Weekly Roberts Market Report

by 5m Editor
20 June 2012, at 7:00am

US - Corn prices continue to show price strength, writes Michael Roberts.

LEAN HOGS on the CME finished up on Monday. JULY’12LH futures closed at $95.450/cwt; up $2.425/cwt. AUG’12LH futures finished $2.025/cwt lower at $93.225/cwt. The DEC’12LH contract closed at $78.425/cwt; up $0.575/cwt. A rise in grain prices, an indicator of higher feed costs, underpinned Monday’s rally. Pit sources said that higher feed costs can deter livestock producers from expanding production. Hog slaughter may again be below the year-ago figure for a second consecutive week following a six-weeks period from late April through the end of May when it averaged 4.5 per cent above a year-ago. USDA’s quarterly hogs and pigs report in March projected supplies to average nearly 2 per cent above a year ago for the second quarter. Hog futures staged a sharp rally on fresh signs of tightening supplies and increasing summer demand for the grilling season. Still, there are signs the industry is struggling from supplies of meat that continue to outweigh demand. The rally recovered steep losses from Friday, when traders took profits from long positions ahead of the weekend. Monday, June 18 USDA put the pork cutout value at 94.33; up 0.21. According to, the average packer margin was placed at a negative $7.95/head based on the average buy of $72.89/cwt vs. the breakeven of $69.99/cwt. The latest CME lean hog index was estimated at 95.25; up 0.96. USDA on Monday estimated the daily processing at 391,000 head vs. 386,000 head last Monday and 394,000 a year ago. USDA put the pork carcass cutout at $77.94/cwt, off $1.05/cwt but $0.53/cwt higher than a week ago.

This table shows the maximum price a producer could pay for feeder cattle and still break even, assuming the costs and conversion/performance factors listed above. Producers should remain aware that calculations are based on averages. Courtesy DTN.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’12 contract closed at $5.994/bu; up 20.0¢/bu. The DEC’12 contract closed at $5.340/bu; up 28.0¢/bu. Weather premium and strong buying interest from both commercial and noncommercial traders were supportive. Persistent economic concerns regarding Europe’s crisis slowed bull enthusiasm. Hot weather drying up soil moisture in key corn producing areas fueled speculation prices could strengthen on shorter production projections. Exports were neutral-to-optimistic with USDA putting corn inspected for export at 24,729 mi bu vs. estimates for 15-21 mi bu. This was well below the 34.3 mi bu needed to stay on pace with USDA’s 1.65 bi bu demand projection. (See chart) Exports compared to this time last year were over 43 mi bu.

Strong cash markets reinforced gains in corn, as basis, or the difference between cash and futures prices, remained firm in spite of the rally in futures. Usually basis weakens when futures prices rally. However, that wasn’t the case on Monday reflecting low availability of supply. Corn prices continue to show price strength.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JULY’12 contract closed at $13.842/bu; up 8.25¢/bu. NOV’12 futures closed at $13.392/bu; up 25.25¢/bu. New crop soybean contracts outpaced old-crop market supplies on weather concerns. Pit sources said they don’t think USDA’s 2012 yield forecast of 43.9 bu/ac will hold. Exports were not supportive with USDA putting soybeans-inspected-for-export at 7,897 mi bu vs. estimates for 10-16 mi bu. Inspections are running 13 per cent ahead of the total needed to stay on pace with USDA’s 1.335 bi bu.

Funds expanded net-bull positions as analysts continue to warn that supplies will tighten if hot weather persists. Funds were net-long 212,956 contracts for the week ended Tuesday, June 13, 2012. Short positions were placed at 5,984 lots. The net-long position is the difference between the number of long contracts (or bets that prices will rise) and short contracts (bets prices will fall). Funds’ net-long positions in soybeans has been large for a lot of the year on expectations that supplies will tighten after drought reduced South American soy production. Soybean prices should continue to strengthen for the next 10-14 days with some profit taking.

WHEAT futures in Chicago (CBOT) closed up on Monday. JULY’12 wheat futures finished at $6.302/bu; up 20.75¢/bu. The JULY’13 contract closed at $7.036/bu; up 15.75¢/bu. Futures were behind nearly all session until near the end when funds jumped in to buy late in the session. Lack of commercial interest held prices back amid speculative short-covering. Spillover from corn and soybeans weather concerns for wheat-crop making in China, Russia and the Ukraine were supportive. Fund managers expanded net-short positions in CBOT wheat futures to 6,367 contracts, more than double their net short of last week at 2,549 lots. USDA put wheat-inspected-for-export at 20,620 mi bu vs. estimates for 20-27 mi bu. This was 1.5 mi bu below the 22.1 mi bu needed to stay on pace with USDA’s 1.15 bi bu demand projection.

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