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Weekly Roberts Report

by 5m Editor
6 August 2008, at 5:05am

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

Headlines

/> Commodities fell sharply on Monday as crude oil dropped as much as $5/barrel during the day, prompting funds and large speculators to shed copper, corn and other hard assets as alternative investments. Grains took more of a hit than most other commodities.

Corn, soybean, and wheat futures sank as traders unloaded positions ahead of a USDA World Agriculture Supply Demand Estimate report that is expected to show pretty decent production despite U.S. flooding.

Weakness in the U.S. Dollar and the threat of regulation limits appeal of commodity investments for fund and large speculative non-commercial accounts as a hedge against inflation.

LEAN HOGS on the CME closed mixed on Monday. The AUG’08LH contract closed at $82.250/cwt, up $0.675/cwt and $3.700/cwt higher than a week ago. The FEB’09 contract closed up $0.325/cwt at $74.950/cwt but $7.500/cwt lower than last week at this time. Strong exports and packer demand were supportive in the nearbys while fund liquidation, profit taking, and lower corn prices weighed on prices. Yes, that’s right, lower corn prices were seen as bearish. According to several pit traders interviewed today, lower corn prices have traders thinking that the herd will not liquidate as much as previously expected. USDA put the pork cutout at $88.90/cwt, up $0.67/cwt. According to HedgersEdge.com, the latest packer margin was placed at $9.50/head based on the average buy of $60.23/cwt vs. an average breakeven of $63.91/cwt. The latest CME Lean Hog index was placed at $82.35/cwt, off $0.06/cwt. It might be a good idea to hold hogs almost ready to heavier weights while planning to sell hogs a little on the lighter side a couple months off. Opportunities to price feed are now if you have only priced short term needs to this point.

CORN on the Chicago Board of Trade (CBOT) sank (tanked?) on Monday. According to the CME Group’s website the daily trading limit will be expanded to 45.0¢/bu for Tuesday. The SEPT’08 contract finished at $5.354/bu, down 29.4¢/bu and 46.6¢/bu cents lower than a week ago. The DEC’08 contract closed at $5.554/bu, also off 29.4¢/bu and 45.8¢/bu lower than this time last week. Fund selling on weaker crude oil prices, good crop weather, lower-than-expected exports, and weak technicals pressured corn prices from the opening. Funds sold over 14,000 contracts in speculative liquidation. Corn-inspected-for-export was placed at 29.670 mi bu by USDA on Monday vs. expectations for between 36-42 mi bu. China has lowered demand temporarily as it limits manufacturing to accommodate the Olympic games. The December ’08 contract fell below key technical support of $5.63 established on July 23. As expected, USDA late Monday showed no change in the U.S. corn crop conditions ratings. Cash corn in the U.S. Midwest was steady to firm amid slow sales on the river. Cash corn in the U.S. Mid-Atlantic States was weak on bids between 29.0¢/bu and 60.0¢/bu lower in many places. Users of corn should be getting quite slap-happy at some of these prices. They are waiting to price more when it is cheaper. Those who have up to 70% of the ’08 crop priced today should be quite happy today as well. It is never a good idea to price over 70% of a crop but looks like prices are headed further south. Two weeks ago this chartist put the measuring objective for December ’08 corn at $4.82/bu. It will most likely get there sooner rather than later.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were down on Monday. The AUG’08 contract finished at $12.870/bu, down 70.6¢/bu from Friday’s close and $1.132/bu (8.1%) lower than a week ago. NOV’08 soybean futures closed at $12.950/bu, off 70.0¢/bu and $1.01/bu (7.2%) lower than last Monday. The November’08 contract reached its measuring objective of $13.484/bu today in a gap down move. Tuesday’s trading limit on contract outrights is now set at $1.05/bu. Long liquidation on sliding crude prices, weak technicals, good crop making weather, and decreasing export expectations pressured the soybean market too. Funds sold 6,000 lots while USDA placed soybeans inspected for export at 7.555 mi bu vs. expectations between 8-12 mi bu. Chart signals of declining moving averages on increased volume and a gap down in trading indicate lower prices are coming. Cash soybeans along the river were mixed but indicated some firming in spot locations. In the U.S. Mid-Atlantic States cash beans dropped like a rock matching futures 70.0¢/bu decline in many, many places. In other news Brazil’s ‘08/’09 soybean crop is now forecast at 64.14 mi tonnes (2.4 bi bu), up 7.2% from last year’s harvest. If up to 50% of the 2008 crop has been not been sold it is now a very, very good idea to do so. Heck, it would be a very good consideration to get to 60%-70% sold at this time. Soybean processors and meal users are finally daring to smile a little.

WHEAT futures in Chicago (CBOT) declined on Monday. The SEPT’08 contract closed at $7.586/bu, off 35.2¢/bu from Friday and 39.0¢/bu lower than a week ago. JULY’09 wheat futures closed off 33.2¢/bu at $8.336/bu; 35.0¢/bu lower than this time last week. Pressuring wheat prices was spillover from sliding corn & soybean futures, technical selling, and rising global stocks while exports and reports of heat stressed U.S. spring wheat were supportive. Ukraine is expected to begin increasing exports in the near future. Funds sold over 5,000 lots of CBOT wheat. Wheat prices also fell in Kansas City and Minneapolis. Support was noted in exports. USDA placed wheat-inspected-for-export at 27.437 mi bu vs. expectations for between 15-20 mi bu. In addition, Egypt issued a quick tender for 55,000-60,000 tonnes (2.0-2.2 mi bu) after the market closed while Iraq continues to buy large quantities of U.S. winter wheat. Pakistan issued a new international tender for 250,000 tonnes (9.2 mi bu) of wheat on Friday while the U.S. Commodity Credit Corporation gave notice it will tender for 23,270 tonnes (855,033 bu) of U.S. Wheat. Cash bids for wheat in the U.S. Plains was steady while in the U.S. Mid-Atlantic States cash wheat bids were 33.0¢/bu-70.0¢/bu cents lower. It would be okay to hold off pricing any more of the ’09 crop at this time.

5m Editor