Weekly Roberts Market Report

by 5m Editor
6 December 2012, at 9:27am

US - Corn trading was lackluster amid quiet volume. Some commercial selling was noted on spreading, writes Michael T. Roberts.

Risk Management Term of the Week: - ARBITRAGE - Actions taken in response to an apparent profit opportunity due to market imbalances. An example would be buying in the cash market and delivering in the futures market because the futures market appears to be unusually high relative to the cash market.

Risk Management Principle of the week: Fundamental and technical analysis of the markets can be complimentary. The need is for understanding of the basic forces of supply and demand (fundamental analysis) and the related ability to anticipate the direction of price trends (technical or chart analysis). Highly sophisticated quantitative analysis is nice but NOT essential to developing a good marketing plan.

LEAN HOGS on the CME finished down on Monday. The DEC’12LH contract closed at $83.925/cwt; down $0.150/cwt but $1.450/cwt higher than last report. APR’13LH futures closed at $90.675/cwt; down $1.100/cwt and $0.825/cwt lower than a week ago. The JUN’13LH contract closed at $100.900/cwt; down $0.625/cwt but $0.050/cwt over last report. After starting strong, US lean hog futures finished lower but not until breaking through highs. Chart signals indicate this will continue in the near term. Fundamentally hog demand was steady-to-firm last week reflected in rising US wholesale prices and a strong cash market as retailers built stocks prior to the Christmas holidays. Stocks are tightening. Late Monday USDA put the lean pork cutout at $85.76/cwt, up $0.98/cwt and $3.42/cwt over last report. According to, the average packer margin was lowered $8.15/head to a positive $0.60/head based on the average buy of $61.09/cwt vs. the breakeven of $60.86/cwt. The latest CME Lean Hog index was estimated at 81.52; up 1.21 and 3.64 higher than last report.

This table shows the maximum price a producer could pay for feeder pigs 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 DEC’12 contract closed at $7.490/bu; up 1.0¢/bu and 1.75¢/bu higher than last Monday. MAR’13 corn futures closed at $7.546/bu; up 2.0¢/bu and 3.5¢/bu higher than a week ago. The DEC’13 contract closed at $6.396/bu; up 4.25¢/bu and 10.75¢/bu higher than last report. Corn trading was lackluster amid quiet volume. Some commercial selling was noted on spreading. Continued rainfall in Argentina threatening production was supportive. Exports should be considered bearish with USDA putting corn-inspected-for-export at 9.626 mb vs. estimates for 23-26 mb. This is well below the 23.8 mb needed this week to stay on pace with USDA’s demand projection of 1.15 bb. Please see chart:

Cash prices were steady with merchandisers reluctant to buy amid fears that Mississippi river levels will remain low or go even lower if dry conditions persist. On Monday the national average basis was -11.0¢/bu under CBOT December futures. It is a very good idea to think about pricing up to 15 per cent of 2013 production if you haven’t done so already.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. JAN’13 futures closed at $14.536/bu; up 15.0¢/bu and 29.0¢/bu over last report. The MAR’13 contract closed at $14.482/bu; up 15.75¢/bu and 26.0¢/bu higher than last week. NOV’13 futures closed at $13.172/bu; up 12.75¢/bu and 21.25¢/bu higher than last Monday. Rain continues to delay soybean planting in Argentina while good weather in the Mato Grosso area of Brazil looks to produce record yields. Fund buying and bullish chart signals were supportive. Exports were bullish with USDA putting soybeans-inspected-for-export at 51.082 mb vs. estimates of 55-62 mb. Even though exports did not meet expectations they are well ahead of the 19.9 mb needed to stay on pace with USDA’s demand projection of 1.345 bb. Please see chart:

Cash soybeans were firmer with the latest national average soybean basis being placed at -34.0¢/bu under the Chicago January 2013 futures contract. It might be a good idea to get to 15 per cent priced in the 2013 crop.

WHEAT futures in Chicago (CBOT) closed down on Monday. DEC’12 wheat futures finished at $8.420/bu; up 2.75¢/bu and 7.0¢/bu lower than a week ago. The JULY’13 contract closed at $8.686/bu; down 1.75¢/bu but 9.5¢/bu lower than last report. Wheat prices were pressured by fresh moisture and the promise of more in the US Southern Plains. However, support was noted on a lower US dollar. When the US dollar is lower US commodities are more attractive to foreign importers. Exports were bearish with USDA putting wheat-inspected-for-export at 14.186 mb vs. estimates for 17.21 mb. Soft Red Winter wheat basis index was steady-to-firm at -40.0¢/bu under CBOT March futures. Hard Red Winter Wheat basis index was placed at -56.0¢/bu under Kansas City March futures. Hard Red Spring Wheat average basis index was placed at -58.0¢/bu under the Minneapolis March futures contract. It is a good idea to price up to 15 per cent of the 2013 crop.

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