It’s been a couple of weeks since my last report due to my father’s death and current out-of-office speaking engagements. I am writing this report from my hotel room at the Southern Region Extension meeting of Agriculture Economists in San Antonio, Texas. Thank you for all of the condolences and well wishes sent from my many readers. Thousands of you have expressed your understanding and have helped lighten the load. Due to speaking engagements over the next two weeks this report will not post again until July 16.

LEAN HOGS on the CME closed higher on Monday. In light trading the JULY’07LH contract finished at $74.100/cwt, up $0.075/cwt and $1.425/cwt higher than two weeks ago, Monday. AUG’07LH futures were the most actively traded closing at $72.575/cwt, up $0.650/cwt but $0.975/cwt lower than two weeks ago. Short covering ahead of Friday’s Hogs and Pigs report which is expected to show a 1% increase in the hog herd over a year ago was noted. Plenty of red meat supplies, anticipated slaughter slowdown, and lower summer cash pork prices are expected to push prices lower this week. The latest CME Lean Hog Index was placed at $77.13/lb, up $0.81/lb. Pork plant margins are still in the red on average. According to HedgersEdge.com, the average pork plant margin for Monday was a negative $4.80/head, $0.90/head worse than last Friday and $6.95/head worse than this time last week. Light fund buying was noted in futures. Hog/Corn price ratios are noted below. Ratios are calculated by Dow Jones using industryaccepted fob cash hog prices from USDA. Cash corn prices from private sources. Historically ratios at or above 20-1 for hogs (live basis) have resulted in expansion of production, while a ratio of 15-1 or less has resulted in contraction.

CORN on the Chicago Board of Trade (CBOT) closed down on Monday. The July’07 contract finished at $3.576/bu, off 9.6¢/bu from last close. This is 38.4¢/bu lower than two weeks ago at this time. The DEC’07 contract was noted as the most active contract finishing at $3.740/bu, down 7.4¢/bu from Friday and 32.0¢/bu, or 8%, lower than two weeks ago. The DEC’08 contract finished at $3.974/bu, down 3.4¢/bu from Friday and 19.0¢/bu (4.6%) lower than two Monday’s ago. Corn was pressured by heavy rains watering the crop ahead of pollination. This is viewed as bearish because it is expected to enhance reproductive crop conditions. Floor sources stated traders expected USDA to raise U.S. corn acreage above March projections of 90.454 million acres in its acreage report due out on Friday. Some economists at the Southern Region Extension meeting noted corn acreage could exceed 100 million acres. From what I have observed across the south through anecdotal survey, I agree. Farmers are already noted as planting the largest U.S. corn crop since 1944 to meet burgeoning ethanol demand. Additionally, USDA reported the US corn crop at 73% good to excellent vs. last week’s 70%. Tomorrow’s trade could sink lower as today’s market expected USDA to keep or lower the crop condition report rating. Weather is still the main market influencer. Weekly export inspections at 29.2 million bu did not meet expectations of between 35-37 million bu. Cash bids for corn in the U.S. Midwest were mostly steady on Monday with cash corn in the U.S. Mid-Atlantic States lower by an average 8.0¢/bu. Funds were noted as selling about 7,000 lots. Friday’s CFTC Commitment of Traders report for futures and options combined for the week ending last Tuesday had large speculators in bullish positions up 30,521 lots at 301,165 contracts with those in short positions down 2,287 contracts at 65,127 lots. Bullish index funds were at 371,317 lots, up 1,361 contracts with bearish index funds placed at 15,681 contracts, up 4,011 lots. Cash sellers that have priced up to 40%-50% of next year’s production on previous advice are in good shape. This market may rebound somewhat over the next few days trying to fill the latest trading gap but overall this market may be headed for a more southerly direction. Pricing another 10% now of next year’s production would not be out of bounds.

SOYBEAN futures on the Chicago Board of Trade (CBOT) ended higher on Monday. The JULY’07 contract closed at $8.042/bu, up 7.2¢/bu but 25.8¢/bu lower than two weeks ago. NOV’07 futures were the most active closing up 7.6¢/bu from Friday at $8.384/bu but lower than two weeks ago by 25.0¢/bu. This activity is short covering after Friday’s sharp decline. The market is viewed as supported by outlooks for U.S. soybean acres and stocks shrinking in the next report and for years to come as farmers are expected to plant even more corn amid increasing ethanol demand. USDA reported that 15.6 million bu were inspected for export last week amid expectations for between 6-8 million bu. According to USDA Monday afternoon, 66% of the U.S. soybean crop is in good-to-excellent condition compared to 65% last week. Economists at the Southern Extension meeting estimated that most corn acres were coming from soybeans. I do not agree. I think the majority will ultimately show coming mostly from cotton acres … at least in the southeast. Cash soybeans in the U.S. Midwest were weak while Mid- Atlantic cash bids for soybeans ranged from 5¢/bu–7¢/bu higher. The CFTC Commitment of Traders report issued last Friday had large speculators expanding net long positions 2,000 lots to 117,300 contracts. Funds sold 3,000 lots. Producers pricing up to 60% of the 2007 crop are still in good shape. Another 10% may be priced on this rally.

WHEAT futures in Chicago (CBOT) were mixed on Monday. JULY’07 wheat futures finished down 2.6¢/bu at $5.894/bu but 42.8¢/bu higher than two weeks ago. Deferreds were mixed with SEPT’07 wheat off 0.4¢/bu at $6.044/bu and DEC’07 wheat up 2.2¢/bu at $6.146/bu. The July’07 contract remained above the 14-day and 20-day moving averages. The market is seen as trying to consolidate ahead of seasonal harvest pressure after Friday’s plunge. The Minneapolis market was gaining on CBOT wheat amid demand for high-protein wheat. Wheat harvest may be slower somewhat due to rains in southern Oklahoma, north-central Texas, and southern Kansas. An economist from Oklahoma at the Southern extension meeting confirmed this. Egypt on Saturday sought 120,000 tonnes (4.4 million bu) of U.S. soft winter wheat for human consumption. USDA on Monday said 16 million bu of wheat were inspected for export last week. This was just over expectations of 13-15 million bu. Fund activity resulted in even positions for the day. The CFTC Commitment of Traders report showed large speculators in bullish positions expanding those positions 6,500 lots to 19,600 contracts. Opening cash wheat bids for Mid-Atlantic States producers were 2¢/bu-4¢/bu lower on Monday. Producers should think about pricing up to 70% of the ’07 crop and not have any remaining wheat from last year’s crop.

Cash sellers should continue to keep hog sales current. Hog feeders should think about pricing near-term grain inputs at this time.