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Weekly Roberts Report

by 5m Editor
26 October 2010, at 12:00am

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

LEAN HOGS on the CME finished down on Monday. DEC’10LH futures finished at $68.450/cwt; off $2.220cwt but $0.425/cwt higher than last week at this time. The FEB’11LH contract closed down $1.550/cwt at $74.375/cwt but $1.500/cwt higher than last report. The APR’11LH contract closed at $78.275/cwt; off $1.675/cwt but $0.900/cwt higher than this time last week. Higher corn prices, more pork, plenty of heavy hogs, profit taking and lower cash pork prices spurred selling. USDA on Friday showed nearly 10 per cent more in storage than a month ago due to a large increase in hams. After opening slightly lower futures fell further on premiums to current cash prices. Technical signals show broken chart support including the 10-day moving average and a trend line across recent lows. Spreading was noted as traders sold December and bought February or April. Cash hogs ranged $0.50-$0.75 lower to a range of $44.50/cwt-$47.00/cwt on weaker demand as most packers were stocked through Friday. USDA put the cash pork cutout at $76.06/cwt; down $0.70/cwt. According to HedgersEdge.com, the average packer margin was lowered $6.10/head to a positive $21.25/hd based on the average buy of $46.65cwt vs. the average breakeven of $54.41/cwt. The CME lean hog index was placed at 66.76/lb; down 0.74/lb and 5.98/lb lower than this time last week.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. DEC’10 corn futures closed up 8.75¢/bu at $5.686/bu and 1.14¢/bu higher than last report. The MAR’11 contract closed at $5.814/bu; up 9.25¢/bu and 1.2¢/bu higher than last Monday. The DEC’11 contract closed at $5.326/bu up 14.25¢/bu and 1.6¢/bu over last Monday. Weak yields, risky weather, a weaker US dollar, hedge fund buying, news that China will be buying more US corn, and strong crude oil prices were supportive. When the US dollar is weaker exports are encouraged because US exports are cheaper. Hedge funds are buying to hedge inflation, and higher crude oil affects corn prices because of ethanol demand. Funds bought over 7,000 lots. Exports were not supportive with USDA putting corn-inspected-for-export at 19.813 mi bu vs. expectations for 25-26 mi bu. Weakening demand is seen as limiting market gains. In other news storms set to blow through the Midwest this week could cause crop losses that could be supportive. The U.S corn crop is seen as especially vulnerable due to very dry weather and the crop being very tall and susceptible to being blown over. The US corn harvest is 83 per cent complete; up from 20 per cent this time last year and above the5-year average of 49 per cent for this time of year. Yields have been disappointing and this could lead to tight supplies next spring. Looks like corn prices are fundamentally supported past the near term.

SOYBEAN futures on the Chicago Board of Trade (CBOT) finished up on Monday. NOV’10 futures closed at $12.176/bu, up 18.25¢/bu and 33.75¢/bu higher than last report. The MAR’11 contract closed at $12.372/bu; up 18.5¢/bu and 34.0¢/bu over a week ago. NOV’11 soybean futures closed up 11.5¢/bu at $11.650/bu and 12.75+¢/bu higher than last week at this time. A falling dollar, brisk fund buying, and good exports were supportive. Funds bought 6,000 lots amid a good volume of 217,000 contracts vs. the 30-day average of 174,000 trades. USDA put soybeans-exported-for-export at 68.344 mi bu vs. expectations for 31-40 mi bu. Exporters reported heavy sales to China for 2010/2011 delivery. Dry weather in Brazil continues to push China to US soybeans. USDA also put U.S harvest progress at 91 per cent vs. 42 per cent a year ago and the 5-year average of 72 per cent. Strong fundamentals indicate continued price strength.

WHEAT futures in Chicago (CBOT) finished up on Monday. The DEC’10 wheat contract closed at $6.740/bu; up 3.25¢/bu but 16.0¢/bu lower than last Monday. JULY’11 futures finished up 5.25¢/bu at $7.412/bu but 24.75¢/bu lower than a week ago. A weak US dollar pricing US wheat better to importers and news last Friday that Russia would retain its ban on grain exports to July 2011 were supportive. Dry weather in the Ukraine is slowing wheat seedings there. Spillover from corn and soybeans were also supportive. Wheat has depended on strength from other commodities since near-term supply threatens weakness. However, the Russian threat of export release hangs over the market. Fundamentally wheat prices have improved from mildly bearish to neutral.