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Weekly Roberts Report

by 5m Editor
4 July 2008, at 4:06pm

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

LEAN HOGS on the CME were mixed on Monday. The JULY’08LH contract finished at $72.875/cwt, down $0.725/cwt and $0.500/cwt lower than a week ago. OCT’08LH futures closed up $0.075/cwt at $73.925/cwt and even with last Monday’s close.

CHICAGO, June 30 (Reuters) - Cash hogs at U.S. Midwest markets were expected to trade 50 cents to $1 per cwt lower on Tuesday amid plentiful hog marketings and limited demand from well-bought packers, cash livestock dealers said.

  • Most pork plants appeared to have all their hog slaughter needs for the week already filled, although some may eventually need a few more hogs to finish the week.
  • Packers will mostly be buying hogs for early next week.
  • Pork plants did not need as many hogs as normal this week due to plant downtime for the U.S. Independence Day holiday on Friday. The upcoming Saturday kill was also expected to be very light to nil.
  • The rest of this week's kills should be at normal levels, dealers said. USDA estimated Monday's slaughter at 428,000 head, versus 424,000 last week and 394,000 last year.
  • The average pork plant margin on Monday was estimated at $8.20 per head, versus $6.20 on Friday and $6.45 a week ago, according to livestock marketing advisory service HedgersEdge.com.
  • Late on Monday, USDA quoted the composite pork carcass cutout at $78.81 per cwt, down 99 cents from Friday and down $1.23 from a week ago.
  • Chicago Mercantile Exchange lean hog futures tumbled on Monday in response to Friday's bearishly construed USDA quarterly Hogs and Pigs report.
  • CME July <2LHN8> lean hogs ended 1.425 cents per lb lower at 71.775 cents and August <2LHQ8> ended off 1.800 at 70.900 cents.
  • The USDA report showed the U.S. hog herd at 106 percent of a year ago as of June 1, above the average estimate for 104.7 percent. The market hog supply was at 107 percent of a year ago, versus the average trade estimate of 105.2 percent, and the breeding herd was at 99 percent of a year ago, close to the average estimate.

LEAN HOGS - July <2LHN8> off 1.425 at 71.775 cents per lb and August <2LHQ8> off 1.800 at 70.900 cents. Both hit 12-1/2 week lows.

  • Bearish reactions to Friday's USDA Hogs and Pigs Report pushed futures sharply lower. Fast market conditions were posted in some months earlier in the day.
  • USDA on Friday reported the U.S. hog herd at 106 percent of a year ago as of June 1. Analysts on average expected 104.7 percent.
  • Also, the report showed the supply of market hogs at 107 percent of a year ago, versus the average trade estimate of 105.2 percent and the breeding herd at 99 percent of a year ago, which was close to the average trade estimate.
  • Lower cash hog markets also prompted selling. USDA reported the average hog price in Iowa/Minnesota markets early on Monday was down $1.58 per cwt at $71.11 on a carcass basis. Midwest hogs expected to trade 50 cents to $1 lower Tuesday.

CME hogs settled down sharply in response to last Friday's bearishly-construed USDA quarterly hog report, fund liquidation and sell stops.

Pork futures gapped lower on Friday's federal government data that suggested increased hog supplies moving forward.

Terminal and Missouri direct hogs that came in as much as $3 lower furthered hog futures losses that resulted in three-month spot-July and nearby-August lows.

Also, back-month hogs spiraled downward in the aftermath of CBOT corn's limit-down debacle that was attributed to bearish USDA quarterly grain stocks and acreage data.

Country hog buyers anticipate another day of cash weakness for Tuesday. Processors are expected to reduce their need for live supplies during the abbreviated holiday workweek.

With little near-term fundamental bullishness to draw from, a few longs on Tuesday may turn to charts for inspiration. July and August became even more oversold technically after Monday's losses.

Deferred-month hog traders will monitor overnight CBOT corn's activity after Monday's limit-down session.

Pork bellies closed lower on profit taking, last Friday's negative USDA hog numbers and August technical pressure.

July lean hogs settled 142 points lower at 71.77 cents a pound, and August ended 180 points lower at 70.90 cents.

July pork bellies closed 122 points lower at 71.80 cents, and August settled 175 points lower at 72.75 cents.

August/July spreading and higher feed costs were not supportive of July futures. Packer demand was expected to pick up on the reopening of the Tyson Food’s Columbus Junction, Iowa plant. According to HedgersEdge.com, the average pork plant margin was placed at a positive $3.70/head vs. a positive $3.50/head this time last week. USDA on Friday put the pork cutout value at $74.15/cwt, down $0.09/cwt. The latest CME Lean Hog index was off $0.63/cwt at $74.15/cwt. It is a very good idea to keep hog marketings current.

