Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 1 June 2006
clock icon 6 minute read

LEAN HOGS on the CME ended lower with the JUNE’06LH contract at $67.700/cwt, up $0.925/cwt and the JULY’06LH futures ended up $1.40/cwt at $66.625/cwt. Futures were viewed as reacting to talk of higher cash prices this week. Funds finished the day buying pushing the JULY’06LH contract to its highest in a week. The AUG’06LH in Chicago on the CME advanced $0.95/cwt to $65.100/cwt. Positive plant margins provided initial optimism and futures rose on technicals and fund buying activity lengthening gains.

The average processor margin for Tuesday was estimated at $5.15/head, compared with a negative $3.75/head one week ago, according to HedgersEdge.com. Hogs were mixed early on with Iowa/Minnesota hogs firm while the Western Corn Belt was seen as weak overall. Late in the day cash dealers were expecting steady to firm cash prices on Wednesday due to increased pork plant demand later on in the week. Floor sources said that tight supplies of hogs ready for market seemed apparent.

USDA reported the average market weight last week at 268.1lbs/hd. The average hog weight last year at this time was placed at 268.2lbs/hd. It looks as though resistance has been established in both the AUG’06LH and the OCT’06LH contracts. Hedgers should consider protecting 3rd quarter marketings in those contracts. 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 0.4¢/bu at $2.544/bu … the same as last week at this time. The DEC’06 contract closed at $2.796/bu, up 0.6¢/bu from the previous close and up 0.1¢/bu from last week. Futures were supported by news of hot temperatures in the U.S. Midwest and a rally in the gold market. Funds bought between 1,000 and 2,000 lots as speculators expect inflation to heat up … taking commodities like gold and corn with it. USDA is expected to show corn planting at 100% complete and a 1% - 2% improvement in crop conditions over last week’s 66% good to excellent crop rating report.

Exports were active with South Korea tending an offer for up to 110,000 tonnes (4.3 million bushels). USDA export inspections for last week were within estimates of between 45 – 50 million bushels. Cash basis bids for corn in the Midwest were mostly steady amid slow farmer selling. Friday’s CFTC Commitments of Traders report for futures and options combined showed funds long 329,310 lots, down 10,746 contracts from the previous week. Short funds declined 3,640 lots to 65,702. Technical support in the JULY’06 corn futures is placed at $2.475/bu with resistance at $2.635/bu.

Technical support in the DEC’06 corn futures is placed at $2.719/bu with resistance at $2.826/bu and the 14-day RSI in the neutral area at 55.73. Fundamentals in place at this time for corn are still 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. Same goes for hedgers. Both hedgers and cash sellers could consider a contract on up to 20 – 25% of the DEC’07 crop at these prices.

SOYBEANS futures at the Chicago Board of Trade (CBOT) finished slightly up through all months with the JULY’06 contract closing up 1¢/bu at $5.834/bu. NOV’06 soybean futures ended at $6.086/bu, up 0.6¢/bu. Funds were key components of the gains due to inflationary markets bringing new buyers amid the absence of fundamental support. Support was also drawn from momentum for soyoil. The market faltered after jumping to a good start amid good near-term weather outlook, good planting progress, and bearish supplies.

Seedings were expected in the 80% range late Tuesday. Export inspections came in 66% higher than last week’s 6.3 million bushel mark at 10.51 million bushels for the week ended May 25. This was well within the 7 – 12 million bushel estimated range for exports. 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 on these rallies.

WHEAT in Chicago for JULY’06 wheat futures closed 3.4¢/bu lower at $4.12/bu after quickly jumping out of the starting blocks on spillover support from gold and crude activity spurring heavy fund buying action. Today’s close was 14¢/bu lower than this time last week. Also holding the market early on were reports of hot weather continuing to stress the U.S. HRW winter wheat crop amid expectations that USDA will lower the crop condition in its weekly ratings report. Some spotty rains were reported but generally viewed as not enough to help the winter crop. Profit taking started around midday turning markets lower.

In export news, India is reported close to finishing a deal for 1.5 million tonnes (55 million bushels) of wheat. India had already tendered for 3 million tonnes (110 million bushels). Morocco stated it would import 40,000 tonnes (1.47 million bushels) for delivery in August under a free trade deal. Japan was quoted as saying it will skip its regular weekly tender due to all orders being filled. USDA reported weekly export inspections of 16.1 million bushels of U.S. Wheat, well within the expected 14 – 18 million bushels. Friday’s CFTC Commitments of Traders report showed funds expanding net long positions in CBOT wheat futures for the week ended May 23.

Funds in CBOT wheat futures only were net long 16,249 lots. Data for CBOT wheat futures and options combined showed funds net long 41,197 contracts and widening already heavy net-long position in Kansas City and Minneapolis wheat. 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 with a watchful eye on the market.

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