Weekly Roberts Market Report14 March 2012
Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University
US - The recent USDA World Agriculture Supply Demand Estimate (WASDE) put ending stocks at 801 mi bu, writes Michael T. Roberts.
LEAN HOGS on the CME finished down on Monday. The APR’12LH contract closed at $87.30/cwt; down $0.525/cwt and $2.125/cwt lower than last report. MAY’12LH futures closed at $95.000/cwt; down $0.700/cwt and $2.875/cwt under last Monday. AUG’12LH futures finished $0.675/cwt lower at $95.800/cwt and $3.525/cwt lower than a week ago. Weak demand and higher corn futures weighed on prices. Lower pork prices are hanging over the market. Good growing weather is showing up in higher live weights. Fund liquidation was also holding down gains. Some floor sources said they expected really high beef prices and high gas prices eating into the homeowner’s bottom line to encourage retail buyers to leave beef for pork. Cash hogs were mostly steady for delivery late in the week. Negative packer margins continue to force processors to buy just enough for the lines. On Monday USDA put the pork carcass value at $84.11; up $0.58/cwt but $0.85/cwt lower than a week ago. According to HedgersEdge.com, the average packer margin was lowered $5.00/hd to a negative $10.25/head based on the average buy of $63.65/cwt vs. the breakeven of $59.94/cwt. Late Monday The CME lean hog index was estimated at $87.46; down 0.19; and 0.22 lower than this time last week.
CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’12 contract closed at $6.540/bu; up 10.0¢/bu but 8.25¢/bu lower than a week ago. The DEC’12 contract closed at $5.684/bu; up 6.0¢/bu but 13.0¢/bu under this time last week. Exports, tight stocks, good cash markets, bull spreading, and continued talk that China may now come back to the US market for corn were all supportive market factors. USDA put corn-inspected-for-export at 36.256 mi bu vs. estimates for 31-33 mi bu. The recent USDA World Agriculture Supply Demand Estimate (WASDE) put ending stocks at 801 mi bu. This is 3.28 weeks’ worth of corn grain. Cash markets were firm as farmers hold onto old crop corn. Local East Coast prices averaged about 6.75/bu for old crop corn and 5.66/bu for new crop. End-users have been forced to pay up for grain or go without. China’s moves to buy US corn now on already tight stocks provide solid support for old crop supplies. New crop corn prices are lower on the potential for a record large US corn crop for 2012/13. Bull spreading also supported nearby crop prices. A “Bull Spread” is an option strategy in which maximum profit is attained if the underlying security rises in price. Either calls or puts can be used. The lower strike price is purchased and the higher strike price is sold. The options will have the same expiration date. The user of this strategy will make a lot of money if the stock price rises but will lose it all if it doesn’t. It is a high risk maneuver that can cause a lot of anxiety. This strategy is being employed because traders think that new crop corn will be pressured by larger supplies. Argentina’s government may modify its export system that would allow more exports to world markets by late summer. Large speculators bolstered net long positions buying more than 13,000 lots.
SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The MAR’12 contract closed at $13.304¢/bu; off 1.25¢/bu but 11.25¢/bu over a week ago. NOV’12 futures closed at $12.994/bu; down 5.75¢/bu but 10.5¢/bu higher than this time last week. Soybean futures were pressured as spreaders took profits and unwound long soy/short corn positions. Pit sources say there is some speculation in the pits that high US soybean prices will hurt export demand. USDA last Thursday put soybeans inspected-for-export at 26.247 mi bu vs. estimates for of 29-35 mi bu. In other news, Brazil’s soy harvest is picking up adding to global supplies. Funds sold 3,000 lots. Cash soybeans on the East Coast averaged $13.00/bu for old crop and $12.50 for new crop.
WHEAT futures in Chicago (CBOT) closed higher on Monday. The MAR’12 contract closed at $6.526/bu; up 14.0¢/bu but 15.0¢/bu lower than last report. JULY’12 wheat futures finished at $6.592/bu; up 5.75¢/bu but 23.5¢/bu lower than a week ago. Spillover from corn, a weaker US dollar, and short-covering were supportive. Good crop growing weather in the US Midwest and Plains accompanied by mild temperatures seen as boosting wheat prospects held higher prices back. Exports were very supportive with USDA putting wheat-inspected-for-export at 31.597 mi bu vs. estimates for 15-17 mi bu.