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Weekly Roberts Market Report

by 5m Editor
28 March 2012, at 6:29am

US - Drought in South America is seen as decreasing SA soybean output by up to 2 per cent while farmers in the US say they will plant more corn, writes Michael T. Roberts.

LEAN HOGS on the CME finished up on Monday with the exception of the nearby April ’12 contract. The APR’12LH contract closed at $84.875/cwt; down $0.150/cwt. MAY’12LH futures closed at $93.900/cwt; up $0.150/cwt. AUG’12LH futures finished $0.125/cwt higher at $93.625/cwt. A lack of fresh news as the market stabilized after losses on Friday encouraged the mixed market on Monday. The market has fallen sharply in the past month on sluggish demand and growing supplies shown in last Thursday’s cold storage report. Some pit sources consider the lean hog market oversold. Technical signs are near those levels. An oversold market is said to occur when the Relative Strength Index (RSI) is at or below 30. The RSI is a measure of market velocity. Cash hogs were reported flat to $1/cwt lower. Ample hog supplies and further declines in wholesale pork prices are weighing on cash prices. Heavier carcass weights due to excellent quality corn and unusually mild weather this winter contributed to increased pork output. Year-to-date US hog slaughter through last week was up 0.6 per cent and pork output was up 0.7 per cent from a year ago. On Monday USDA put the pork carcass value at $79.82; up $0.15/cwt but $2.47/cwt lower than a week ago. This is nearly 14.5 per cent lower than a year ago. According to HedgersEdge.com, the average packer margin was raised $1.85/hd to a negative $10.15/head based on the average buy of $60.74/cwt vs. the breakeven of $57.08/cwt. Late Monday The CME lean hog index was estimated at 85.77; down 0.78; and 2.21 lower than this time last week.

CORN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The JULY’12 contract closed at $6.360/bu; down 8.5¢/bu. The DEC’12 contract closed at $5.532/bu; off 4.25¢/bu. After following soybeans higher most of the day Corn futures fell back on profit taking and some technical selling. Worries over an expected large crop and thoughts that corn plantings in the US could even go higher weighed on prices. USDA will publish the much anticipated Prospective Plantings report on Friday, March 30 and its World Agriculture Supply Demand Estimates (WASDE) and Crop Production reports on April 10. Large speculators increased net-bull positions to 311,712 contracts. Exports were bearish with USDA putting corn-inspected-for-export at 22.216 mi bu vs. trade estimates for 28-33 mi bu. Corn producers should consider pricing up to 50 per cent of the 2013 crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The MAY’12 contract closed at $13.794/bu; up 13.75¢/bu. NOV’12 futures closed at $13.294/bu; up 7.0¢/bu. Soybeans reached fresh six-month highs on concerns of a smaller South American crop and expectations for small growth in US soybean plantings. Drought in South America is seen as decreasing SA soybean output by up to 2 per cent while farmers in the US say they will plant more corn. Exports were bullish with USDA putting soybeans-inspected-for-export at 24.913 mi bu vs. trade estimates of 20-29 mi bu. This is well ahead of the 13.2 mi bu needed to stay on pace with USDA’s 1.275 bi bu demand projection. Expectations for greater Chinese demand for US soybeans are also driving the futures rally. Basis for US soybeans at export terminals strengthened in anticipation of increased sales to China. Farm selling has slowed. Some spillover pressure from corn trimmed gains near the close. The carry in the May-to-July futures spread weakened representing a bullish commercial outlook. New-crop inverses continue to strengthen, indicating a longer-term bullish commercial outlook. Technically, the short-term trend turned up after the May contract posted a new high. Now is a very good time to price up to 40-50 per cent of the 2012 crop.

WHEAT futures in Chicago (CBOT) closed up on Monday. The MAy’12 contract closed at $6.594/bu; up 5.25¢/bu. JULY’12 wheat futures finished at $6.702/bu; up 5.75¢/bu. Wheat futures were supported by concerns for dry weather in Europe’s wheat belt and the risk of frost damage to the US winter wheat crop. Follow-through non-commercial short covering also supported the rally. Exports were bearish with USDA putting wheat-inspected-for-export at 15.358 mi bu vs. trade estimates for 23-28 mi bu. Export inspections were below the 15.4 mi bu needed to stay on track with USDA’s 1.0 bi bu projection. European wheat millings were up 1.5 per cent for the week ending March 23, 2012. Considering the weakening underpinnings now would be a very good time to sell up to 35 per cent of the 2012 crop.