Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 25 July 2007
clock icon 6 minute read

LEAN HOGS on the CME closed higher on Monday. AUG’07LH futures closed at $74.550/cwt, up $0.650/cwt while the OCT’07LH contract closed at $72.175/cwt, up $0.200/cwt. The August set a fresh high on Friday and remained technically firm. Trading was light amid spreading and hopes for fresh export news to China. China’s swine industry is experiencing disease problems and the market is sure they will need fresh pork, it just doesn’t know when. Cash markets were firm fueling bull spreads while some traders rolled contracts into December. Packer demand held firm even in the face of strong margins. The average pork packer cutout margin for Monday, according to HedgersEdge.com, was placed at $8.45/head, $0.95/head lower than Friday but $1.85/head better than last week at this time. USDA placed hog slaughter at 390,000 head on Monday compared to 368,000 head last Monday and 381,000 head one year ago. Some traders expected hog slaughter to reach 400,000 head this week amid ample market-ready supplies and profitable pork-plant margins. USDA put the pork carcass cutout at $76.24, up $0.10 on Friday. The latest CME Lean Hog Index was placed at $69.45/cwt, up $0.20/cwt. Cash sellers can back off aggressively selling at this time while maximizing revenue over the next week or so. Hog feeders are encouraged to price near-term grain inputs at this time.

CORN on the Chicago Board of Trade (CBOT) closed down on Monday. The SEPT’07 contract finished at $3.100/bu, off 8.2¢/bu from last close and 24.6¢/bu lower than last week. The DEC’07 contract, still the most active, finished at $3.254/bu, also down 8.0¢/bu from Friday and 23.0¢/bu lower than last Monday. The DEC’08 contract finished at $3.814/bu, down 4.4¢/bu from Friday but only 10.0¢/bu lower than two weeks ago. Good growing weather weighed on the market as forecasts for milder weather in the near future were noted. Speculative selling provided momentum for skid row today. The market expected USDA to increase the good-to-excellent corn rating by 1%-2% but were surprised late in the day. USDA lowered the crop rating by 2% from last week to 62%. The December wheat/December corn spread widened to more than $3.00/bu, levels not seen in 30 years. USDA put corn inspected for export last week at 35.7 million bu, well within estimates for between 34-38 million bu. Israel and South Korea were looking for corn, but not necessarily U.S. corn. Cash corn in the U.S. Midwest was steady to firm late in the day as farmers were somewhat slow to turn loose of supplies. Cash corn in the U.S. Mid-Atlantic States was weaker, up to 8.0¢/bu lower. Funds sold over 4,000 contracts. The CFTC Commitment of Traders report for futures and options combined showed lard speculators decreasing bullish positions in corn to 89,100 lots, down 30,000 contracts. Cash sellers having priced up to 50%-60% of next year’s production are still in good shape. It may be a good idea to price up to 25% of the 2008 crop. Pricing the ’07 crop with put options as we near harvest may not be a bad idea either. However, with DEC’07 corn mostly overbought and ethanol demand still cranking up, I still think there is some life left in the December contract.

SOYBEAN futures on the Chicago Board of Trade (CBOT) ended lower on Monday. The AUG’07 contract closed at $8.162/bu, down 34.0¢/bu and 55.4¢/bu lower than last Monday. NOV’07 futures, the most active, closed down 34.2.0¢/bu from Friday at $8.410/bu and 57.6¢/bu lower than last week at this time. Good weather for pod setting was noted, offsetting concerns for lower ending stocks. As with corn, the market expected a better crop-condition report from USDA today. However, the crop condition of good-to-excellent was lowered by 1 point to 61%. Weekly export numbers published by USDA were not what traders expected. USDA reported 3.4 million bu inspected for export last week compared to expectations of between 8-12 million bu. Funds sold about 7,000 lots. The CFTC Commitment of Traders report showed large speculators reducing bullish positions by almost 10,000 contracts to 109,000 lots. Cash soybeans were steady in the U.S. Midwest while weaker by up to 36.0¢/bu in the U.S. Mid-Atlantic States. Producers with up to 60% of the 2007 crop are still in good shape. Put options may be worthwhile to purchase.

WHEAT futures in Chicago (CBOT) were stronger on Monday. SEPT’07 wheat futures finished up 4.0¢/bu at $6.202/bu and 20.1¢/bu higher than last week at this time. The JULY’08 contract finished at $5.684/bu, up 4.6¢/bu. Reports of lower-than-expected yields and rust problems weighed on the market. Wheat bucked the trend corn and soybeans set for the day. Providing market momentum, dry weather was noted stressing the young crop and wet weather has been increasingly bringing plant pathology problems, Australian forecasters lowered that country’s ‘07/’08 crop estimates by 9% to 23.7 million tonnes (870 million bu). Also buoying the market was news that Argentine growers may not be able to plant as much wheat as expected due to the lack of moisture. Meanwhile, hot weather in the U.S. Plains was seen as limiting crop yield and raising concerns about crop progress. USDA placed the wheatinspected-for-export total at 19.3 million bu, well above the expected range of 13-16 million bu. Friday’s CFTC Commitment of Traders report for futures and options combined showed large speculators increasing bullish positions by 2,644 lots to 103,086 contracts. Those in bear positions were up 7,060 lots at 73,801 contracts. Opening cash wheat bids for Mid-Atlantic States producers were 4.0¢/bu-5.0¢/bu higher on Monday. Producers should consider staying priced at 70% of the ’07 crop.

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