CORN on the Chicago Board of Trade (CBOT) finished limit down on Monday in response to larger-thanexpected USDA acreage report. As a result, CBOT corn futures limits will expand to the 45.0¢/bu limit for Tuesday’s trading. The JULY’08 contract finished at $7.246/bu, off 30.0¢/bu but 92.2¢/bu higher than two weeks ago. The DEC’08 contract closed at $7.570/bu, off 30.0¢/bu and 8.0¢/bu lower than Monday before last. USDA’s acreage report was bearish for corn. The report showed that U.S. farmers expected to harvest nearly 78.9 mi ac of corn from 87.3 mi planted acres, off 9% from last year but still the second largest harvest on record since 1944. USDA March estimates for corn seedings were 86.014 mi acres. Big difference! These figures will most likely undergo some adjustment because the survey was taken during the first two weeks of June before most of the flooding in the Midwest. USDA said it intends to re-survey over 9,000 affected producers during the middle of July so they can allow time for flooded fields to dry somewhat (if no more rain falls) and for producers to more fully take stock of their situation and remaining cropping options. This will give a better picture of the corn situation. In addition, it was announced today that NASS will increase the number of corn and soybean fields selected for objective field measurements. This will allow the NASS August 12 Crop Production report to contain more accurate measurements of corn and soybean yield and production. Even though corn futures were limit down, believe it or not soaring outside crude oil markets and speculative influences that did not believe the USDA report was reflective of the impact of the worst flooding in 15 years were supportive. After trading ceased on Monday, USDA put the U.S. corn crop at 61% good-toexcellent condition, up from 59% last week. USDA placed corn crop silking 6% behind the 5-year average pace of 9%. Funds sold 10,000 lots! Volume for Monday was estimated at 302,156 futures and 105,222 options. CFTC trade data issued late last Friday had large speculators cutting net bull positions for the week ended June 24. It is still a good idea to have up to 60% of the ’08 crop priced and speculate with the rest of the crop. After this bearish news there is still plenty of upside potential. Trading will most likely be very volatile as the market waits to see if the U.S. corn crop will be cut short in the next USDA assessment after the floods.

SOYBEAN futures on the Chicago Board of Trade (CBOT) surged upward on Monday based on fears that soybean stocks will fall to near record lows on USDA’s harvested acreage forecasts. USDA reported on Monday that despite recent flooding, U.S. farmers expected to harvest more than 72 mi ac vs. 74.5 mi ac planted. This is the third largest on record and up 17% from last year. Keep in mind the USDA reassessment that will take place the middle of July as stated earlier in the corn section. The JULY’08 contract finished at $16.050/bu, up 23.4¢/bu from last week and 71.0¢/bu more than two weeks ago. NOV’08 soybean futures closed at $15.74/bu, up 14.4¢/bu. Even though planted acres were up, the USDA report shows stocks at 663 mi bu vs. 676 mi bu in the June 1 report and 429 mi bu on hand one year ago. End-of-quarter positioning by large commodity funds were also supportive. Late on Monday USDA reported that U.S. soybean crop 58% in good-to-excellent condition. The market expected and received a 2% rating improvement. Volume was heavy at times with an estimated 168,250 futures and 23,186 options registered in trading. CFTC Commitment of Traders report last Friday had large speculators decreasing net bull positions in soybeans while expanding net bull positions in both soyoil and soybean meal for the week ended June 24. This action was supported by surging crude oil prices. Having up to 60% of the ’08 crop priced is still a good idea. Looks like higher soybean prices are in the offing for both the 2008 and 2009 crop. However, if the USDA survey work of July shows the soybean crop in better condition look for profit taking and lower soybean prices.

WHEAT futures in Chicago (CBOT) closed down on Monday on news of better global supplies. The JULY’08 contract closed at $8.764…434/bu, off 52.0¢/bu and 33.0¢/bu lower than Monday before last. JULY’09 wheat futures closed off 4.4¢/bu at $9.504/bu but 63.0¢/bu higher than this time last week.

CHICAGO, June 30 (Reuters) - U.S. wheat futures plunged on Monday, with Chicago Board of Trade wheat down nearly 6 percent on bearish stocks data from the U.S. Department of Agriculture coupled with harvest pressure, traders said.

