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Weekly Roberts Market Report

by 5m Editor
19 July 2011, at 8:17am

US - The continuing hot weather and crop condition are determining the corn market, writes Michael Roberts.

LEAN HOGS on the CME finished down on Monday. August 2011 LH futures closed at $98.450/cwt; down $0.500/cwt and $0.725/cwt lower than last report.

The December 2011 LH contract closed at $87.200/cwt; down $0.675/cwt. May 2012 LH futures closed at $94.700/cwt; off $0.200/cwt.

Futures fell on expectations that summer heat will slow US demand. On the other hand, hot summer temperatures don’t slow US hog production as much as beef since most hogs are now grown inside where temperatures can be better regulated. Producers can wait longer to sell slower growing animals as well.

Rumors of increased export business with China were supportive of futures and cash prices. Japan, Russia, and South Korea were also pricing US pork last week. Chinese officials stated there were plans to increase pork sales from reserves to cope with rising domestic pork prices.

Cash hog prices were mostly steady with USDA on Monday putting the pork cutout at $100.38/cwt, up $0.31/cwt from Friday and $3.23/cwt higher than a week ago. The carcass cutout value is a measure of wholesale pork prices. Cash live-hog prices were steady-to-firm, up one dollar with top prices going to $63-$65/cwt.

According to HedgersEdge.com, the average packer margin was raised $7.75/hd from last week to a positive $10.35/head based on the average buy of $68.30/cwt vs. the average breakeven of $72.18/cwt.

The latest CME lean hog index was placed at $95.23; down $0.30 and $3.34 lower than a week ago.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed down on Monday. The July 2011 DA contract finished at $21.19/cwt; even with last Friday’s close but $0.06/cwt over a week ago.

September 2011 DA futures finished at $20.12/cwt; up $0.48/cwt and $1.48/cwt over last report. Buyers pushed bids higher until a sale occurred at $2.12. Cheese blocks started at $2.0575. Fluid milk futures continued the upward trend. Fonterra will auction tomorrow.

Major heat is dominating the Central and Northeastern US threatening to cut back milk production further.

Retail dairy prices rose for the seventh straight month led by strong cheese and fluid prices. Retail butter prices weren’t as strong but are still higher than a year ago. Cow numbers increased from December to May but milk output has slacked.

Controlling costs is paramount at this time. It would be a very good idea to put a price floor under milk at this time while using options to hedge against rising feed costs. However look for feed prices to lower somewhat if good growing weather is forecast.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday. August 2011 LC futures closed at $109.850/cwt; down $0.750/cwt and $4.85/cwt lower than a week ago.

The October 2011 LC contract was the most active and closed at $115.850; off $1.000/cwt and $4.800/cwt lower than this time last week.

June 2012 LC futures closed at $120.500/cwt; down $0.800/cwt and $2.15/cwt lower than last report. Downward price movement and oppressive feedlot weather are likely to encourage profit taking this week.

Hot, humid weather often weighs heavily on cattle prices since ranchers sell off overheated animals increasing supplies. Additionally, reduced beef grilling this time of year is pressuring prices. Consumers usually buy less meat between the fourth of July and Labor Day as summer heats up.

Beef plant margins remain bullish. USDA put the five-area average cash price at $110.93/cwt; $3.95/cwt lower than a week ago.

USDA on Monday put choice beef prices at $180.88/cwt; off $0.87/cwt but $1.69/cwt over last report.

According to HedgersEdge.com, the average packer margin was lowered $15.84/head to a positive $15.75/head based on the average buy of $114.20/cwt vs. the average breakeven of $115.43/cwt.

Fundamentally the heat can affect prices either up or down; up by decreasing cattle supplies and dressed meat quantities or down by discouraging backyard grilling and therefore demand.

FEEDER CATTLE at the CME closed down on Monday. The August 2011 FC contract finished at $134.575/cwt, down $1.125/cwt and $8.775/cwt lower than last report.

The November 2011 FC contract settled at $137.100/cwt, off $1.075/cwt and $7.60/cwt lower than this time last week. Lower corn futures were somewhat supportive.

Plains feeder producers are selling cattle at bargain prices due to hot, dry weather hurting pastures and drying up watering holes in that part of the country.

The Oklahoma National Stockyards in Oklahoma City, OK estimated receipts for Monday at 13,000 head vs. 13,582 last Monday and 7,243 this time last year.

The latest CME feeder cattle index was placed at $139.33; up $0.21 and $1.85 over a week ago.

CORN futures on the Chicago Board of Trade (CBOT) closed mixed on Monday. Deferreds showed no gain while nearbys slipped. September 2011 futures closed at $6.962/bu; off 5.0/bu. The December 2011 contract closed at $6.770/bu; down 8.0/bu but 44.5/bu higher than last report.

The September 2012 contract gained 1.25/bu while the 2012 December contract and deferreds beyond settled unchanged from Friday.

Weather and crop condition reports will influence the corn market for the near-term unless there is some fundamental shift due to a US economic upheaval. There are rumors that Standard & Poors and Moodys are considering lowering the US credit rating from AAA+ in light of events playing out in Washington.

Hot weather and forecasts for more are expected to start stressing the US corn and soybean crops.

Lackluster exports pressured prices amid a stronger US dollar. USDA put corn-inspected-for-export at 28.95 mi bu vs. expectations for 30-33 mi bu.

Expect December 2011 corn prices to remain volatile but decline if good corn-growing weather is the reality. We are now in a weather market barring major trading influences by global merchandisers. It might be a good idea to advance some sales in the 2011 corn crop.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed mixed on Monday with the front three months down and further deferreds gainers. Short covering amid light volume and profit taking on market volatility and weather uncertainty were the play. The August 2011 contract closed at $13.854/bu; off 0.25/bu.

November 2011 soybean futures closed 0.75/bu lower at $13.862/bu but 39.25/bu higher than a week ago.

Soybean prices have been moving in a sideways channel for weeks now. A firm US dollar amid growing concerns for the US economy weighed on soybean futures.

Exports were bearish with USDA putting soybeans-inspected-for-export at 3.714 mi bu vs. expectations for five to seven mi bu. China is expected to reduce soybean imports nearly seven per cent in 2011 due to better production in that country. Cash soybeans were steady in the US Midwest on Monday.

WHEAT futures in Chicago (CBOT) also closed mixed on Monday. September 2011 futures finished 5.25/bu lower at $6.894/bu. The December 2011 contract closed at $6.182/bu; off 5.25/bu and 55.75/bu lower than a week ago.

Wheat futures were pressured by the same influences affecting corn and soybeans; a strong US dollar and uncertainty over the US budget in Washington.

Trading volume was light. Weather was a market influencer on late-planted spring wheat. USDA put wheat-inspected-for-export at 18.73 mi bu vs. expectations for 21-25 mi bu.

Global crops look good right now and stocks are seen as recovering. Wheat prices may be under more downward pressure. It would be worth considering pricing up to 25 per cent of the 2012 crop.

Further Reading

- You can view the full report by clicking here.