Drier weather in the US Midwest is aiding harvest progress. Exports were neutral with USDA placing corn-inspected-for-export at 35.487 mi bu vs. expectations for 33-40 mi bu. Cash corn bids were weak amid quiet farmer selling after the sell-off. Funds bought nearly 4,000 lots. Hopefully 90 per cent of the 2010 crop and 60 per cent of the 2011 were priced on the run up.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were mixed on Monday with contracts before July 2011 going bearish and those after bullish. NOV’10 futures closed at $10.540bu, down 3.0¢/bu and 74.5¢/bu lower than last report. The MAR’11 contract closed at $10.724/bu; off 2.5¢/bu and 73.25¢/bu lower than a week ago. NOV’11 soybean futures closed up 3.75¢/bu at $10.472/bu but 51.25¢/bu lower than last week at this time. Expectations for a large US crop, harvest pressure, a stronger US dollar, and good weather pressured 2010 soybean futures. Support came from end-user buying. Late Monday USDA put the US soybean crop at 37 per cent harvested vs. 28 per cent this time last year. News that Brazil’s 2010/11 soybean crop is estimated to be a record 69.1 mi tonnes (2.54 bi bu) pressured prices. USDA put soybeans-inspected-for-export at 16.360 mi bu vs. expectations for 15-19 mi bu. Cash soybeans were flat-to-weak amid sluggish farmer selling. Funds sold over 4,000 lots. Hopefully 90 per cent of the 2010 crop and 30 per cent of the 2011 crop have been sold.

WHEAT futures in Chicago (CBOT) finished down 23 per cent from recent highs on Monday. The DEC’10 wheat contract closed at $6.472/bu; down 7.25¢/bu and 59.25¢/bu lower than last Monday. JULY’11 futures finished off 5.5¢/bu at $6.964/bu and 38.25¢/bu lower than a week ago. Technical signals and countries buying non-US wheat continue to pressure prices. While pessimistic Canadian wheat crop estimates were supportive the news was offset by reports that Argentine wheat is thriving due to ample moisture. Floor sources said that buying corn and selling wheat in spread trades was the action of the day. Hopefully sales of 2011 wheat were advanced to 85 per cent last week. If not, there is still this week.