21 May 2008

5 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were down on Monday. The JUNE’08LC contract closed at $93.100/cwt, down $0.775/cwt and $1.200/cwt lower than last Monday. AUG’08LC futures were off $1.200/cwt at $97.900/cwt and $2.200/cwt lower than a week ago. Fund selling, sell stops and worries over premiums pressured prices. According to two floor sources, traders were thinking that packers would back off buying having filled needed orders prior to heading into the holiday weekend but countered that Monday’s downturn was exaggerated and prices could rebound on Tuesday and Wednesday. Providing some support for prices was USDA’s monthly cattle-on-feed report and the 5-area average for live cattle; placed at $94.06/cwt vs. $93.86/cwt this time last week. The Cattle-on-Feed report showed April marketings 111% of last year while putting April placements at 98% of a year ago. USDA’s boxed beef was placed at $156.57, up $0.01/cwt. The estimated packer margin for Monday was placed at $34.95/head vs. $41.40/head a week ago, according to HedgersEdge.com. This was estimated on the average packer buy of $93.90/cwt vs. a breakeven buy of $96.75/cwt. Cash sellers should consider pushing cattle off the feed lot as soon as they are ready. It is a very good idea to price more corn inputs at this time.

FEEDER CATTLE at the CME were off on Monday. The May’08FC contract finished at $107.875/cwt, down $0.600/cwt but only $0.05/cwt lower than a week ago. The May contract expires on May 22. AUG’08FC futures were down $1.325/cwt at $111.750/cwt but $0.975/cwt higher than last Monday. Spot selling ahead of the end of the May contract, board premiums to the CME Feeder Cattle Index and spillover from live cattle pressured prices. Feeder futures started the day with the RSI overbought in many contracts and ended up that way as well. This could trigger selling later in the week. Cash feeders in Oklahoma City last week were up $1-$2/cwt. The latest CME Feeder Cattle Index for May 15 was placed at $106.73/cwt, up $0.13/cwt. It might be a good idea to price more corn needs now if you don’t have grass.

CORN on the Chicago Board of Trade (CBOT) closed down on light trading despite an attempted rally at midday on Monday. The JULY’08 contract finished at $5.886/bu, off 4.2¢/bu. The DEC’08 contract closed down 3.6¢/bu at $6.130/bu and 24.6¢/bu lower than this time last week. Good planting weather and lower cash prices pressured prices. USDA late Monday put the U.S. corn crop at 73% planted vs. the 5-year average of 88% and 88% planted this time last year. The crop was 51% planted this time last week. The market traded 75% planted all day. Yield trend lines are not likely to be challenged if the crop doesn’t get into the ground. Most genetic benefits address drought and head tolerance rather than shorter maturity time. A development in Congress reported U.S. Senator Kay Bailey Hutchison introducing a statute that would freeze the federal mandate for corn-based ethanol at 9 bi gals arguing that too much corn in the gas tank was pressuring food prices. However, U.S. Agriculture Secretary Ed Schafer downplayed the call for change countering that ethanol is not having a major impact on food prices. Cash corn in the U.S. Midwest was weaker on Monday while cash corn in the U.S. Mid-Atlantic States was steady to weaker down 2.0¢/bu – 4.0¢/bu on both old crop and new crop corn. In export news, USDA said on Monday that 27.318 mi bu of U.S. corn were inspected for export vs. expectations for between 35-40 mi bu. The CFTC Commitment of Traders report had large speculators in bullish positions increasing by 7,300 lots to 180,291 contracts. There is still strong fundamental support going into the growing season and as trading goes deeper into a weather related market. Hopefully 60% of the ’08 crop has been priced. Watch for weather rallies if you want to price more than that, however, make sure you can deliver.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were off in sluggish trading on Monday. The JULY’08 contract finished at $13.330/bu, off 45.0¢/bu from last week. The NOV’08 soybean contract ended at $13.220/bu, off 27.2¢/bu but 32.8¢/bu higher than last Monday’s close. The market was pressured by talk that the Argentinean farmer strike was near a deal, technical weakness, and good planting outlook for soybeans. USDA placed the U.S. soybean seedings at 27% vs. 11% planted last week and a 52% 5-year average. The 14-day Relative Strength Index (RSI) for November 2008 soybeans finished at 73.02. Anything over 70 is considered overbought and anything lower than 30 oversold. The RSI may remain high and go even higher as all moving averages have not diverged lower yet. However, any news of the end of the Argentinean farmer strike and/or good planting weather will pressure prices. In addition, the gap in the November contract established on May 9 will tend to want to be filled around the $12.45/bu range. USDA placed soybeansinspected- for-export at 8.531 mi bu vs. estimates for between 9 – 13 mi bu. Cash soybeans in the U.S. Gulf were weak, as well as those in the U.S. Mid-Atlantic States, down 27¢/bu – 45¢/bu. The CFTC Commitment of Traders report showed large speculators increasing bull positions by 5,000 contracts to 82,705 lots. It is a good idea to get up to 50% of the ’08 crop priced. It is still a good idea to try and forward price up to 15% of the ’09 crop if you can.

WHEAT futures in Chicago (CBOT) closed up on technical trading Monday. The JULY’08 contract closed at $7.910/bu, up 15.4¢/bu but 14.4¢/bu lower than last Monday. Near oversold conditions could not contain buyer enthusiasm amid expectations for new export interest from Iraq and others. Egypt is said to be seeking between 55,000 tonnes (2.0 mi bu) to 60,000 tonnes (2.2 mi bu). Bangladesh issued a tender for 100,000 tonnes (3.7 mi bu) while South Korea bought 21,800 tonnes (801,019 bu) of U.S. wheat. USDA placed U.S. wheat-inspected-for-export at 12.003 mi bu vs. expectations for between 17 – 21 mi bu. Continued drought conditions in eastern Australia added support. Southern and southeastern Australian farmers received much needed rain encouraging them to plant full tilt. However, it was noted that the key wheat producing region of New South Wales was mostly missed by the rain. Weather in the U.S. Plains was improving as the crop advances toward harvest. The supplement to CFTS’s Friday Commitment of Traders report had large speculators in net bear positions expanding those positions by 8,000 contracts to 20,482 lots. It might be a good idea to get to 60% priced in 2008 crop wheat.