Weekly Roberts Market Report

by 5m Editor
27 July 2011, at 6:10am

US - Heavy rains fell on parts of the US Midwest over the weekend easing stress on the corn crop and seen as aiding pollination, writes Michael Roberts.

LEAN HOGS on the CME finished down on Monday with the exception of the August contract. AUG’11LH futures closed at $100.925/cwt; up $0.100/cwt and $2.475/cwt over last report. The DEC’11LH contract closed at $88.800/cwt; down $0.375/cwt but $1.600/cwt higher than last week at this time. MAY’12LH futures closed at $95.200/cwt; down $0.550/cwt but $0.50/cwt over last report. CME hog futures were weak despite rumors of China seeking more US pork. The reason being the lack of confirmation of pork sales to that country. Floor sources said profits were taken after the rally to the highest prices since April last Friday. Cash hogs in the US Midwest traded $0.50-$2/cwt higher on Monday amid light volume even though USDA’s report from last Friday showed red meat supplies down 6 per cent from the previous month but up 17 per cent from a year ago. Frozen pork supplies were up 20 per cent from a year ago while pork bellies increased 33 per cent from last year. USDA on Monday put the pork cutout at $98.93/cwt, down $0.80/cwt from Friday and $1.45/cwt lower than a week ago. According to, the average packer margin was lowered $15.30/hd from last week to a negative $4.95/head based on the average buy of $73.19/cwt vs. the average breakeven of $71.33/cwt. The latest CME lean hog index was placed at $96.48; up $0.69 and $1.25 higher than a week ago.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. SEPT’11 futures closed at $6.786/bu; off 11.25¢/bu and 17.75¢/bu lower than last Monday. The DEC’11 contract closed at $6.744/bu; down 11.0¢/bu and 2.75¢/bu lower than last report. Good crop weather and recent economic uncertainty pressured prices. Heavy rains fell on parts of the US Midwest over the weekend easing stress on the corn crop and seen as aiding pollination. However, hot, dry conditions persist in the southern tier of the Corn Belt. Weather news was considered good in the short term. Corn stockpiles are at historically low levels so a good crop this year is very important to ease shortages. The current environment has kept corn prices trading 73 per cent higher than a year ago. Corn prices have pulled back nearly 15 per cent since reaching all-time highs in early June on supply concerns. Users of grain are still nervous about weather threats because supplies are expected to reach 15-year lows. The on-going stress over the US budget had markets jittery and taking profits out of the market amid light volume. Volume was only about half of the average for the last 30 days. Exports are seen as neutral with USDA putting corn-inspected-for-export at 35.301 mi bu vs. expectations for 32-36 mi bu. USDA confirmed sales of 105.156 tonnes (4.14 mi bu) of US corn to Japan for 2011-12 delivery. Technically speaking the right shoulder of a head-and-shoulder’s formation seems to be forming in the December 2011 contract. If the crop gets timely rains prices could make a measuring objective of $5.8339/bu in the couple of weeks. It may be a little too early to tell but if the 10-day moving average and the Relative Strength Index diverge downward December prices will make the measuring objective sooner rather than later.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed lower on Monday. The AUG’11 contract closed at $13.654/bu; off 14.75¢/bu and 20.0¢/bu lower than a week ago. NOV’11 soybean futures closed 16.25¢/bu lower at $13.720/bu and 14.25¢/bu lower than a week ago. Soybeans fell 1.2 per cent in the largest single-day drop since June 30 on improved crop weather and US debt worries. The inability of the US Congress and Administration to agree on a budget deal kept investors wary of higher risk assets like commodities and concerned about the global economy. Several floor sources said the pits are just a jittery mess waiting on Washington. Exports were disappointing at 5.158 mi bu vs. expectations for 7-9 mi bu. This put additional pressure on prices. Charts signal a continuing sideways tracking pattern with increased volatility. One would think this makes traders glad because they make money on volatility but the Washington debate on the debt ceiling has everyone staying on the side-lines.

WHEAT futures in Chicago (CBOT) closed down on Monday. SEPT’11 futures finished 3.75¢/bu lower at $6.884/bu and 1.0¢/bu lower than a week ago. The DEC’11 contract closed at $7.290/bu; off 2.0¢/bu but $1.108/bu higher than a week ago. Spillover from falling corn and soybeans pressured wheat prices. Some traders used the decline to cover short positions pulling prices back from daily lows near the close. Good crop weather helped wheat producers in key wheat-growing areas of the northern US Plains. Russia and Iraq forecast lower imports on improved production. Uncertainty in global production indicates some nervousness over stocks the next 6 months. USDA put wheat-inspected-for-export at 22.44 mi bu vs. expectations for 20-24 mi bu.

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