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Weekly Roberts Report

by 5m Editor
27 August 2008, at 1:09am

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

Headlines:

The Roberts Report will not be posted next week due to the holiday.

Index Funds and large speculators keep the “Fun” in Fund influence.

The USDA World Agriculture Supply Demand Estimate (WASDE) report was bearish for corn, neutral for soybeans, and bullish for wheat. However, corn futures were oversold so index funds took prices up … way up. Soybeans tagged along while wheat rode its own fundamentals lower. The volatility of the market has been dizzying. It looks like the corn market has put in a major bottom. I’m through with my measuring objective of $4.81/bu for corn. An old friend talked with me today about the fact that the US no longer produces an excess corn. We can now burn in our gas tanks what we couldn’t use up before. With supply and demand so closely aligned, any shift in weather, actual use vs. production, and/or exports can change market momentum in a minute … even a New York minute.

That is what happened last week. Traders didn’t believe USDA’s report about yield potential due to late planting, dry conditions, and the possibility of an early frost … and … the U.S. dollar weakened helping oil prices rebound. Result … more money in large speculative pockets. This provided large amounts of cash to buy commodities such as grains and oilseeds and livestock therefore driving those prices up. In addition, the Relative Strength Index (RSI) showed oversold in many markets. Put all this together and you have large speculators with a lot of cash with mostly “buy-only” position rules bidding up prices.

If you would like a copy of this report faxed directly to you please call me at 804-733-2686 and ask to be put on a fax list for the report. If I am not here please ask the person who answers to put you on the Roberts Commodity Report fax list. We’ll gladly fax the report to you on Tuesday. I’d like to say I can mail you a copy but postage is kind of expensive these days on a non-profit, land-grant budget. Many thanks to all those from around the world who read this report. Your feedback is valued and appreciated.

LEAN HOGS on the CME closed mostly off on Monday with the two nearby’s trading higher. The OCT’08LH contract closed at $74.000/cwt, up $0.250/cwt but $1.800/cwt lower than a week ago. DEC’08 futures closed up $0.250/cwt at $74.250/cwt but down $0.742/cwt from last Monday’s close. The FEB’09 contract closed up $0.300/cwt at $80.050/cwt; $0.525/cwt lower than this time last week. Nearby months were supported by the bullish discount to the CME Lean Hog index. The CME Lean Hog Index was placed at $87.79/cwt, off $0.64/cwt. USDA placed the pork cutout at $88.86/cwt, down $1.45/cwt. Hogs are expected to trade lower the rest of the week as processors cut back on purchases prior to the holiday eroding current demand. The latest packer margin was lowered $2.60/head over last Monday to $7.75/head based on the average buy of $60.86/cwt vs. an average breakeven of $63.88/cwt, according to HedgersEdge.com. It is still a good idea to push hogs off the feeding floor when ready. Feed grain markets will remain very volatile.

CORN futures on the Chicago Board of Trade (CBOT) finished off on Monday. The SEPT’08 contract finished at $5.802/bu, down 6.2¢/bu from Friday but 27.2¢/bu cents higher than a week ago. The DEC’08 contract closed at $6.000/bu, off 6.4¢/bu from Friday but 27.4¢/bu higher than this time last week. Long liquidation in profit taking, sagging wheat prices, disappointing exports, and forecasts for improved growing weather in the Corn Belt that failed to support speculative ideas of a dry Corn Belt pressured prices. USDA on Monday reported corn-inspected-for-export at 30.562 mi bu vs. expectations for between 35-41 mi bu. Expectations for a lower corn crop condition rating provided some support. As the market predicted, USDA cut the U.S. corn crop good-to-excellent rating by 3% to 64%. Cash corn in the U.S. Midwest was steady amid slow farmer selling. Cash corn in the U.S. Mid-Atlantic States was weaker with bids ranging from 3.0¢/bu – 8.0¢/bu lower in many places. The CFTC Commitment of Traders report for the week ended August 19 showed large speculators increasing net long positions by about 5,400 lots to 67,375 contracts. Funds sold almost 7,000 lots. Those who have up to 70% of the ’08 crop priced today are in good shape. Speculate with the rest. It might be a good time to consider getting up to 20% of the ’09 corn crop priced on these price up moves.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were up on Monday. The AUG’08 contract finished at $13.392/bu, up 18.2¢/bu from Friday’s close and 60.2¢/bu higher than a week ago. NOV’08 soybean futures closed at $13.470/bu, up 20.0¢/bu and 58.0¢/bu higher than last Monday. According to several floor sources the market correctly factored in a lower good-to-excellent crop rating of 1%. In addition, they said that the market was struggling to factor current prices against U.S. demand levels. Weather reports of more dryness were supportive. The market thinks that both corn and soybeans will struggle to make decent yields ahead of cooler temperatures. Even though warmer-than-normal temperatures are forecast for the U.S. Corn Belt, numbers in the lower 30s in some places were considered bullish according to floor sources. Cash soybeans in the U.S. Mid-Atlantic States were stronger with bids ranging 18.0¢/bu -21.0¢/bu higher for ’08 and ’09 soybeans. It is a good consideration to get 60%-70% of the ‘08 crop sold at this time (if you haven’t already). It would also be a good idea to price up to 20% of the ’09 crop.

WHEAT futures in Chicago (CBOT) sank on Monday. The SEPT’08 contract closed at $8.402/bu, off 25.2¢/bu from Friday and 19.4¢/bu lower than a week ago. JULY’09 wheat futures closed up 24.2¢/bu at $9.114/bu; 22.2¢/bu lower than this time last week. After opening higher, news of good weather, increasing global stocks, and lack of follow through initiated chart-based selling and profit taking. These factors came together to pressure prices. The Kansas City and Minneapolis wheat markets were also pressured. Russia reportedly will harvest 15.1% more wheat this year while Australia was finally catching a break on crop producing weather. Decent exports were somewhat supportive. USDA placed wheat-inspected-for-export at 23.734 mi bu vs. expectations for between 19-23 mi bu. Iran bought 150,000-200,000 tonnes (5.5-7.3 mi bu) of wheat. Commodity funds were net sellers selling 3,000 wheat contracts. The CFTC Commitment of Traders report showed large speculators decreasing net short positions in CBOT wheat by 6,100 lots to 16,697 contracts. It might not be a good idea to price any of the ’09 crop beyond 60%.

5m Editor