  • A limit-down break in corn lent additional pressure in wheat.
  • At the CBOT, July soft red winter wheat settled down 52 cents, or 5.8 percent, at $8.43-1/2 per bushel, after hitting a two-week low at $8.39. Back months fell 35-1/2 to 53-3/4 cents.
  • Funds were net sellers of 4,000 CBOT wheat contracts. CBOT wheat volume estimated at 92,023 futures, 11,367 options.
  • At the Kansas City Board of Trade, July hard red winter wheat fell 42 cents, or 4.5 percent, to settle at $8.83 a bushel, with back months down 40 to 48-3/4 cents. KCBT volume estimated at 20,763 contracts.
  • At the Minneapolis Grain Exchange, July spring wheat closed down 37 cents at $11.75 per bushel, with most-active September down 51-3/4 at $9.50-1/2 and back months down 35 to 60 cents. MGE volume estimated at 4,839 contracts.
  • USDA reported U.S. June 1 wheat stocks at 306 million bushels, above the average trade estimate of 261 million and USDA's latest wheat ending stocks estimate of 254 million. [ID:nDAT001091]
  • USDA plantings data viewed neutral; USDA pegged 2008 U.S. all-wheat plantings at 63.457 million acres, slightly below March intentions estimate of 63.803 million. [ID:nDAT001088]
  • USDA reported export inspections of U.S. wheat in the latest week at 15.003 million bushels.
  • Drier weather early this week to boost U.S. Plains wheat harvest; wet weather later in week a concern. [ID:nDTN034]
  • After the close, Egypt issued a snap tender seeking 55,000 to 60,000 tonnes of optional-origin wheat for shipment July 23-31 and/or Aug. 1-10. Results expected on Tuesday.
  • Jordan tendered to buy 100,000 tonnes hard wheat [ID:nSP320770]; Bangladesh tendered to import 100,000 tonnes wheat. [ID:nDHA74546]
  • After the close, USDA said the U.S. winter wheat harvest was 36 percent complete by Sunday, up from 22 percent a week earlier but behind the five-year average of 48 percent.
  • USDA said 74 percent of the U.S. spring wheat crop was rated good to excellent, up from 72 percent the previous week.
  • CBOT July deliveries light at 29 lots, well below estimates for 2,000-5,000. [ID:nN30241496] [ID:nN27453075]
  • CFTC's supplement report on Friday showed large speculators cut their net short position in CBOT wheat to 23,304 contracts in the week ended June 24, down 2,800 lots.

WHEAT TENDER: The Egyptian state's main wheat buying agency said on Monday it wanted to buy 55,000 to 60,000 tonnes of optional-origin wheat for shipment July 23-31 and/or Aug. 1-10. Egypt's General Authority for Supply Commodities (GASC) was widening its options due to high prices by adding Ukraine wheat to the origins sought, said U.S. traders. Tenders should reach GASC by 12 p.m. local time (0900 GMT) on Tuesday and the results should come out around 4:30 p.m. local time (1330 GMT) on the same day. Wheat bids should be free-on-board (FOB).

Said el-Hefny, vice chairman of GASC, said the wheat should be U.S. North Pacific soft white wheat, U.S. hard red wheat, U.S. soft red winter wheat, French milling wheat, Australian standard white wheat, Australian hard wheat, German milling wheat, Canadian soft wheat, Argentine bread wheat or Kazakhstan milling wheat.

GASC was also seeking 30,000 to 60,000 tonnes of Russian wheat, UK milling wheat (ukp or uks variety), Syrian wheat or Ukraine milling wheat.

SUNOIL TENDER: Egypt's state-owned Holding Company for Food Industries (HCFI) will retender on Wednesday to buy 10,000 to 15,000 tonnes of optional-origin sunflower seed oil for arrival in the last half of August, U.S. traders said Monday. Bids are due Wednesday noon Cairo time. Egypt's HCFI passed on a tender for the same amount on June 25 with U.S. traders saying they wanted to wait amid declining vegetable oils prices.

WHEAT TENDER: Jordan has tendered to purchase 100,000 tonnes of hard wheat from optional origins, European traders said on Sunday. Half is for shipment in the second half of August and half in the first half of September. Bidding deadline is July 8.

WHEAT TENDER: Bangladesh has issued a tender to import 100,000 tonnes of wheat by September to boost its emergency food stocks, officials said on Monday. The tender, issued by the Food and Disaster Management Ministry, will close on July 14 and will run until August 3, for shipment within 30 days of the date of signing the contract.

The tender price has to be quoted separately for the country's Chittagong and Mongla ports, based on the cost of cargo, insurance and freight including stevedoring on the seller's account, at both ends of shipment. The minimum quantity to be offered is 25,000 tonnes, the officials said.

Profit taking, seasonal harvest pressure and weakening crude oil futures were not supportive of prices while soaring corn encouraged the buying of $8.00/bu wheat for feed. Wheat-inspected-for-export did not meet expectations coming in at 14.655 mi bu vs. estimates for between 15-20 mi bu. Iran will reportedly tender for 50,000 tonnes (1.8 mi bu) while Algeria bought 400,000 tonnes (14.7 mi bu). USDA placed the U.S. winter wheat harvest at 16% complete compared to the 5-year average of 19%. The U.S. winter wheat crop was rated 47% good-to-excellent condition while the U.S. spring wheat crop was placed in 67% good-to-excellent condition vs. a 63% rating last week. Supporting prices was news that Australia wheat is now estimated to harvest 24.3 mi tones (892.9 mi bu) or 3.2% lower than expected. Funds bought over 1,000 lots of CBOT futures amid a somewhat heavy volume of 92,297 futures and 12,212 options. The supplement to Friday’s CFTC Commitment of Traders report had large speculators increasing net bear positions by 2,000 contracts to 30,285 lots. If you haven’t sold the entire 2008 wheat crop by now it is a good idea to get it sold.

5m Editor