Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 19 July 2006
clock icon 8 minute read

USDA World Agricultural Supply/Demand report deemed bullish for U.S. corn and soybeans while somewhat neutral to bullish for U.S. wheat. Acres planted in corn and soybeans were not shifted as much as expected. Nothing new though … weather continues to dominate commodity market trading.

LEAN HOGS on the CME for the JULY’06LH contract expired at 1:00 p.m., EDT, closing up $0.10/cwt at $70.225/cwt due partly to its discount to the CME lean hog index. The latest CME lean hog index price was $70.78/cwt, off $0.50/cwt. The AUG’06LH futures contract finished at $68.425/cwt, up $0.475/cwt. Hot weather supported July prices but packers may have to increase bids to get hogs to the plant.

Deferred months were up and down. USDA on Friday placed the pork cutout at $76.21/cwt, up $0.25/cwt. The pork plant margin, according to hedgerEdge.com estimates, was up $1.60/head from Friday and up $2.35/head from a week ago at $10.40/head. Hedgers are out of short positions but should remain poised to place new orders. Advancing feed grain input pricing should be avoided at this time.

CORN on the CBOT finished lower a range of 5¢/bu– 9¢/bu on deferreds through DEC’07. The JULY’06 closed at $2.516/bu, off 9¢/bu. DEC’06 corn futures ended down 8.6¢/bu at $2.680/bu. Despite heat-stressing weather by noon, market-opening reports of cooler temperatures and crop-yield building moisture over the weekend took the weather premium out of the market some floor sources were quoted as saying. The selling escalated when the SEPT’06 contract slid below its 100-day moving average of $2.54/bu. Compared to last Friday’s volume, an estimated 163,606 futures and 38,583 options traded. Some floor sources stated that part of the sell off was linked to huge net long positions in CBOT corn held by funds which made the market vulnerable to sporadic weakness.

USDA’s crop condition report expectations lent some uncertainty to price activity. Contrary to trader expectations of 2%-3% lower ratings, the US corn crop good-to-excellent rating was lowered by 1% to 62% after the markets closed on Monday. It may be possible that gains in eastern corn-belt quality may offset condition losses in western corn growing areas. The JULY’06 corn contract broke key support set on July 7 at $2.521/bu. The JULY’06 contract filled the trading gap established in last Monday’s gap-up session. The DEC’06 contract did not quite fill the up-gap set last Monday. Primary support for the JULY’06 is now placed at $2.515/bu and DEC’06 corn futures on the CBOT at $2.67/bu. The USDA WASD report placed corn acres at 79.4 million acres, up 1.9 million from March 30.

The 190 million bushel increase is a result of: a) a 149 bu/ac yield increase from 72.1 million harvested acres, b) a 76 million bu increase in imports, and c) an increases in feed and corn-for-ethanol usage. As a result, ending stocks are projected to be 1.077 billion bu, down 14 million bu from some pre-report expectations of 1.4 billion bu in ending stocks. USDA leaves unchanged the $2.25/bu-$2.65/bu average farm price. Corn export inspections for the week ended July 13 at 45 million bu compared to 36.3 million bu the week before. 1.73 billion bu have been inspected for export to date compared to 1.49 billion bu last year at this time. Cash bids for corn in the Midwest early on Monday were steady amid slow farmer sales.

Cash corn was steady to higher in the mid-Atlantic states due to fresh need from last week’s product movement. Friday’s CFTC Commitments of Traders report for futures and options combined showed funds in long positions up 7,169 lots to 299,183 contracts while those in short positions were down 22,519 contracts at 110,437 lots. Cash sellers that priced up to 40%-50% of new crop corn are still in good shape. Those in short positions on the DEC’06 corn futures contract at the $265/bu on up to 50% of the crop should remain there. Producers should hold off on pricing any more of the 2007 corn crop unless using a basis contract.

