Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 9 August 2006
clock icon 6 minute read

The next USDA World Supply/Demand report for crops is due out on Friday, August 11, 2006. Unless there are dramatic shifts in current weather patterns or the August report (based on real-time field data) establishes a different picture of production, forces driving the corn and livestock markets may not change much. Renewed exports, choppy grain markets, lively cash markets, and active technical fund buying spur livestock markets across the board.

LEAN HOGS on the CME closed higher on Monday amid support from steady cash markets and chart-based fund buying and buy-stops, traders said. AUG’06LH futures closed at $71.425/cwt, up $1.450/cwt. OCT’06LH futures closed up $1.65/cwt at $63.30/cwt. Higher live cattle futures and higher retail pork prices initiated gains in lean hog futures. The CME lean hog index was placed at $69.47/cwt, up $0.87/cwt.

Hog futures rose despite concerns of declining hog exports amid beef export resumption to Japan. USDA placed hog slaughter at 336,000 head, down 44,000 head on Monday as some plants took a floating holiday ahead of Labor Day. USDA placed the pork cutout average on Friday at $73.50/cwt, up $1.36/cwt. The average pork plant margin for Monday was estimated at $2.60/head, up from $0.37/head on Friday but down from $5.20/cwt a week ago, according to HedgersEdge.com.

Cash sellers should still be pushing hogs off the feeding floors. Hedgers are out of short positions but should remain poised to place new orders. Advancing feed grain input pricing should not be considered at this time.

CORN on the CBOT Monday finished down 2.0¢/bu–5.2¢/bu with some contracts sinking to new lows. Both the SEPT’06 and the DEC’06 futures contracts closed down 5.2¢/bu at $2.396/bu and $2.57/bu respectively. Even though the SEPT’06 and the DEC’06 contracts closed lower on the day they finished slightly higher than last week at this time. Rain and forecasts for more moderate temperatures in the U.S. Midwest pressured corn lower.

The U.S. corn crop is considered to have passed its most critical reproduction stage meaning the corn crop has a good chance of getting bigger. The USDA report scheduled for Friday, August 11 will give more of an indication of crop size and is not expected to be bullish for corn or soybeans. Exports were generally quiet over the weekend. South Korea is said to be seeking corn imports and is expected to work a deal with China for cheaper corn. No offers are expected this week from Japan or Taiwan. USDA placed U.S. corn inspected for export last week at 48.3 million bu respectably compared with expectations of between 42 – 48 million bushels.

Cash bids in the Midwest were mostly steady while slightly lower in the Mid-Atlantic. Friday’s CFTC Commitments of Traders report for futures and options combined for the week ended last Tuesday showed funds in long positions up 2,209 lots at 302,278 lots. Corn volume on the CBOT was estimated by the exchange at 171,181 futures and 22,352 options. Cash sellers that priced up to 40%-50% of new crop corn are still in good shape. The price rally of last week afforded a nice opportunity to price up to 10% more of this year’s crop. Producers may want to price up to 20% of the 2007 corn crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were choppy last week but turned bearish on Monday with the AUG’06 futures setting a new contract low finishing off 14.2¢/bu at $5.632/bu. The NOV’06 closed at $5.82/bu, down 15.0¢/bu. The NOV’07 contract closed down 12¢/bu at $6.37/bu. Current rains and more in the forecast turned the market bearish as the soybean crop is in its key pod-setting stage.

Favorable crop weather is expected to expand crop estimates reported by USDA on Friday, August 11. Also proving bearish on the market were large deliveries on the August contract placed at 1,343 lots. Cash basis bids in the Midwest were mostly steady amid slow farmer selling. Even though exports were above estimates of 6-12 million bushels, this did little to provide bullish momentum. USDA reported 15.5 million bushels inspected for export last week. Both primary and secondary technical support in the NOV’06 contract were broken as prices approached lows not seen in 9 months.

Friday’s CFTC Commitments of Traders report for futures and options combined for the week ended Tuesday had long funds up 2,135 lots from the previous week at 60,358 lots. Funds in short positions were placed at 95,480, up 22,506 lots. Cash sales could have been advanced to 60% last week through Wednesday. It still may be prudent to consider pricing up to 20% of the ’07 crop. Hedgers should consider short positions in the $5.81/bu-$5.80/bu range in NOV’06 soybean futures.

WHEAT in Chicago (CBOT) closed lower on Monday following bearish tones in corn and soybeans and declining significance of production-related concerns. Unless something directly affecting wheat fundamentals is reported wheat is pretty much expected to tag with the other grain markets now. The SEPT’06 and the JULY’06 wheat futures contracts closed down 3.0¢/bu at $3.93/bu and $4.464/bu respectively.

Fund activity showed between 2,000 and 2,500 contracts being sold, floor sources said. Volume on the CBOT was estimated at 73,346 futures and 3,572 options. The market seems to have factored in bullish export inspection data from USDA. Weekly export inspections were placed at 18.6 million bu, somewhat greater than the expected 13-18 million bu. Intermarket spreads in Kansas City and Minneapolis gained against CBOT wheat reflecting bearish supply/demand factors expected for soft red winter wheat. Cash bids for SRW were near historic lows showing soft demand from processors amid abundant supplies.

USDA reported the spring wheat harvest 49% complete, 32% ahead of the five-year harvest average. Friday’s CFTC Commitments of Traders report showed funds off long positions 9,765 lots in CBOT wheat futures at 14,059 contracts for the week ended Aug.1. Cash sellers with up to 70% of the ’06 crop sold are in good shape. Producers may still think about selling up to 30%-40% of the ’07 crop at this time. Hedgers may consider having 70% of the ’06 crop and up to 25% - 35% of the ’07 crop protected.

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