Weekly Purcell Agricultural Commodity Market Report Wayne D. Purcell Agricultural and Applied Economics Virginia Tech

Lean hogs on the CME almost regained declines posted since the last report as the APR’06LH finished up $0.80/cwt at $58.15/cwt and the JUNE’06LH contract closed up $0.60/cwt at $65.875/cwt. Futures started higher in reaction to Friday’s USDA quarterly Hogs and Pigs report showing the U.S. hog herd expanding at a slower-than-expected pace. USDA put the U.S. hog herd at 101% of last year at 60.104 million head. Analysts placed the herd at 100.7% of last year; the low end of estimates at 100.8% – 102% of last year’s numbers. Other gains were attributed to short covering and chart-based buy orders. The latest lean hog index was off $0.29/cwt at $55.39/cwt. The average pork packer cutout margin for Monday was $2.55/cwt, down from $4.95/cwt posted last Friday and also down from $7.95/cwt noted a week ago, according to HedgersEdge.com. It is suggested that sellers should remain short in JUNE’06LH and AUG’06LH futures.

CORN on the CBOT opened 0.5¢/bu to 1¢/bu higher on spillover support from Friday’s surge as a result of a bullish USDA plantings report. The MAY’06 corn contract rose to levels not seen since August 23, 2005. USDA on Friday forecast the smallest U.S. corn plantings since 2001 and record soybean plantings this spring. After opening at $2.382/bu the MAY’06 corn closed at $2.364/bu, up 0.4¢/bu. The DEC’06 corn contract closed up 0.2¢/bu at $2.682/bu. Corn continues to gain on soybeans amid outlooks now showing tight U.S. corn supplies and burdensome soybean supplies. A huge volume day last Friday set an all time high of 331,455 lots bought as funds bought 60,000 lots. Gains were limited in part by recent rains improving seeding prospects in the U.S. while weather in Sough America was noted as good for corn harvest and filling soybean pods. Strong weekly export inspections were supportive as USDA reported 42 million bushels were inspected vs. the expected 35 – 40 million. Friday’s CFTC commitments of traders report for futures and options combined showed long funds were down 2,933 lots at 198,621 from last week while short speculators were up 14,708 lots at 133,561. Fresh farmer sales showed in the Midwest and the Mid-Atlantic. Cash corn opening bids in the Mid-Atlantic on Monday were 4¢/bu to 8¢/bu higher. Technical support in MAY’06 corn futures was placed at $2.33/bu and resistance at $2.40/bu. For cash sellers, if the ’06 crop has been priced at the 25%-50% level, sit on that position. Since planting intentions are down more than expected almost anything can happen if a drought develops this summer. If higher prices hold, it will be a good year for you as you have already covered cost of production. Hedgers who had 50% of the crop hedged should now be off at least 25% of those positions in a sit-tight mode.

SOYBEANS futures at the Chicago Board of Trade (CBOT) closed off on Monday with the MAY’06 and NOV’06 soybean futures both down 6.4¢/bu at $5.65/bu and $5.962/bu respectively. Sell-stops were triggered early when NOV’06 futures fell below $6.00/bu. Pressure on price was tied to the drop last Friday following the bearish USDA plantings report, good crop weather in both the U.S. and South America, and record large U.S. soybean stocks. USDA reported dismal exports at 13.1 million bushels, the low end of the expected 13 – 17 million bushels. Cash basis bids for soybeans in the Mid-Atlantic States were mostly lower amid weak export demand. Friday’s CFTC commitments of traders report for futures/options combined showed large speculators in long positions were down 4,140 lots at 46,222 and the funds in short positions up 16 lots at 79,965. The ’05 bean crop should have been long by now. Cash sellers not forward priced at 50% of the 2006 crop should consider getting there. Prior to Friday, hedgers should have taken some profits on about half of the 50% crop coverage. It could be prudent to remain at the 25% level of the ’06 crop.

WHEAT in Chicago for both MAY’06 and JULY’06 CBOT wheat futures closed down 5.6¢/bu and 6.4¢/bu respectively. The MAY’06 finished at $3.42/bu and the JULY’06 at $3.55/bu. The 9-day relative strength index for May is near neutral at 42. Weighing over the market were early sell-stops following reports of heavier-than-expected rains, some fund selling, and routine exports over the weekend. Funds sold 2,000 to 2,500 lots. USDA reported export inspections at 11.7 million bushels, down from the estimated range of 15-20 million bushel. The CFTC on Friday said that as of March 28 large speculators were nearly even in CBOT wheat futures/options after trimming their net long position. Hopefully cash sellers considered pricing up to 55%-60% of the ’06 crop on last week’s report. If sales are still at or below 25% of the 2006 crop, catch up sales could be placed on any short-term rallies.