Weekly Roberts Report: Surging Cattle Prices Support Hogs

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 28 February 2007
clock icon 4 minute read

LEAN HOGS on the CME closed up on Monday from spillover support from cattle. The APR’07LH closed up $0.125/cwt at $66.875/cwt. The JUNE’07LH contract closed at $77.100/cwt, up $0.700/cwt. The August through the February ‘08 contracts all posted fresh highs. Hogs got support from surging cattle prices and continued winter weather but the market felt pressure from seasonal price patterns. Off months were stronger amid talk that supplies will be tight this spring. The CME Lean Hog Index was placed at $67.15/cwt, down $0.65/cwt. The average pork plant margin for Monday was put at $8.25/head, up $2.10/head from Friday and $2.40/head over a week ago, according to HedgersEdge.com. Cash sellers should hold onto hogs in this weather putting on as much extra weight as they can to take advantage of these prices. Corn users should not price corn at this time trying to catch it on the down tick.

CORN on the Chicago Board of Trade (CBOT) finished lower again on Monday due to fund selling and profit taking into sell-stops. The MAR’07 contract finished at $4.254/bu, down 4.6¢/bu. The DEC’07 contract finished at $4.180/bu, off 2.6¢/bu but over 9.0¢/bu higher than two weeks ago. DEC’08 futures finished down 1.2¢/bu at $3.916/bu. The market is technically overbought with the 14-day Relative Strength Index for DEC’07 corn futures at 71.45. An RSI over 70 is considered an overbought market. This left corn in a position susceptible to wild price swings and some profit taking. A very large volume was registered on Monday with 329,049 futures and 93,877 options compared to 273,171 futures and 89,915 options traded last Friday. The nearby contract changed positions by as much as 12.0¢/bu on Monday at times as weather put a damper on spring planting expectations amid strong demand in the livestock, ethanol, and energy sectors. These prices have U.S. farmers getting ready to plant a lot of corn as any little worry to the corn crop bounces the corn market around amid the current uptrend in crude oil. Corn producers who haven’t considered selling up to 40%-50% of the ’07 crop by now should do so. There should be no old crop corn in the bins.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed a little better on Monday. Soybeans felt some downward pressure as corn declined. The MAR’07 contract finished at $7.786/bu, up 0.4¢/bu. NOV’07 futures also closed up 1.2¢/bu at $8.320/bu. Soy oil soared as crude made gains. Profit-taking in corn limited gains in soybeans. Some are thinking that soybean plantings may be limited due to wet weather. Commodity funds were strong buyers of soybeans buying 1,000 contracts. Weekly export inspections were lower than the expected 32-37 million. Fridays CFTC Commitments of Traders report showed large speculators growing net long positions in soybean futures but decreasing net long positions in options for February 20. Cash soybeans were steady on Monday in the Midwest to 5.0¢/bu lower in the Mid-Atlantic States. Cash sellers should have considered pricing up to 50%-60% of the ’07 crop.

WHEAT in Chicago (CBOT) ended lower on Monday amid profit taking and spillover from the corn markets. MAR’07 futures closed at $4.830, down 1.2¢/bu. JULY’07 wheat finished off 2.4¢/bu at $5.062/bu after pegging a new contract high at $5.18/bu. Funds were net even in trading. Soybeans lost ground due to huge holdings in long positions in CBOT corn futures by large speculators and hedge funds leaving this market vulnerable to price swings. Even as Egypt refused to buy U.S. wheat over the weekend USDA lists export data that is supportive. Export inspections for U.S. wheat were placed at 23.1 million bu, more than the 18-22 million expected. All wheat exports were down in other countries. Weather continued to be a friend to U.S. wheat. Cash wheat bids in the Mid-Atlantic States were weaker. It is a good idea to have up to 60% of the ‘07 crop forward priced at this time.

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