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Weekly Roberts Market Report

by 5m Editor
24 August 2011, at 7:02am

US - Who says producers are getting rich? Rising nitrogen costs are partially a function of higher US fuel costs encouraging nitrogen imports. Fertiliser is an important component of production costs for crops, especially corn, writes Michael Roberts.

Nitrogen fertiliser production is energy-intensive as natural gas makes up 70 to 80 per cent of production costs.

US nitrogen fertiliser supplies, while historically domestic, have been increasingly imported over the past decade. Shares of US nitrogen fertiliser are now nearly equal between domestic and foreign suppliers.

This chart may be found in the ERS report, Impacts of Higher Energy Prices on Agriculture and Rural Economies, ERR-123, published in August 2011.

LEAN HOGS on the CME finished up on Monday. OCT’11LH futures closed at $89.000/cwt; up $0.625/cwt but $0.975 lower than a week ago.

The DEC’11LH contract closed at $85.150/cwt; up $0.275/cwt but $0.650/cwt lower than this time last week. MAY’12LH futures closed at $94.300/cwt; up $0.300/cwt but $0.500/cwt under last report.

Hogs were supported by the broad rally in equities and commodities and October’s discount to cash and fund buying. Last week 1.650 mi head were processed; up 30,000 head from the previous week.

Cash prices on Monday were mostly unchanged amid light volume. Processors seem to have most of the hogs they need for processing this week.

On Monday USDA put the pork cutout at $106.69/cwt, down $0.97/cwt; and $2.76/cwt lower than last week. According to HedgersEdge.com, the average packer margin was raised $0.80/hd from last week to a positive $7.60/head based on the average buy of $74.88/cwt vs the average breakeven of $77.79/cwt.

The latest CME lean hog index was placed at $105.09; down $0.93 and $2.68 lower than last report

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. SEPT’11 futures closed at $7.204/bu; up 9.5 ¢ /bu and 13.25 ¢ /bu higher than last Monday. The DEC’11 contract closed at $7.344/bu; up 9.25 ¢ /bu and 14.5 ¢ /bu over last report.

Corn began trading with a 40.0 ¢ /bu daily trading limit on Monday, up from the previous 30.0 ¢ /bu limit. If a contract locks up or down the limit, limits expand by increments of 10.0 ¢ /bu until the limit trading is not reached then reverts to the original trading limit.

Reports of low US corn yield prospects, weather concerns for crop development, a weak dollar, and gains in crude oil and the US stock markets were supportive. Surveyed corn crops in the US Corn Belt showed signs of below-average yield potential after planting delays pushed development behind schedule.

Rain was spotty amid continuing drought conditions in many parts of the US Floor sources expected USDA to lower the US corn crop in good-to-excellent condition by one to two points.

USDA late Monday lowered the rating three per cent to 67 per cent. Exports were neutral-to-weaker with USDA putting corn-inspected-forexport at 29.5 mi bu vs. expectations for 28-35 mi bu. Chart signals indicated by a rising wedge and an elevated nine-day Relative Strength Index at 64.64 strongly suggest an approaching deep correction.

Resistance is measured at $7.365/bu. It might be a good idea to price another 10 per cent of the 2012 crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The SEP’11 contract closed at $13.764/bu; up 16.75 ¢ /bu and 33.0 ¢ /bu over last report.

NOV’11 soybean futures closed 16.5 ¢ /bu higher at $13.582/bu and 70.0 ¢ /bu higher than a week ago. The MAR’12 contract closed at $13.976/bu; up 12.25 ¢ /bu and 28.75 ¢ /bu higher than this time last week.

Concerns for crop yields and strengthening crude and equity markets were supportive. As expected, USDA lowered the US soybean good-toexcellent crop rating by two points to 59 per cent.

Exports were steady-to-firm as late Monday USDA put soybeans-inspected-for-export at 10.854 mi bu vs. expectations for five to 13 mi bu. This was over double those of last week. It would be a good time to consider pricing up to 20 per cent of the 2011 crop.

WHEAT futures in Chicago (CBOT) closed up on Monday. SEPT’11 futures finished 4.75 ¢ /bu higher at $7.354/bu and 23.0 ¢ /bu over last week at this time.

The DEC’11 contract closed at $7.660/bu; up 4.75 ¢ /bu and 24.75 ¢ /bu higher than this time last week. JULY’12 wheat futures finished at $8.094/bu; up 4.25 ¢ /bu and 18.25 ¢ /bu higher than last report.

CBOT wheat was supported by worries over low yields and crop loss expectations due to reduced acreage flooded in key spring wheat states.

Dry weather also remains a concern in the US Plains hard red winter wheat growing region. Global wheat production is under pressure from poor production weather in key wheat growing countries such as France and Germany.

The winter wheat harvest continues on track in west Ukraine. Yields look better than average so far. Exports were bearish with USDA putting wheat-inspected-for-export at 17.4 mi bu vs. expectations for 20-25 mi bu.