Corn futures traded lower pressured by negative technical signals and positioning ahead of USDA’s World Agriculture Supply Demand Estimate (WASDE) report due out Thursday at 8:30 am. Follow-through non-commercial long-liquidation from last week’s bearish close continued to drive investors away. Fundamentally the commercial side continues to grow more bullish toward the longer-term supply and demand situation as indicated by the strengthening trend in a series of futures spreads. However, inactivity of investors will allow the market to continue to struggle as shown by the Relative Strength Indexes and both moving average measures in contracts through December 2014 turning down as traders minimize risk ahead of the report. The national average basis is -18 ¢ /bu under CBOT December futures. Basis in the Mid-Atlantic ranged from +68 ¢ /bu in Virginia to +$1.13/bu in the middle of North Carolina. Producers should be priced at 60% of anticipated production and 25% with PUT Options holding the remainder of un-priced corn until harvest to sell. Storing un-priced corn without a floor price may not be such a good idea.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. NOV’12 futures closed at $15.500/bu; off 1.5 ¢ /bu. The MAR’13 contract closed at $15.060/bu; down 7.0 cents ¢ /bu. NOV’13 futures closed at $13.214/bu; off 12.75 ¢ /bu. Soybean futures were pressured by spillover from corn and apprehension over what might be in the Thursday WASDE report. Hedgers took profits and funds liquidated positions to minimize risk ahead of the report. The national average basis for soybeans is -50.0 ¢ /bu under CBOT November futures. Basis in the Mid-Atlantic ranged from -70 ¢ /bu in Virginia to +$1.23/bu in the middle of North Carolina.

WHEAT futures in Chicago (CBOT) closed up on Monday. DEC’12 wheat futures finished at $8.610/bu; up 3.5 ¢ /bu. The JULY’13 contract closed at $8.406/bu; up 0.5 ¢ /bu. Wheat futures settled slightly higher on worries about threats from dry weather to world production offsetting risk associated with the USDA WASDE report. Wheat has been the strongest market in part due to lower production forecasts in Australia and lower-than-expected yields and quality in the European Union. The French soft wheat crop was reduced to 35.9 mi tonnes (1.319 bi bu) from 36.5 mi tonnes (1.34 bi bu) by the country’s farm ministry. However, this new estimate is still 5.6% greater than the 2011 harvest. However, significant production reductions in other countries have contributed to lower global stocks. Spillover from corn and soybeans countered what might have been substantial gains in CBOT wheat. Soft Red Winter Wheat’s national average basis was unchanged at -38 ¢ /bu under CBOT December futures. Hard Red Winter Wheat was placed at -61 ¢ /bu under Kansas City December futures. Hard Red Spring Wheat national average basis was placed at -78 ¢ /bu under the Minneapolis December futures contract.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed up on Monday. The OCT’12DA contract closed up $0.15/cwt at $21.05/cwt. DEC’12DA futures closed at $20.64/cwt; up $0.32/cwt. The MAR’13DA contract closed at $18.98/cwt; up $0.15/cwt. Milk production has increased somewhat across the country; some on steady cow numbers and some on increased milk production per cow amid some culling. Processors would like greater volume but producers can’t see increasing production on high-priced feed costs. Higher cheese prices have made it attractive for processors to buy more milk if it were available. Cheese prices increased for the week but much less than two weeks ago. Butter prices declined by $0.095/lb. Several loads were traded at $1.86/lb rather than the $2/lb traders expected. Class III futures were: 3 months out = $20.74/cwt; 6 months out = $19.95/cwt; 9 months out = $19.45/cwt; and 12 months out = $19.22/cwt. This week variable cost of production for the average North Carolina conventional 200 cow dairy with a 23,000 lb average is $22.75/cwt.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday. The OCT’12LC contract closed at $123.350/cwt; up $0.300/cwt. DEC’12LC futures closed at $126.400/cwt; up $0.200/cwt. APR’13LC futures closed at $133.050/cwt; down $0.125/cwt. The market is getting spillover support from last week’s gains and the ongoing notion that supplies of fed cattle are tightening. However, cattle futures started steady-to-flat in early trading amid a focus on tightening supplies and last week’s gains in cash markets. Pit sources said today they are waiting on additional trade interest to surface later in the week. Columbus Day seems to have significantly limited overall trade participation. Cash prices are expected to develop $1-$2/cwt higher near $125-$126/cwt when buying picks up later in the week. The cattle market is being underpinned partly by declining grain prices. Support from lower grain prices could be offset by worries about the global economy, particularly the prospect of an economic slowdown in China. Beef prices have increased recently due to increased export activity while domestic demand continues to be sluggish. Large funds are selling bull positions by 35% by last Friday moving money out of beef in anticipation of lower prices on the unstable global economy. Last week’s processing was down 7.3% from a year ago on sluggish demand. Year-to-date slaughter is off 4.2%. USDA’s latest boxed-beef prices were placed at $189.99/cwt; down $1.36/cwt. According to HedgersEdge.com, the average packer margin was placed at a negative $43.60/head based on the average buy of $123.17/cwt vs. the breakeven of $119.55/cwt. On Friday, October 5, 2012 USDA put the 5-area weekly steer average at $123.67/cwt. Please see graph:

FEEDER CATTLE at the CME closed up on Monday. The OCT’12FC contract closed even with Friday’s close at $144.825/cwt. NOV’12FC futures closed at $146.300/cwt; up $0.100/cwt. APR’13FC futures closed at $153.950/cwt; up $0.950/cwt. Feeders are supported by declining grain prices improving margin economics. Feeders were extremely dull most of the morning with electronic markets trading mixed in a narrow range before the open. The lack of direction in live cattle as well as the inability to add any additional pressure to corn futures during the morning trade kept most feeder cattle traders complacent with status quo positions as they wait on the next big shift in outside markets (namely the WASDE report due out on Thursday). For Monday 10.8.12; estimated receipts at the closely watched Oklahoma City market were put at 7,000 head vs. last week’s 4,780 head and 7,021 head this time last year. Compared to the last two weeks demand was not well tested for feeder cattle but considered very good for long weaned calves. Short-weaned and un-weaned calves did not get much bidding due to swings in weather temperatures that can be hard on young-stock. Many areas near Oklahoma reported record low temps these past two days.

The CME feeder cattle livestock index was placed at 143.72 up 0.39. Please see chart:

LEAN HOGS on the CME finished mixed on Monday. OCT’12LH futures finished $0.150/cwt higher at $81.475/cwt. The DEC’12LH contract closed at $76.875/cwt; up $0.325/cwt. APR’13 futures closed at $87.250/cwt; down $0.550/cwt. Like beef, hog prices were mostly flat to begin the week. Seasonal expansion in hog supplies may limit upside potential as the weather contributes to large hog gains on the farm. Little new information is available inside or outside of the hog complex with the markets seeming to be all over the map in early trading. Cash prices are steady-to-flat. However, producers continue to sell stock on a timely basis to keep shipments up to date and supplies from backing up on the farm. Slaughter rates are projected to be around 1% above a year-ago. According to HedgersEdge.com, the average packer margin was placed at a positive $1.18/head based on the average buy of $59.30/cwt vs. the breakeven of $60.48/cwt. The latest CME Lean Hog index was estimated at 80.46; down 1.04.

Further Reading You can view the full report and graphs/tables by clicking here.