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Weekly Roberts Report: Keep moving cash hogs out

by 5m Editor
20 December 2006, at 12:25pm

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.



LEAN HOGS on the CME closed down on Monday. FEB’07LH futures closed at $61.875/cwt, off $0.375/cwt. The APR’07LH closed off $0.375/cwt at $63.500/cwt. According to USDA data, cash hogs traded higher in some Midwest markets but lower in the east. Expectations that cash hog prices will be weaker in the coming days weighed on nearby contracts. One floor source said that the market is “evening up” ahead of the holidays … as usual. Other sources said that losses in futures were limited by recent lower-than-average hog weights which is viewed as a sign that producers are current on marketings and may not have extra hogs to sell for Christmas hams. USDA reported last week that average hog weights in Iowa/Minnesota markets were off 0.6 lbs from the previous week at 269.3 lbs/head and off 1.7 lbs/head from a year ago. USDA placed the pork carcass cutout value at $65.52/cwt, up $1.18/cwt. This was aided by the large gain in the average loin price … a popular pork item at this time of year. Average pork plant margins for Monday were estimated at $8.75/head, up $2.20/head from last Friday and up $7.60/head from last week, according to HedgersEdge.com. Cash sellers should continue to push hogs off the feeding floors as soon as they can be readied while avoiding weight discounts. Hedgers should be in short positions protecting 1st quarter ‘07 and 2nd quarter ’07 pork production. Corn users should consider pricing more near-term corn inputs now.

CORN on the Chicago Board of Trade (CBOT) closed lower on Monday after rebounding on the days’ lows amid year end consolidating of positions and weak technical signs. The MAR’07 futures contract closed at $3.656/bu, off 3.2¢/bu and down 5.0¢/bu from last week at this time. The DEC’07 contract was one of four contracts finishing on the upside closing at $3.616/bu, up 0.6¢/bu and 10.4¢/bu higher than last Monday. The DEC’08 contract finished up by 0.6¢/bu at $3.450/bu. Funds in weighty long positions left the market susceptible to selling as the CFTC Commitments of Traders report showed funds in heavy net-long positions at 291,875 lots in CBOT corn futures/options combined. This was an increase of 11,598 lots for the week ended December 12. USDA reported export sales of 116,000 tonnes (4.6 million bu). China is reported to have declared that it is not expecting to enter ethanol or biodiesel production. It intends to purchase grain for food only. Weekly export inspection numbers came in within expectations between 37-41 million bu at 40.2 million bu. Argentina’s corn crop was placed at 85% planted as of Friday. This is up 3% from last week but down 1% from a year ago. Cash corn in the Midwest was steady amid slow farmer sales and a full marketing channel slowing export pace. Cash corn in the Mid-Atlantic States was mixed on Monday with basis improving in some areas but weakening in others. The JAN’07 ethanol contract closed at $2.05/gal, even with the last close but off 20.0¢/gal from last Monday. Corn producers selling up to 20%-30% of the ’07 crop last week are in good shape. This market is still very volatile. Buying a put option may be useful.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed off on a technical bounce continuing last week’s setbacks. The JAN’07 soybean contract closed at $6.480/bu, off 9.4¢/bu and 18.0¢/bu lower than this time last week. The NOV’07 closed down 8.2¢/bu at $7.066/bu and 13.4¢/bu lower than last Monday. The market is showing bear signs on the technicals amid overall good growing weather in South America. Argentina’s soybean crop was 77.5% planted as of last Friday, up 7% from a week earlier but 2% behind last year’s seedings. As with corn, funds in heavy long positions are hanging over the market. Weekly export inspection numbers did not meet expectations of 25-29 million bu, coming in at 23.8 million bu. Cash sales of soybeans in the Midwest and Mid-Atlantic states were slow on Monday. The CFTC’s Commitment of Traders report had funds expanding net long positions in CBOT soybean futures for the week ended December 12. After filling the gap-down of December 4 on December 14, the NOV”07 contract looks as though it is trying to confirm the right shoulder of a small head and shoulder formation. The Relative Strength Index on the NOV’07 chart and all key moving averages (MA), except the 20-day MA, have turned down. The NOV’07 contract seems to be headed toward the measuring objective of around $6.815/bu-$6.825/bu. Cash sellers should still consider pricing up to 50% of the ’07 crop. Hedgers who placed short positions near $7.00/bu in the NOV’07 contract last week are in good shape.

WHEAT in Chicago (CBOT) ended off on Monday with MAR’07 futures closing at $4.874/bu, down 6.6¢/bu. JULY’07 wheat finished lower by 7.0¢/bu at $4.840/bu but virtually even with last Monday’s close down only 0.06¢/bu. All other contracts were off 2¢/bu – 6.6¢/bu. Declines in corn and soybeans provided lack-luster trading on the day amid disappointing weekly U.S. export data and bearish weather forecasts for the U.S. Plains. USDA reported export inspections below expected ranges of 14-18 million bu at 11.4 million bu. Australia’s crop seems to be on-the-grow with export estimates now placed at 12.793 million tonnes (470 million bu), up almost 2 million tonnes (73.5 million bu) from the previous forecast. Also affecting export expectations were reports that India has planted 20% more wheat this year than last year and that wheat producers in the Ukraine had increased seedings by 11.8% over last year. The CFTC’s Commitments of Traders report on Friday had funds reducing net long positions in CBOT wheat futures for the week ended December 12. Cash bids for the ’06 crop were weaker in the Mid-Atlantic States. Hopefully cash sellers sold the remainder of the ’06 crop at last week’s prices. It still might be a good idea to forward price up to 30% of the ‘07 crop at this time. Hedgers should consider opportunities around the $4.75/bu range in JULY’07 futures.

ThePigSite News Desk


5m Editor