Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 25 April 2006
clock icon 5 minute read

LEAN HOGSon the CME were again mixed on Monday, while pork belly futures closed limit up following Friday’s monthly Cold Storage report, according to floor sources. JUNE’06LH found 3-week highs with the JULY’06 contract a 6-week high with pork bellies leading the gains. Ham and bellies were down significantly from a year ago. After being sparked early on lean hogs slid finally on selling initiated by the large premium with June monitoring the sell-off in the nearbys. JUNY’06LH closed off $0.575/cwt at $65.60/cwt and the JULY’06LH closed at $66.875/cwt, off $0.125/cwt. The June contract met resistance at the 40-day moving average. The futures market is carrying a good premium to the index weighing on the market. The latest CME Lean Hog Index was up $1.12/cwt at $56.56/cwt. Some traders also noted competition from poultry noting plentiful supplies, up overall 32.5% from a year ago. Sliding cattle futures provided additional pressure on hog futures following the bearish cattle report on Friday. Hedgers should have exited all short positions last week. Cash sellers should keep sales as current as possible.

WHEAT in Chicago for MAY’06 wheat futures closed down 2¢/bu at $3.506/bu. The JULYT’06 contract closed down 1.6¢/bu at $3.634/bu. Longs were exhausted by noon. Some support was seen in reports of inadequate weekend moisture for HRW in Kansas. Funds were even to light sellers. Traders estimated Monday’s USDA crop progress report to show U.S. spring wheat planting progress at 15-20% complete, up 5-10% from last week. Also expected was a 2-point decline in U.S. winter wheat ratings from last week’s good to excellent rating of 39%. Friday’s CFTC report showed short funds had cut their net short positions in CBOT wheat futures and options for the week ended April 18. Longs increased their positions by about the same amount resulting in a wash. Funds in Kansas City trimmed long positions while those net long in Minneapolis expanded theirs. Cash sellers should have considered pricing up to 40%-50% of the ’06 crop last week. Sit tight. Hedgers should not have any short positions in place at this time but be prepared for action.

SOYBEANS futures at the Chicago Board of Trade (CBOT) finished up with the MAY’06 contract up 4.4¢/bu at $5.742/bu and the NOV’06 contract closing up 5.2¢/bu at $6.092/bu in short covering. Funds bought about 4,000 (20 million bushels) soybean contracts. Slow exports continue to pull at prices as freshly harvested South American soybeans come on the market. USDA reported export inspections at 9.1 million bushels, about 1 million bushels below estimates of 10-15 million bushels. Weather forecasts are making for better field working conditions in the U.S. while providing harvest disruptions in the southern hemisphere. Firm cash basis bids for beans were registered early Monday in the Midwest amid thin farmer offerings. Friday’s CFTC Commitments of Traders report showed funds net short positions retracting in CBOT beans for the week ended April 18. Cash sellers not forward priced at 50% of the 2006 crop should consider getting there taking advantage of any rebounds. Hedgers should have taken some profits on about half of the 50% crop coverage week before last. Considerations of hedges on up to 40%-50% of the crop could prove favorable.

CORN on the CBOT for the MAY’06 corn contract closed down 3.6¢/bu to $2.326. The DEC’06 contract opened $2.722/bu before closing at $2.670/bu, down 3.6¢/bu. Technical corrections amid weakness in the gold and crude markets were responsible for the bearish tone. The corn market has been following the metals and energy markets of late. Commodity markets tend to move in tandem during increased fund activity. Funds sold 6,000 lots (30 million bushels). Corn exports were supportive providing some bullish support. USDA reported weekly export inspections last week well above trade estimates of between 30-35 million bushels at 50.1 million bushels. Crop progress for corn plantings is estimated at 20-25% complete, up from 9% last week. Early on Monday cash bids were steady to firm in the Midwest amid slow sales from farmers who were working in the fields. Cash bids for corn were steady to slightly higher in the MidAtlantic last Friday. Friday’s CFTC Commitments of Traders report showed funds expanding net long positions in CBOT corn futures and options combined for the week ending April 18. Long funds were up 15,426 lots from the previous week at 281,124 (1.4 billion bushels). Funds in net short positions were down 14,166 lots at 72,482. Technical support in DEC’06 corn futures is placed at $2.655/bu and resistance at $2.751/bu. Technical support in the May contract was at $2.34/bu and resistance was at $2.415/bu. Cash sellers last week should have considered at least being 25% sold in new crop corn. It is now time to consider forward pricing to the 30%-40% level of new crop corn if you are not already there. The same recommendations hold true for hedgers. Hedges against the DEC’07 crop may be considered at the 10% level.

Mike Roberts is now the sole author of the Weekly Commodity Market Report. Dr. Wayne Purcell is now fully retired.

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