Weekly Roberts Market Report

by 5m Editor
14 December 2011, at 6:27am

US - Exports were supportive with USDA putting corn-inspected-for-export, writes Michael T. Roberts.

LEAN HOGS on the CME closed up on Monday with the exception of April ’12 and December ’12 futures. The DEC’11LH contract closed at $86.225/cwt; up $0.825/cwt and $0.925/cwt higher than this time last week. MAY’12LH futures closed at $95.400/cwt; up $0.750/cwt but $2.20/cwt lower than last report.

Strong exports, short-covering, speculative profit taking, and the close price proximity to CME’s lean hog index prior to the expiry of the spot month on Wednesday were supportive. Pork exports in October were the highest on record for that month and year-to-date exports continue at a record pace.

Late Monday the latest CME lean hog index estimate was placed at $85.95; down $0.20 and $0.27 lower than last report. Pit sources said Monday that buying in nearby months was encouraged on ideas that cash hog prices for wholesale pork may soon bottom out as retailers complete purchases for the Christmas and New Year’s holidays.

Cash hog markets are mostly flat since last Wednesday putting off weakness volatility. Late Monday USDA put the wholesale pork price at $89.77/cwt; down $0.47/cwt but $0.80/cwt higher than a week ago. According to, the average packer margin was raised $3.80/hd to a positive $6.80/head based on the average buy of $62.44/cwt vs. the average breakeven of $64.90/cwt.

In other packer news – Smithfield Foods Inc. reported lower earnings on smaller second quarter sales receipts and rising commodity input costs. Smithfield owns many company owned farms in its vertically integrated business model. In other words, Smithfield is taking it on the chin on the packing side. However, Smithfield’s business model for company owned farms is showing strong profits on higher cash hogs prices.

Smithfield Foods Inc. is the US’s largest pork producer with brands that include John Morrell, Armour, and Farmland. Smithfield is fond of saying that it is one-day’s drive from over 90 per cent of the population of the United States... meaning its product is the freshest that can be found in most meat cases.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday with the exception of the December 2011 contract which closed even with last Friday. The DEC’11 contract closed at $5.854/bu; even with Friday’s close but 52.0¢/bu higher than last report. MAR’12 futures closed at $5.940/bu; off 0.25¢/bu but 30.0¢/bu over last week’s close. The DEC’12 contract closed down 3.75¢/bu at $5.480/bu and 56.0¢/bu lower than last report.

Falling equities based on Eurozone woes and a strong US dollar weighed on prices. Exports were supportive with USDA putting corn-inspected-for-export at 35.674 mi bu vs. estimates for 28-35 mi bu. CFTC data showed that large speculators had cut net bull positions in CBOT corn for the fourth straight week.

Traders told me today they were expecting more declines in corn futures after near term strength runs out. Fund buying late in the session helped prices recover most early losses. Last week’s USDA World Agriculture Supply Demand Estimate (WASDE) was considered bullish for corn.

Chart signals (descending triangle) indicate near-term upside potential but continued weakness about a month out as the right shoulder of a reverse head-and-shoulders formation shapes up. Measuring objective is calculated at $5.834/bu; +/- 10.5¢/bu.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. JAN’11 soybean futures closed 5.0¢/bu higher at $11.120/bu but 24.25¢/bu under last report. The MAR’12 contract closed at $11.222/bu; up 5.75¢/bu but 14.25¢/bu lower than last Monday. NOV’12 futures closed at $11.370/bu; up 1.75¢/bu and 11.5¢/bu over last week at this time.

Short covering, profit taking and concerns that dry weather in South America limiting production there were supportive. A firm US dollar didn’t seem to matter on short global supply worries. Farmers in Brazil & Argentina have virtually stopped planting due to dry conditions.

Europe’s latest plan to resolve the euro zone debt crisis didn’t convince traders that it was working. Exports were bearish with USDA putting soybeans-inspected-for-export at 29.749 mi bu vs. estimates for 34-38 mi bu. November exports from China were up 49+ per cent over October.

Large speculators cut net bull positions in CBOT soybeans on profit taking. USDA’s WASDE report last week was considered bullish for US soybeans. November 2012 soybean futures show upside potential a few weeks out.

WHEAT futures in Chicago (CBOT) closed down on Monday with the exception of the nearby December ’11 contract. The DEC’11 contract closed at $5.754/bu; up 2.0¢/bu but 23.25¢/bu lower than last report. JULY’12 wheat futures finished at $6.270/bu; down 6.25¢/bu and 15.5¢/bu lower than a week ago.

A firm US dollar seen as limiting future exports and worries over the Euro-crisis overseas had investors taking money out of commodity markets. Good prospects for US Plains crop development also weighed on prices.

Exports were considered neutral with USDA putting wheat-inspected-for-export at 16.504 mi bu vs. estimates for 15-19 mi bu. Bangladesh and Jordan made significant tenders for optional-origin wheat while Iraq switched to Russian wheat from US wheat.

Heavy late spring rains lowering quality prospects for Australia’s bumper crop were supportive for US wheat futures. Last week’s USDA’s WASDE report was considered bearish for wheat tempering price enthusiasm. A narrowing, descending triangle indicates upside potential but not too much for in the near term.

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