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Weekly Roberts Report

by 5m Editor
27 January 2010, at 6:02am

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

LEAN HOGS on the CME were mixed on Monday. APR’10LH futures finished at $68.375/cwt; down $1.475/cwt. The MAY’10LH contract closed off $1.000/cwt at $74.350/cwt and $1.275/cwt lower than week before last. USDA’s cold storage report was better than expected placing cold storage stocks at 474.8 mi lbs; down from 482.8 mi lbs and a whole lot different than the 555.6 mi lbs in storage this time last year. End of December ham stocks were almost half of November stocks with USDA placing them at 49.9 mi lbs vs. 84.4 mi lbs in November and 74.2 mi lbs this time last year. Cash hogs had a weak undertone but were supported by the cold weather snap that was seen as a hindrance to hog movement to processing plants. On Friday USDA put the wholesale pork price at $77.19/cwt; off $0.17/cwt but $6.13/cwt over this time two weeks ago. Export prospects continue to worry traders as talks between Russia and the U.S over poultry and hog imports to that country have been called off … again. In addition, traders were keeping an eye on the Obama bank plan that may reduce fund participation in commodities. If banks are forced to lower positions commodity “dumping” will occur and prices will plummet. The latest CME lean hog index was placed at $69.52/lb; up $0.49/lb and $2.66lb higher than last report. According to HedgersEdge.com, the average pork plant margin was raised $3.25/head from last report to a positive $13.85/head. This was based on the average buy of $50.11/cwt vs. the average breakeven price of $55.24/cwt. It might be a good idea to just price short term feed needs for now. Corn prices should come down.

CORN futures on the Chicago Board of Trade (CBOT) ended up somewhat on Monday. The MAY’10 contract closed at $3.786; up 3.25¢/bu and 54.5¢/bu (12.7 per cent) lower than last report. DEC’10 corn futures closed up 2.5¢/bu cents at $3.996/bu and 45.25-¢/bu cents lower than last week. A recently oversold market and improved exports due to lower corn prices were supportive. USDA placed corn-inspected-for-export at 20.969 mi bu. Also seen as supportive were recent reports lowering soil moisture in Argentina corn growing areas. There is little fundamental reason for higher corn prices. This is seen as a technical bounce as non-commercials profit. Having said that; there is technical support that should not allow prices to fall too much more. The recent January USDA World Agriculture Supply Demand Estimate (WASDE) report was bearish. USDA increased the 2009 corn yield to record levels and increased US 2010 corn crop acreage to 90.83 mi acs while lowering the 2010 US corn farm price forecast to $2.90-$4.50/bu. Such a wide ranged indicates USDA is unsure too. Farmers are reporting that they are getting out into corn fields to harvest the remaining part of the 2009 crop. Cash corn was steady to firm. Funds traded about 5,000 contracts. Looking at the CFTC reports there is a large shift of ownership to commercial funds as speculative funds liquidate. This can sometime indicate a “turning” market. Expect sideways movement before corn prices come down a bit more. Hopefully at least 50 per cent of the 2010 corn crop is priced. It would be a good idea to price another 10 per cent on any up-tick.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday on bearish global fundamentals and technical selling. Even though soybeans were technically oversold prospects for bumper soybean crops in South America weighed heavily on soybeans. The MAR’10 soybean contract closed at $9.404/bu; down 11.0¢/bu and 70.0¢/bu lower than week before last. Pre-placed sell orders activated in the March contract when prices broke through the $9.406/bu barrier. NOV’10 futures were down 7.6¢/bu at $9.254/bu. News from South America that their soybean crop is almost certainly larger than USDA expects is pressuring prices on already bearish fundamentals. It is expected that Brazil, Paraguay, and Argentina soybean crops loom large and could be revised upward. USDA put soybeans-inspected-for-export at 42.198 mi bu. Hedge funds traded about 3,000 contracts making small additions to long positions. Large speculative funds sold 5,000 lots in CBOT soybeans. Cash soybeans were steady to weak on Monday. My client that didn’t sell his soybeans on my advice two weeks ago sold them last week. Boy is he glad. It would be a good idea to hold of pricing anymore of the 2010 crop at this time.

WHEAT futures in Chicago (CBOT) were down a little from Friday on Monday but off were off big time since last report. MAR’10 futures closed at $4.982/bu; down 0.25¢/bu and off 74.5¢/bu (13 per cent) from week before last. The JULY’10 wheat contract closed at $5.234/bu; down 0.5¢/bu and 71.0+¢/bu (12 per cent) lower than last report. Resistance for March wheat just above $5.00/bu was touched but wheat was unable to go further than that. March wheat retreated and finished below $5.00/bu for the 4th straight time. Fundamental support is lacking as there are still ample global stocks everywhere. Wheat supplies at a 22-year high continue to weigh on prices with sporadic short-covering sessions amid oversold chart signs that provide underlying support. Jordan issued a tender for 100,000 tonnes (3.674 mi bu) as Turkey reported selling 200,000 tonnes (7.348 mi bu) of milling wheat. Russia shipped wheat to Cuba and Bangladesh while Ukraine exports have fallen off the last 4 weeks. Seems like everyone has wheat and it’s moving somewhere! USDA placed wheat-inspected-for-export at 16.875 mi bu vs. expectations for 9-14 mi bu. However, according to several floor sources weeks of solid sales reports are needed to confirm an improved demand situation. Colder temperatures were registered in the US Plains but temperatures were not deemed cold enough to do any damage to the US crop. Funds made insignificant additions to long positions. It would be a good idea to get 30 per cent of the of the 2010 wheat crop priced.