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Weekly Roberts Market Report

by 5m Editor
17 August 2011, at 6:03am

US - Slaughter weights are on the rise despite hot humid growing conditions, writes Michael Roberts.

LEAN HOGS on the CME finished down on Monday with the exception of the October 2011 contract. OCT’11LH futures closed at $89.975/cwt; up $0.500/cwt.

The DEC’11LH contract closed at $85.800/cwt; down $0.400/cwt and $1.300/cwt lower than this time last week. MAY’12LH futures closed at $94.800/cwt; off $0.100/cwt and $1.60/cwt under last report.

The October contract was supported by its large discount to cash prices. Futures were mixed on Monday as traders weighed a big discount to cash prices against indications supplies will decrease dramatically in the fall.

Slaughter weights are on the rise despite recent hot, humid growing conditions. USDA last week put its 2011 US pork production estimate at 22.680 bi lbs vs. 22.699 bi lbs in the previous estimate.

Additionally, USDA raised export estimates to 5.012 bi lbs from 4.872 bi lbs.

In other export news the Chinese government said Monday its hog supply increased by 1.1 per cent in July and projected a looming pork glut even though pork prices have risen there more than 50 per cent over the last 12 months.

China has been struggling with sharply increasing food-cost inflation as higher-paid urban workers increasingly buy more expensive foods. According to USDA on Monday just over 1,000 head traded on a live basis a weighted average of $80.91/cwt; off $3.45/cwt.

Also on Monday USDA put the pork cutout at $109.45/cwt, down $0.40/cwt; and $0.34/cwt lower than last week. According to HedgersEdge.com, the average packer margin was raised $4.25/hd from last week to a positive $6.80/head based on the average buy of $76.81/cwt vs. the average breakeven of $79.41/cwt.

The latest CME lean hog index was placed at $107.77; down $0.07 but $1.22 over last report.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. SEPT’11 futures closed at $7.072/bu; up 5.5¢ /bu and 32.0 ¢ /bu higher than last Monday.

The DEC’11 contract closed at $7.200/bu; up 5.5 ¢ /bu and 34.0 ¢ /bu higher than last report.

A weak US dollar, follow-through from last week, higher equities (crude and gold), and bullish corn data from USDA last week were supportive. A lower US dollar makes US origin corn attractive for global importers.

The market continues follow-through momentum from last week’s larger-than-expected reduction in US production estimates. USDA cut output forecast 4.1 per cent from July to 12.914 bi bu due to damage from intense heat.

Brazil is looking to increase corn production as world supply grows tighter and improved technology boost yields. Even though the US dollar value has declined USDA put corn-inspected-for-export at 27.567 mi bu vs. expectations for 31-34 mi bu.

International traders told me today they were waiting to see what next week brings regarding the price of US corn. Late Monday USDA kept the US corn crop in good-to-excellent condition at 60 per cent; lowering the excellent grade by one per cent and raising the good rating by one per cent.

Chart patterns indicate price strength weakening. It might be a good idea to price 10 per cent of the 2012 crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed higher on Monday. The SEP’11 contract closed at $13.434/bu; up 15.75 ¢ /bu.

NOV’11 soybean futures closed 16.5 ¢ /bu higher at $13.512/bu and 39.75 ¢ /bu lower than a week ago.

The MAR’12 contract closed at $13.690/bu; up 16.5 ¢ /bu.

Follow-through from last week, dry weather in portions of the US soybean belt, a weaker US dollar, and spillover from equities and corn were supportive. Additional and surprising support came from larger-than-expected US soy crush data for July.

The National Oil Processors Association (NOPA) placed US July soy crush at 122.952 mi bu; 5.234 mi bu higher than June’s figures and 4.452 over analysts’ estimates.

Exports were bearish with USDA on Monday putting soybeans-inspected-for-export at 4.277mi bu vs. estimates for six to 11 mi bu. Soybean prices in Rosario, Argentina closed slightly higher.

WHEAT futures in Chicago (CBOT) closed up on Monday. SEPT’11 futures finished 10.0 ¢ /bu higher at $7.124/bu and 56.0 ¢ /bu over last week at this time.

The DEC’11 contract closed at $7.414/bu; up 9.25 ¢ /bu and 46.75 ¢ /bu higher than this time last week.

JULY’12 wheat futures finished at $7.912/bu; up 8.0 ¢ /bu and 32.75 ¢ /bu higher than last report.

Rising export demand and a lower US dollar were supportive.

USDA put wheat-inspected-for-export at 18.455 mi bu vs. expectations for 22-28 mi bu. Saudi Arabia was the largest buyer of multi-source wheat on Monday. Easing volatility in some global markets motivated buyer interest.

Some pit sources said several on the floor are still concerned about supplies following drought conditions in the US southwest and flooding over late plantings in the northern US Plains’ states.

Wheat has also been getting a boost from corn as both grains are used for livestock feed. Look for gains to be limited from increased competition from low-priced- wheat coming from the Black Sea region. Late Monday USDA put the US spring wheat crop in good-to-excellent condition at 66 per cent, unchanged from last week.