Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 25 May 2006
clock icon 7 minute read

LEAN HOGS on the CME ended lower with the JUNE’06LH contract at $67.525/cwt, down $0.625/cwt and the JULY’06LH futures off $0.65/cwt at $66.975/cwt amid light futures trading. Pork production reported last week as large and seasonal pork-sales declines indicate lower pork prices are on the horizon. Cash hog prices were called steady to lower but generally thought of as having little reaction to Friday’s

Cold Storage report from USDA. Total pork supplies were placed at 516.2 million head, down 47.54 million head. Hog slaughter was estimated at 390,000 head, 9,000 head more than one week ago and 3,000 head more than one year ago. Open interest on CME hogs registered another record Friday rising to 164,703 contracts. Hedgers should consider protecting 3rd quarter marketings at this time. Cash sellers should keep sales as current as possible pushing weights to the limit.

CORN on the CBOT for the July’06 futures closed up 1.6¢/bu at $2.544/ and the DEC’06 contract closed at $2.786/bu, up 1.4¢/bu from the previous close but down 5.4¢/bu from last week. After being hard pressed on Friday amid sliding gold and crude oil prices the commodities flame-out showed signs of slowing as corn futures climbed. In spite of Friday’s slide to a one-week low, the JULY’06 contract remained above all key moving averages and the RSI was viewed as neutral at 62.11. Overflow support was seen from surging wheat and fund buying activity as the outside markets (gold and silver) were stabilizing factors.

An estimated 159,458 futures contracts were traded Monday compared to 214,833 futures traded last Friday. Hard Red Winter wheat in Kansas City (KBOT) registered highs not seen in 10 years while Soft Red Winter wheat jumped to new contract highs in Chicago (CBOT). “Wheat supported corn as worries over hot weather in the U.S. Plains was seen as causing further cuts in this year’s wheat crop,” one trader was quoted. Bearish factors in corn were: a) generally good weather in the corn-belt and b) net-long fund positions greater than expected as reported by the CFTC. Funds were net long futures and options combined 270,723 lots (1.4 billion bushels).

This was an expansion from last week as of May 16. The USDA plantings progress report showed the U.S. corn crop as 92% planted and rated as 66% good to excellent, up from 63% a year ago. Cash corn in the Midwest was firmer early amid declining barge freight rates. Exports to Japan were expected to remain quite this week. Corn cash bids in the Mid Atlantic states were steady to 2.0¢/bu higher early Monday. USDA early Monday said 53.5 million bushels were inspected last week, a blockbuster week above estimates for 35 – 45 million bushels. It looks like the question asked last week, “How far up will corn go?” has been answered … for now … at $2.866./bu on DEC’06 corn futures.

It looks like bearish technicals are at work with both the RSI and the 4-day moving average on the DEC’06 corn contract turning down amid a large volume day. Even though it looks like a very important high has been reached, look for corn to trade sideways the next couple of days. Fundamentals in place at this time for both corn and wheat seem to be showing support for this market. Cash sellers that have priced up to 40%-50% of the new crop are in good shape and should sit tight. Both hedgers and cash sellers could consider a contract on up to 20 – 25% of the DEC’07 crop.

SOYBEANS futures at the Chicago Board of Trade (CBOT) finished 4.0¢/bu to 6.3¢/bu lower through all months with the with the JULY’06 contract down 4.4¢/bu at $5.824/bu, 21.8¢/bu lower than last Monday. NOV’06 soybean futures ended at $6.06/bu, down 4.6¢/bu from Friday and 19.0¢/bu lower than one week ago. Prices were weighed down by follow-through technical sales. A stronger dollar shifted money out of commodities amid speculative liquidation by funds. Mounting U.S. and world oilseed supplies due to huge crops in South America & the U.S. and favorable planting weather also provided bearish fundamentals.

Above both the five-year tempo of 51% and trade estimates of 49 – 53%, USDA reported 55% of the U.S. crop planted by last Sunday. Dismal weekly export inspections were placed at 5.872 million bushes, below range estimates of between 7 – 11 million. Funds sold about 2,500 soybean futures amid moderate volume as large speculators expanded their net long positions in soybeans and the soy oil complex. Cash sellers should have considered selling up to 50% of new crop beans for several weeks now. Hedgers should have considered protecting up to 50% of the crop by now. If not at these levels it is strongly recommended to get there. Those waiting on local cash beans in the Mid Atlantic to get to 6.00$/bu may not want to hold their breath.

WHEAT in Chicago for JULY’06 wheat futures closed 10.0¢/bu higher at $4.262/bu in what became new contract highs after markets in both Chicago and Kansas City opened lower amid profit taking from last week’s rise. Prices took off by noon and never looked back. The CBOT followed Kansas City wheat in what proved to be its highest price in a decade on the KCBT with the KCBT JULY’06 finishing at $5.174/bu and the KCBT DEC ’06 contract closing at the highest level … $5.274/bu. The run-up pulled CBOT wheat deeper into what is viewed as technically overbought ranges with the 14-day RSI finishing at 75.95.

An RSI over 70 is considered technically overbought. Market moving factors were continued dry weather in Nebraska and Colorado amid further deteriorating crop growing conditions. In areas where rain fell there were worries of head scab, a yield-lowering fungal disease. USDA placed the spring wheat crop at 76% good to excellent while the winter crop was downgraded from 36% to 30% good to excellent. Funds bought 5,000 lots on the CBOT for the day in an estimated volume of 61,574 lots. Kansas City wheat futures set contract highs on all contracts. Export inspection data proved helpful to price levels showing inspections of 15.6 million bushels, .6 – 2.6 million bushels above expectations.

Tight world wheat supplies are seen as keeping demand for U.S. wheat hefty despite these high prices. Friday’s CFTC Commitments of Traders report showed funds widening net long positions in CBOT wheat combined futures and options as of May 16 with longs up 4,574 lots at 58,405 contracts. Cash sellers who have not priced 50% of the ’06 crop can use this opportunity to get there. Hedgers should not have any short hedges in place at this time but put options may be considered.

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