Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 4 April 2007
clock icon 7 minute read

News travels fast, even to South America. I learned last Friday while in Rosario, Argentina that the USDA World Agricultural Supply Demand Estimates (WASDE) report showed corn planted acres increasing 15.5% over last year. It’s been said before but bears repeating, if all these acres are planted the result will be the largest corn acreage since 1944. Most of the 12.127 million acre increase to 90.45 million acres comes from a reduction of 8.382 million acres of soybeans (planting 67.14 million acres) and a reduction of 3.127 million acres of cotton. Planted wheat acres increased 3 million acres to 60.30 million acres. Many producers priced some corn but if history is consistent, not as much as one would expect. Farmers don’t like to price more than they think they can deliver and many farmers didn’t like the forward prices they took in the spring of 2006 only to see prices climb later on. Several analysts think that many farmers passed on $4.00/bu corn waiting on $5.00/bu corn … let’s hope not. However, I too am in the camp that thinks there is a lot more forward priced corn now than there was 12 – 18 months ago.

LEAN HOGS on the CME closed higher on Monday with the exception of the May contract. The APR’07LH contract closed at $65.025/cwt, up $1.175/cwt and $0.668/cwt higher than two weeks ago. MAY’07LH futures closed at $75.000/cwt, off $0.90/cwt. The JUNE’07LH contract closed at $75.525/cwt, up $0.125/cwt. Friday’s USDA quarterly Hogs and Pigs report placed total hogs on US farms at 101.3% over a year ago but below the expected 101.5% increase. The breeding herd was reported at 100.9% of last year’s herd and over the expected 100.4%. Hogs kept for market were placed at 101.3% of last year. The bullish news was found in heavier carcass weights. The report placed heavy hogs weighing over 180 lbs at 103.8% over last year at this time. These heavy hogs likely accounted for much of the faster kill rate. Many expect heavy hog supplies to start declining from this point tightening market ready supplies. Hogs weighing 120-179 lbs were estimated at 99.9% of last year’s numbers. This may encourage a stronger cash market this week. The CME Lean Hog Index was placed at $60.76/cwt, up $0.15/cwt. Cash hogs were steady to firm on Monday as plants actively searched out supplies. Cash hogs were $0.50/cwt-$1.00/cwt higher. Deferred months showed promise but were limited near the end of the day by ideas that lower corn will encourage more hog production. Cash sellers should try to sell hogs at the right weights while pushing them off the finishing floors as soon as they are ready in order to take advantage of these favorable prices. Hog feeders should be pricing grain in puts at this time.

CORN on the Chicago Board of Trade (CBOT) tumbled again on Monday with the exception of the DEC’08 corn contract, which gained 0.2¢/bu. The MAY’07 contract finished at $3.546/bu, off 19.6¢/bu and 43.4¢/bu lower than two weeks ago at this time. The DEC’07 contract finished at $3.694/bu, off 14.0¢/bu and 36.6¢/bu lower than two weeks ago. DEC’08 futures finished up 0.2¢/bu at $3.804/bu but 13.0¢/bu lower than this time two weeks ago. The market plunged 5% last Friday after the USDA WASDE report was released and was off another 5% at the close on Monday. We all know why … corn acres are not only up but over what most expected. The highest estimate noted two weeks ago was an increase to 90 million acres rather than 90.45 million acres. I’ve said many times in many extension meetings this winter that the American farmer knows how to produce. It is worthy to note, however, that the market did end above the 20.0¢/bu limit-down point. On the other hand, news of dry weather in Alabama and a soggy Midwestern corn belt amid heavy, soaking rains on already saturated fields was viewed as somewhat supportive. The jury is out on how many acres there will truly be at the end. Those corn acres planted in pastures that have not seen a plow in 20 years will also have to come to the market sooner or later. Exports were generally seen as not news-worthy. Weather markets will begin to take hold of the market now. Two weeks ago this report stated that this market still showed signs of losing steam, at least through late March and early April, on declining crude prices, increasing crop acres, and now shaky ethanol support from the U.S. government. Hopefully cash sellers are priced up to 40%-50% of next year’s production at this time. If not, it’s not too late to start.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed higher on Monday trading in a choppy, sideways pattern since March 1, 2007. The MAY’07 contract finished at $7.779/bu, up 17.6¢/bu and 23.0¢/bu higher than this time two weeks ago. NOV’07 futures also closed up 16.2¢/bu at $8.212/bu and 18.2¢/bu higher than a week ago. Today’s action is generally viewed as a recovery from last Friday’s sell off after following corn lower. Soybeans diverged from corn gaining momentum when corn began to recover near the end of the session. Two floor sources noted today that if the corn/soy price relationship tightens up and there is a spring delay in corn seedings due to wet weather, traders think that corn acres will switch back to soybeans proving bearish on current prices. The huge soybean crop that I saw over the last two weeks I spent in Argentina will further pressure prices in the coming days. The soybean crop there has had amazingly good growing weather. However, recent rains are slowing harvest. One thing South American growers have going for them is there convenient portable bag-storage system that allows them to store their money right there on the farm and move no more and no further than what they have to. Additionally, it is noteworthy to say that one thing the soybean market has in common with the corn market is that a weather market looms on the horizon. Producers should consider having at least 60% of the 2007 crop priced. These prices held prior to March 30 but all bets are now off for the next few days.

WHEAT futures in Chicago (CBOT) were off on Monday with the MAY’07 contract closing at $4.280/bu, off 10.0¢/bu and 27.0¢/bu lower than two weeks ago at this time. JULY’07 wheat futures finished down 8.6¢/bu from last Friday’s closing at $4.696/bu but nearly even with two weeks ago. A bullish tone to soybeans supported wheat. Inter-market spreading in December wheat/corn was also supportive. Both floor sources spoken to on Monday saw traders as still reflecting on what last Friday’s USDA plantings report means for the wheat market after corn took a beating, soybeans found support and wheat acres were reported up some from last year. The CFTC Commitment of Traders report showed funds and large traders widening net short positions slightly. Producers who have priced between 60%-80% of the ‘07 crop are in good shape.

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