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Weekly Roberts Market Report

01 December 2011

Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University

US - Dollar-denominated grains have become more competitive in global markets as a result of a weaker US dollar, writes Michael T. Roberts in his Weekly Roberts Agricultural Commodity Market Report for 29 November.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed up on Monday with the exception of the JULY’12 contract recapturing value lost over the last five trading days. NOV’11DA futures finished at $19.11/cwt; even with Friday’s close.

The JAN’12DA contract closed at $17.50/cwt; up $0.52/cwt. Dairy futures got a demand boost after holiday supplies have been reduced amid heavier milk manufacturing over the long weekend. Cash cheese and butter prices were supportive. Cheese, butter, and whey futures were also higher in the nearby months.

To date, China has imported 150 mi lbs of whole milk powder; down 45 per cent from a year ago. CWT accepted bids to provide assistance on sales of 7.4 mi lbs of cheese for delivery through April. Total assistance registered to date is 88.3 mi lbs. Outside market influences were helpful.

The DOW jumped 291 points to end at 11,523 while the Nasdaq gained 86 points to close at 2,527. Current average futures prices for Class III milk are: three months out = $18.46/cwt; six months out = $17.65/cwt; nine months out = $17.37/cwt; and 12 months out = $17.38/cwt.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) finished up on Monday with the exception of the nearby December. The DEC’11LC contract closed at $129.950/cwt; down $0.150/cwt. JUNE’12LC futures closed at $124.500/cwt; up $0.200/cwt. Live cattle were influenced by gains in outside markets. A weaker US dollar seen as increasing export demand was supportive.

However, floor traders are concerned that current prices cannot be maintained in cash and wholesale markets. Cash prices set record highs in November while wholesale beef prices are at all-time highs. The week is off to a slow start in the cash trade but should pick up near the end of the week.

The USDA 5-area price for Monday was placed at $124.94/cwt. Late Monday USDA put the choice boxed beef price at $195.93/cwt; down $0.30/cwt from Friday. According to HedgersEdge.com, the average packer margin was placed at a negative $25.40/head based on the average buy of $123.59cwt vs. the average breakeven of $120.96/cwt.

FEEDER CATTLE at the CME closed up on Monday with the exception of the March ’12 contract. The JAN’12FC contract settled at $143.725/cwt; up $0.100/cwt. APR’12FC futures finished at $148.700/cwt; up $0.325/cwt. Feedlot volume was good.

The Oklahoma City National Stockyards estimated receipts at 6,000 hd. vs. 4,871 last Monday and 8,213 hd. a year ago. Compared to last week feeder steers were steady to $2.00/cwt higher. Feeder heifers were firm at $2-$4/cwt higher.

Demand was extremely good for steer and heifer calves. Wheat pasture in many areas was improved greatly following recent rains improving winter grazing conditions.

The CME feeder cattle index was placed at $143.81; up $1.53 from the previous close.

CORN futures on the Chicago Board of Trade (CBOT) finished up on Monday. The DEC’11 contract closed at $5.916/bu; up 9.25¢/bu. MAR’12 futures closed at $5.984/bu; up 8.5¢/bu. The DEC’12 contract closed up 10.0¢/bu at $5.454/bu.

Corn futures were supported by Friday’s buying opportunity amid a falling US dollar as the Euro Zone debt crisis continues. A weaker US dollar makes dollar-denominated grains more competitive in global markets.

Floor sources said they hoped demand for US corn would renew. Corn exports were viewed as somewhat bullish with USDA putting corn-inspected-for-export at 30.596 mi bu vs. estimates for 27-31 mi bu.

On Monday France’s Supreme Court over ruled a ban on GMO corn developed by Monsanto wrong and ordered the ban immediately lifted. Funds were active buyers purchasing 9,000 lots.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday on rising open interest. JAN’11 soybean futures closed 14.5¢/bu higher at $11.210/bu. The MAR’12 contract closed at $11.310/bu; up 15.25¢/bu. NOV’12 futures closed at $11.360/bu; up 16.5¢/bu.

Soybean futures rebounded from last week’s slide to lows not seen in over 12 months on news that the Euro zone could be nearing a solution to its sovereign-debt crisis. The falling US dollar was supportive. CBOT soybeans are near oversold. Good weather in most of South America, except for Brazil, held prices in check.

Exports were near bearish with USDA putting soybeans-inspected-for-export at 41.406 mi bu vs. estimates for 40-45 mi bu. Reports indicate that China is stockpiling soybeans from internal farming sources to last until the end of April 2012.

Funds were net buyers of over 4,000 lots while noncommercial traders cut 13,093 long contracts and added 4,449 shorts, leaving them net short, 23,522 contracts. Money managers beefed up bearish bets on US agricultural commodities last week on sagging prices and concerns that the global economy was weakening. However, Monday showed renewed buying activity on oversold opportunities.

WHEAT futures in Chicago (CBOT) closed up on Monday on a mild run of short covering. The DEC’11 contract closed at $5.746/bu; up 0.25¢/bu. JULY’12 wheat futures finished at $6.222/bu; up 4.5¢/bu. Wheat futures were also supported by a weaker dollar and a rallying stock market.

Exports were neutral with USDA putting wheat-inspected-for-export at 15.392 mi bu vs. estimates for 14-18 mi bu. Sluggish global demand for US wheat weighed on futures. Additionally, wheat fundamentals remain sluggish as world markets are expected to continue taking sales away from US suppliers.

Funds bought net 1,000 CBOT wheat lots but large speculator added 9,420 short contracts while getting out of 2,444 long contracts leaving them net-short 86,620 lots.

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