SOYBEAN futures on the Chicago Board of Trade (CBOT) had soybean futures through NOV’07 finishing lower a range of 8.2¢/bu– 13.4¢/bu at the end trading on Monday. AUG’06 futures closed sharply lower to $5.900/bu, down 13¢/bu cents. The NOV’06 contract closed down 13.6¢/bu at $6.112/bu. NOV’07 beans on the CBOT finished down 10.2¢/bu at $6.580/bu. Bullish factors included: 1) livestock-producer buying activity over worries about limited supplies due to hot weather damaging the U.S. soybean crop and 2) elevator demand in the mid-South boosted by the weakness in futures. Exports were quiet over the weekend. USDA’s WASD report lowered planted U.S. soybean acres by 2 million acres to 74.9 million acres planted.

Beginning stocks are now estimated at 545 million bu, down 25 million bu. 3.01 billion bu, 70 million less than last month, are expected to be harvested from 73.9 million acres. This plus an additional 4 million bu expected from imports put supply projections for the year at 3.559 billion bu. No changes in demand are expected. Ending stocks for the 2006/’07 are now placed at 560 million bu. This is 95 million bu less than previously estimated and 15 million bu more than the carry over from the 2005/’06 crop year. The season average farm price for soybeans is now placed at $5.00-$6.00/bu, down $0.10/bu on both ends from previous expectations. Exports were quiet. Cash soybeans were mostly steady amid quiet farmer selling. Opening bids in the mid-Atlantic were steady to 3¢/bu higher at most country elevators. Friday’s CFTC Commitments of Traders report for futures and options combined put long funds increasing net positions by 4,697 lots to 62,863 while aggregate short positions for funds declined 4,613 contracts to 59,890 lots. Technical support in the NOV’06 soybean contract is now at $6.116/bu. Both cash growers and hedgers are encouraged to get to 50% of new crop sales on these “choppy-market“ rallies.

WHEAT in Chicago (CBOT) and Kansas City (KCBT) closed lower on Monday amid lack luster follow-through combined with weakness in corn and soybean futures. Wheat on the KCBT gained at first but followed opening declines on the CBOT. KCBT wheat on the SEPT’06 contract closed down 4.6¢/bu at $4.906/bu while DEC’06 wheat futures in Kansas City finished the day at $5.050/bu, off 6.4¢/bu. CBOT wheat for SEPT’06 futures closed off 4.4¢/bu at $3.930/bu while the DEC’06 contract closed at $4.124/bu, off 5¢/bu. The wild ride was due to the baking heat expected to further worsen the new spring wheat crop.

Traders expected USDA to lower the condition ratings of the U.S. spring wheat crop by 2%-5%. Late in the day after trading hours USDA lowered the good-to-excellent crop rating by 8% to 34%, down from 42% last week. The good-to-excellent crop rating for U.S. spring wheat was 33% lower than last year at this time at 75%. Egypt bought 120,000 tonnes (4.4 million bu) of U.S. wheat on Saturday for shipment in mid-August. Iraq is expected to issue a tender in the near future. USDA reported 13.6 million bu of U.S. wheat inspected for export last week. This was on the low end of expectations of between 13-17 million bu. Even though both planted and harvested acres were increased from the last estimate, the latest WASD report from USDA projects all wheat production at 1.806 billion bu, down 8 million bu from the June estimate. The per/acre yield was lowered by 1 bu/ac to 38.3 bu/ac.

Total use was placed at 2.040 billion bu, down 5 million bu. Ending stocks for new crop wheat were placed at 438 million bu, 22 million greater than last month but still 130 million bu lower than carryout from the 2005/’06 crop year. The season average on-farm price was raised by $0.10/bu on both ends to $3.70-44.30/bu. The CFTC Commitments of Traders report showed funds in long positions for futures and options combined increasing to 75, 153 lots, up 5,416 contracts. Funds in short positions declined 203 lots to 4,761 contracts. Cash sellers with up to 70% of the ’06 crop sold are in good shape. It may be wise to sell the rest of the crop on a basis contract at this time. Producers may still think about selling up to 30%-40% of the ’07 crop at this time. Hedgers should have 70% of the ’06 crop and up to 25% - 35% of the ’07 crop protected.

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