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Weekly Roberts Report

by 5m Editor
14 May 2008, at 3:48am

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

LEAN HOGS on the CME were mixed on Monday with the two nearby’s up while deferreds declined. The MAY’08LH contract closed at $80.475/cwt, up $0.250/cwt and $5.500/cwt higher than last week. JUNE’08LH futures were up $0.150/cwt closing at $77.025/cwt and $3.825/cwt higher than last Monday. What a difference a week can make. Deferreds are down on fund liquidation, profit taking, and thinking that packer demand will back off as retailers have holiday supplies mostly bought. June and July spreading was supportive. USDA said on Monday exports for the month of March declined 7.5% from February but were 37.3% higher than a year ago. On Friday, USDA placed the pork cutout value at $78.77/cwt, up $0.06/cwt. According to HedgersEdge.com, the average pork packer margin was a negative $5.55/head ($5.10/head lower than last Monday) based on the average buy at $58.70/cwt vs. a breakeven of $56.61/cwt. The latest CME Lean Hog index was up $1.00/cwt at $77.22/cwt. It still might be a good idea to keep market hogs sold as soon as they are ready. Pricing near term corn inputs by Wednesday might be a good idea.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were down on Monday. The JUNE’08LC contract closed at $94.300/cwt, down $0.225/cwt but $3.100/cwt higher than last Monday. AUG’08LC futures were off $0.100/cwt at $100.100/cwt but $2.650/cwt higher than a week ago. Profit taking and expectations for a peak to holiday grilling order placements pressured prices. Highs were set or near-set last Thursday and Friday in many contracts. USDA placed the 5-area average at $93.86/cwt, up $1.59/cwt. USDA put choice beef at $156.59/cwt, up $0.55/cwt while reporting March beef and veal exports up 36.4% over last year and almost 10% higher than last month. Exports to South Korea are expected to resume sometime this week. Estimates for the soon-to-published Cattle on Feed report range from 97 %-100.3% over this time last year with placement estimates running from 83% - 110.6% of a year ago. Marketings are expected to be 105% - 110.9% over last year. USDA will release the official numbers this Friday. According to HedgersEdge.com, the average packer margin for Monday was placed at $41.40/head based on the average packer buy at $92.89/cwt vs. a $96.15/cwt breakeven. Cash sellers should consider pushing cattle off the feed lot as soon as they are ready. It might be a good idea to price more short-term corn inputs before Wednesday.

FEEDER CATTLE at the CME closed mostly up on Monday. The May’08FC contract finished at $107.925/cwt, up $0.575/cwt and $2.675/cwt higher than a week ago. The May contract expires on May 22. AUG’08FC futures were up $0.850/cwt at $110.775/cwt and $2.525/cwt higher than last Monday. A drop in corn prices was supportive as chart-based buying kicked in late in the day. Funds were noted spreading September (buying) /August (selling). The latest CME Feeder Cattle index for May 8 was placed at $105.42/cwt, up $0.24/cwt. August feeders may still be supported on continued good rain for pastures. It might be a good idea to price any short-term corn needs before Wednesday … if you don’t have grass.

CORN on the Chicago Board of Trade (CBOT) corrected downward on Monday. The MAY’08 contract finished at $6.034/bu, off 15.0¢/bu but 21.4¢/bu higher than last Monday. The DEC’08 contract closed down 12.2¢/bu at $6.376/bu but 25.0¢/bu higher than this time last week. Profit taking from last Friday’s all-time highs, prospects for better planting weather in the U.S. Midwest, lower than expected corn-inspected-forexport, and lower crude oil prices weighed on the market. The December contract’s 14-day Relative Strength Index (RSI) ended at 95.26, phenomenal! USDA placed the U.S. corn crop seeding rate at 51% vs. the 77% five-year average and 71% planted this time last year. Traders were expecting around 50% planted. U.S. farmers are under tremendous pressure now to get the crop in the ground or switch to (most likely) soybeans. USDA placed corn-inspected-for-export at 34.263 mi bu vs. market expectations for between 35-40 mi bu. Even though recent weather has enabled farmers to crank out planted acres, the recent cold snap and wet weather will slow that down. Cash corn in the Corn Belt was steady while cash bids in the U.S. Mid-Atlantic States were off by a range of 1.0¢/bu – 3.0¢/bu. Funds were noted as selling about 5,000 contracts while expanding net bull positions. If you held off on getting up to 60% of the ’08 crop was priced last week there still is hope for this week. Corn prices show promise of a rally by Wednesday or Thursday.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were off on Monday. The MAY’08 contract finished at $13.350/bu, off 14.4¢/bu from last week but 62.0¢/bu higher than a week ago. The NOV’08 soybean contract ended at $12.892/bu, off 14.4¢/bu but 73.8¢/bu higher than last Monday’s close. Lower corn and crude oil futures pressured the soybean complex while continued producer strikes in Argentina and USDA’s most recent World Agriculture Supply Demand Estimate (WASDE) report were bullish for soybeans. The market traded on expectations that the U.S. soybean crop would show 15%-18% planted today. Late in the day USDA placed that number at 11% vs. 26% planted a year ago and a 29% 5-year average. Exports were supportive as USDA placed U.S. soybeans-inspected-for-export at 13.136 mi bu vs. expectations for between 9-12 mi bu. Argentina soybean harvest weather is very favorable at present but farmers are not moving soybeans to market. U.S. cash soybeans were steady while opening bids for soybeans in the U.S. Mid-Atlantic States were 50%-60% higher first thing Monday morning. Funds sold about 3,000 lots while cutting bullish positions in CBOT soybeans. Last week’s report suggested that up to 40% of the ’08 crop should be priced. Look for opportunities to price 10% more of the ’08 crop toward the end of the week. It is still a good idea to try and forward price up to 15% of the ’09 crop if you can.

WHEAT futures in Chicago (CBOT) closed mostly up on Monday. The MAY’08 contract closed at $7.934/bu, up 2.0¢/bu and 1.0¢/bu higher than a week ago. The JULY’08 contract closed at $8.054/bu, up 1.0¢/bu and even with last Monday. Short covering late in trading supported the market as wheat continues to trade sideways. USDA in its WASDE report on Friday estimated the U.S. wheat crop will set a record high and trend even larger in the ’09 crop year. Wheat-inspected-for-export was placed at 20.590 mi bu vs. expectations for between 15-20 mi bu. Iraq issued a tender for 50,000 tonnes (1.8 mi bu) of U.S. wheat while Pakistan increased its estimate of wheat imports to 2.5 mi tonnes (91.8 mi bu). Meanwhile, Argentina may expect the ‘08/’09 wheat crop area to decrease by as much as 8% because of the farmer strikes there. Funds were noted as increasing net short positions in CBOT wheat. Cash wheat in the U.S. Mid-Atlantic States was weaker by a range of 15.0¢/bu – 19.0¢/bu. On the other hand, wheat is still supported by short global supplies and good fundamentals at this time. It might be a good idea to hold off pricing anymore wheat this week. The ’08 crop should be 50% priced on previous advice. If it is not, there may still be some upside potential in the near term.


5m Editor