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Weekly Roberts Market Report

by 5m Editor
3 August 2011, at 7:17am

US - Commodities erased early gains on Monday (1 August) after disappointing US manufacturing data left investors hanging on a congressional vote they hoped would rescue the US from its debt crisis. Hot dry weather continues to support price volatility, writes Michael Roberts.

LEAN HOGS on the CME finished up on Monday. AUG’11LH futures closed at $103.100/cwt; up $0.325/cwt and $2.175/cwt over last report.

The DEC’11LH contract closed at $89.250/cwt; up $0.725/cwt and $0.450/cwt higher than this time last week.

MAY’12LH futures closed at $96.100/cwt; up $0.450/cwt and $0.90/cwt over last report. Higher hog futures were supported by gains in pork exports and record high cash pork prices. Higher cash markets are predicted for the near term. Through May, China has bought nearly 130.5 mi lbs of US pork compared to 6.55 mi lbs this time last year.

Sharply higher pork prices in China were noted in an essay by a senior state economist and former official with the People’s Bank of China acknowledging government measures may not be able to fully control pork price volatility despite many recent state moves designed to rein in inflation.

Pork exports to top buyer Japan are also up 15 per cent year-to-date through May at 626.64 mi lbs. Additionally, hot weather has slowed hog marketings pushing up prices.

Cash prices in the Iowa/Minnesota market closed Friday at $101.15/cwt; up from $99.55/cwt this time last week.

USDA on Friday put the pork cutout at $104.64/cwt, up $0.46/cwt from Friday and $5.70/cwt higher than a week ago. According to HedgersEdge.com, the average packer margin was raised $4.80/hd from last week to a negative $0.15/head based on the average buy of $75.62/cwt vs. the average breakeven of $75.56/cwt.

The latest CME lean hog index was placed at $101.51; up $1.22 and $5.03 over last report.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. SEPT’11 futures closed at $6.812/bu; up 15.75 ¢ /bu and 2.75 ¢ /bu higher than last Monday.

The DEC’11 contract closed at $6.856/bu; up 11.25 ¢ /bu and 11.25 ¢ /bu higher than last report. Prices appear to be in a sideways trading pattern on nervousness regarding corn yield expectations.

Buying amid position squaring and continued hot weather that could limit US corn crop development supported prices. Despite the downtrend in equities and crude oil in a violent reaction to political indecision involving the US debt problem corn futures made gains.

Continued hot weather this week is expected to continue to stress the US corn crop. Relief is expected by the weekend. Ethanol plants and livestock feeders are competing for the last of the 2010 crop driving cash corn prices higher.

Exports are viewed as neutral to bearish as USDA put corn-inspected –export at 32.02 mi bu vs. expectations for 30-35 mi bu. This is below the 47.3 mi bu needed this week to stay on pace with USDA’s 1.875 bi bu demand projection.

USDA late Monday placed the US corn crop in good-toexcellent condition at 62 per cent; the same as last week but nine per cent lower than this time last year. Volatility and price direction will remain unsettled as long as hot weather patterns continue.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up somewhat on Monday. The AUG’11 contract closed at $13.586/bu; up 4.5 ¢ /bu but 6.75 ¢ /bu lower than a week ago.

NOV’11 soybean futures closed 4.75 ¢ /bu higher at $13.620/bu but 10.0 ¢ /bu lower than a week ago.

Spillover from corn futures and hot weather supported CBOT soybeans. Soybeans remained firm but gains were limited on declining equities and crude oil prices.

Floor sources said the market is still worried about a possible downgrade in the US credit rating. Exports are considered neutral-to-bearish with USDA putting soybeans-inspected-for-export at 5.762 mi bu vs. expectations for five to ten mi bu.

Exports needed 13.3 mi bu this week to stay on USDA’s 1.52 mi bi bu demand projection. Cash soybeans were neutral-to-weaker at country elevators.

South American news shows that Buenos Aires is likely to keep its soybean planted area nearly the same as last year. Brazil’s soybean crop is expected to increase by 0.4 per cent over last year to a record 75.18 mi tonnes (2.76 bi bu). November 2011 chart signals indicate a continued sideways pattern ranging +/- $1.15/bu from $13.472/bu over the last seven months.

WHEAT futures in Chicago (CBOT) closed up on Monday. SEPT’11 futures finished 4.0 ¢ /bu higher at $6.764/bu but 12.0 ¢ /bu lower than a week ago.

The DEC’11 contract closed at $7.206/bu; up 5.0 ¢ /bu but 8.5 ¢ /bu lower than this time last week. JULY’12 wheat futures finished at $7.842/bu; up 11.2 ¢ /bu. The sharp rally near the close of corn futures supported US wheat prices.

USDA placed wheat-inspected-for-2 export at 16.16 mi bu vs. expectations for 20-25 mi bu. US wheat exports are seen as bearish as 21.9 mi bu in exports were needed to stay on pace with USDA’s projection of 1.15 bi bu for the 2011-12 marketing year.

Iran plans to export two mi tonnes (75.488 mi bu) of wheat while Ukraine’s wheat exports were placed at 4.16 mi tonnes (152.86 mi bu) in 2010-11.

So far Ukraine’s wheat yield is estimated at 3.36 tonnes (123.46 bu) per hectare; 304.9 bu/ac. Last year Ukraine averaged 2.8 tonnes (102.88 bu) per hectare or 254.22 bu/ac.

The top Asian wheat importer bought 20 per cent more wheat in June and July. Floor traders say they expect this pace will continue through August. Weather remained supportive.