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Weekly Roberts Report

by 5m Editor
11 June 2008, at 4:18am

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

LEAN HOGS on the CME were off on Monday. JUNE’08LH futures were off $1.150/cwt, closing at $73.975/cwt and $2.350/cwt lower than last Monday. The June contract will expire on Friday. The JULY’08LH contract finished at $72.925/cwt, down $1.075/cwt and $3.275/cwt lower than a week ago. OCT’08LH futures closed down $1.375/cwt at $73.925/cwt but $1.025/cwt higher than this time last week. High and higher looking corn prices, large stocks, fund selling, and sell-stops pressured prices. Additional pressure was applied by the unwinding of last Friday’s July/August bear spreads associated with the Goldman/Sachs rolling of contracts to the next contract month and last Friday’s lower pork cutout. USDA on Friday put the pork cutout value at $76.76/cwt, off $0.99/cwt. According to HedgersEdge.com, the estimated packer margin on Monday was a positive $3.50/head vs. a positive $1.90/head this time last week. This was based on the average processor buy at $53.79/cwt compared to a $55.13/cwt breakeven price. The latest CME Lean Hog Index was placed at $75.15/cwt, off $0.35/cwt from Friday and $3.24/cwt lower than this time last week. With corn inputs going higher, it is a very good idea to keep hog marketings current and consider a serious feed input risk management strategy.

CORN on the Chicago Board of Trade (CBOT) roared on Monday for contracts this side of December ’09. Contracts after that that date declined an average of 3.0¢/bu -4.0¢/bu. Prices continued their upward momentum posting new highs as heavy rains in the U.S. Midwest roll in. Most believe now that the trend yield for corn will not be made this year. The JULY’08 contract finished at $6.572/bu, up 6.4¢/bu and 41.6¢/bu over last Monday and 68.6¢/bu higher than two weeks ago. The DEC’08 contract closed up 7.4.6¢/bu at $6.852/bu, 42.0¢/bu higher than a week ago and 70.4¢/bu over Monday before last. I was asked on a radio show May 28 where I thought prices were headed for corn and soybeans, I responded, “up.” I didn’t think it would be so high so quickly. Weather was the driving factor even as outside energy markets subsided. More rain is forecast and could begin to affect soybean prices. Farmers were expected to plant 86-87 mi acres this year. That has changed and will most likely be reflected in the USDA World Agriculture Supply-Demand Estimate report due out Tuesday. Cash corn in the U.S. Midwest was steady to weak on Monday while cash prices in the U.S. Mid-Atlantic States have jumped between 12.0¢/bu and 16.0¢/bu in the last two days. The market traded crop-condition estimates for a 5%-7% drop in good-to-excellent condition. USDA late on Monday placed the corn crop in good-to-excellent condition at 60% vs. 63% a week ago and 77% this time last year. USDA on Monday put the corn-inspected-for-export number at 36.315 mi bu vs. estimates for between 31-37 mi bu. Margin requirements to trade corn futures were raised to $1,688/contract from $1,350/contract and will take effect Monday night. Funds bought 7,000 lots while the CFTC Commitment of Traders report had large speculators cutting net bull positions by 2,100 lots to 179,721 contracts as of June 3. So far it has been recommended that 60% of the ’08 crop has been priced. It could be a good idea not to price anymore corn at this time. This nearby market will most likely continue its upward momentum for a bit.

SOYBEAN futures on the Chicago Board of Trade (CBOT) ended up somewhat on Monday with the exception of the two nearby contracts. The market is taking a wait-and-see approach to see if more soybeans are planted or not. The JULY’08 contract finished at $14.520/bu, off 5.4¢/bu from last week but 86.6¢/bu more than a week ago. After touching the previous contract high, the NOV’08 soybean contract ended at $14.470/bu, up 7.4 /bu and 88.6 /bu higher than last Monday. A temporary end to the Argentinean farmer strike, the increased likely hood that acres intended for corn will be planted to soybeans, and reports that the Brazil soybean crop are near record levels pressured prices. However, excessive rain in the U.S. Midwest is already being noted as slowing or perhaps even preventing up to 20 mi acres of intended soybean seedings. USDA on Monday showed the U.S. soybean crop at 77% planted vs. 92% a year ago and the 89% 5-year average. The market reportedly was factoring in an 85%-88% planted range. Also on Monday USDA put soybeans-inspected-for-export within trade estimates at 3.983 mi bu. Cash soybeans in the U.S. Midwest were mixed on Monday after last Friday’s run to the elevator by producers. In the U.S. Mid-Atlantic States soybean prices ranged from 6.0¢/bu -8.0¢/bu cents lower for old crop and 7.0¢/bu– 10.0¢/bu higher for new crop. Funds were reported to have bought 2,000 contracts while the CFTC Commitment of Traders report supplement for last Friday showed large speculators increasing net bull positions by 6,400 contracts to 90,721 lots for the week ended June 3. Having up to 60% of the ’08 crop priced it would be a good consideration to hold off pricing beans in the short run. If the weather breaks and allows planting soybean prices will come under more pressure.

WHEAT futures in Chicago (CBOT) closed down on Monday after a short-lived rally to start. The JULY’08 contract closed at $7.884/bu, off 22.4¢/bu but 6.0¢/bu higher than last Monday. JULY’09 wheat futures closed off 20.2¢/bu at $8.874/bu but 29.4¢/bu higher than this time last week. Traders are expecting that USDA will narrow ending stocks for soybeans and corn while showing a larger 2008 wheat crop. This attitude, profit taking after last week’s close, hedging activity, as well as Brazil and other country’s agriculture reports showing better-than-expected harvests pressured prices. However, the same heavy weather supporting corn and soybeans also supported the U.S. Midwest SRW wheat belt in that damage to mature wheat could occur and spring wheat plantings in the Northern Plains could also suffer from the heavy rains. USDA placed wheat-inspected-for-export within trade estimates at 19.394 mi bu. Egypt bought 2.1 mi tonnes (77.2 mi bu) from Egyptian farmers posting a 41% increase over last year. Trying to get a better price, Pakistan withdrew last week’s tender for 75,000 tonnes (2.8 mi bu) while offering a tender for 250,000 tonnes (9.2 mi bu) this week. Farmers in the Ukraine are getting started on their wheat harvest as well with mass harvesting expected in the coming days. Funds sold 2,000 contracts while the supplement on Friday to the CFTC Commitment of Traders report showed large speculators cutting net short positions in CBOT wheat by 2,400 contracts to 28,113 lots. Hopefully the entire 2008 wheat crop sold last week. If not, it could be a good idea to do so this week.

5m Editor