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Weekly Roberts Report

by 5m Editor
14 March 2007, at 7:37am

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.

LEAN HOGS on the CME closed mostly lower on Monday. The APR’07LH contract closed at $67.950/cwt, unchanged from Friday’s close but $2.950/cwt higher than this time last week. The JUNE’07LH contract closed at $77.475/cwt, down $1.275/cwt from Friday but $2.000/cwt higher than last Monday’s close. Profit taking by chartists fueled early fund selling as mixed reports and expectations for cash hogs contributed to uneven trading. April/June spreading helped the April contract recover on the day. It was reported that about 6,000 spreads were done near the close of the market offsetting active fund rolling as the funds liquidated old net long positions in April futures. An estimated 17,000 lots of April and June futures traded by the closing bell. Cash hogs started out strong but demand weakened near the close. Packers were reportedly complaining about light hogs being marketed after recent storms. UDSA published a lighter-than-expected slaughter number below trade expectations. The world’s largest slaughter plant located in Tar Heel, NC and owned by Smithfield Foods, Inc. shut down on Monday to install a new hog stunning system. It is expected to be up and running on Tuesday. USDA put the pork carcass cutout on Monday at $68.69/cwt, down $0.16/cwt. According to HedgersEdge.com, the average pork plant margin for Monday was estimated at $11.65/head, up $5.65/head from last Friday and $8.15/head better than this time last week. Cash sellers should try to hold onto hogs until they are the right weights. Hog feeders should think about pricing more feed inputs at this time.

CORN on the Chicago Board of Trade (CBOT) closed down on Monday. The MAR’07 contract finished at $3.996/bu, off 8.4¢/bu and 17.6¢/bu lower than this time last week. The DEC’07 contract finished at $4.026/bu, down 5.0¢/bu and 6.0¢/bu lower than last Monday’s close. DEC’08 futures finished off 3.4¢/bu at $3.864/bu but 7.0¢/bu higher than this time last week. Corn was driven lower by expectations for more corn acreage and a $1/barrel slide in crude oil prices to $59/barrell. This led to fund selling, soybean/corn spreading, and sell-stops in the market. Funds sold between 8,000 and 9,000 contracts amid an estimated volume in CBOT corn of 246,872 corn futures and 68,093 options. These futures markets will remain volatile as companies release their estimates for U.S. corn and soybean acres. Trying to meet surging corn demand, producers are expected to plant the largest amount of U.S. corn acres seeded in 60 years. Last year 78.3 million acres of corn was planted. USDA has pegged the U.S. crop at 87.0 million while an elevator survey by Daniels Midland shows an increase in 2007 U.S. corn acres to a huge 88.5 million acres. All eyes are watching for the USDA Prospective Plantings report that will be released on Friday morning, March 30. Exports were fairly quiet. South Korea is reportedly seeking food-grade-only corn this week while other world-market buyers are expected to take a break from corn purchases. Unexplainably, producers remain sell-shy waiting on higher prices … despite the fact that corn futures prices continue near 10-year highs. Friday’s CFTC Commitments of Traders report for futures and options combined last Tuesday placed large speculators in long positions at 372,338 contracts, off 31,405 lots and those in short positions at 66,631 lots, up 8,935 contracts. Funds in long positions were pegged at 372,705 lots, up 1,501 from the previous week, while those in short positions shifted down 23 lots to 9,461 contracts. The APR’07 ethanol contract finished at $2.33/gal, up 0.050¢/gal. Primary support for the DEC’07 corn contract is placed at $3.992/bu with secondary support at $3.893/bu. DEC’07 corn could break out to the down side measuring objective of $3.665/bu filling the gap established January 12th if more bearish planting news is put out March 30, exports remain quiet, and South American corn gets good crop news. Hopefully cash sellers have forward contracted up to 50% of new crop corn by now. Hedgers should consider short positions in DEC’07 corn in the $3.95/bu range. This market shows signs of losing steam, at least through late March and early April, on declining crude prices and increasing crop acres.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed higher on Monday in soybean/corn spreading and bullish soybean crop news. The same ADM survey reported above in corn notes an 8.3 million drop in soybean acres. The MAR’07 contract finished at $7.552/bu, up 5.2¢/bu and 19.6¢/bu higher than this time last week. NOV’07 futures also closed up 4.4¢/bu at $7.804/bu but 7.6¢/bu lower than a week ago. Soybean futures are competing with corn futures for soybean acres. Combine nervous expectations about U.S. producer plantings and crop weather and you have one volatile market. This will likely continue through at least March 30. Volume in CBOT soybeans was estimated at 85,977 futures and 20,058 options. Cash sellers with 50%-60% of the ’07 crop priced are in good shape.

WHEAT in Chicago (CBOT) were off on Monday with MAR’07 futures closing at $4.600/bu, off 5.4¢/bu and 8.0¢/bu lower than this time last week. JULY’07 wheat finished down 6.2¢/bu at $4.832/bu and 8.2¢/bu lower than last Monday. The sell off in corn and lack of any fresh bullish news proved bearish on wheat. Trade was light in CBOT wheat with 34,851 futures and 8,094 options being traded. Floor sources said the market struggled all day for price discovery. Funds sold some 2,000 lots. As with corn exports, soybean exports were quiet. USDA reported export inspections at 19.9 million bu, on the low side of the 17-23 million bu expected export range. Friday’s CFTC Commitment of Traders report had large speculators reducing long positions in CBOT wheat to net short positions for the week ended March 6 coming in at 12,517 contracts while funds trimmed net long positions in CBOT wheat to 193,962 lots. Producers with up to 60% of the ‘07 crop forward priced at this time are still in good shape.

5m Editor