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Weekly Roberts Market Report

by 5m Editor
14 September 2011, at 6:49am

US - Following a break last week for Labor Day, this week saw strong corn futures on Monday whilst dairy, soybean and wheat futures are down, writes Michael Roberts.

LEAN HOGS on the CME closed mixed on Monday. OCT’11LH futures closed at $86.675/cwt; down $0.575/cwt. The DEC’11LH contract closed at $82.725/cwt; off $0.850/cwt. MAY’12LH futures closed at $96.800/cwt; up $0.200/cwt. Bulls were sluggish on slow pork movement on steady cash hog prices. The average cash hog price early Monday in Iowa and Southern Minnesota was placed at $83.54/cwt; up $0.14/cwt.

Profit taking on recent gains, higher corn prices, and pressure from outside markets weighed on nearbys. Good packer margins are encouraging higher slaughter rates. Some traders expect up to 2.2 mi head will be processed this week vs. 2.170 mi head a year ago. Late Monday USDA put the pork cutout at $94.28/cwt, up $0.05/cwt. According to HedgersEdge.com, the average packer margin was raised $9.90/hd from last report to a positive $15.75/head based on the average buy of $61.88/cwt vs. the average breakeven of $67.86/cwt. The latest CME lean hog index was placed at $87.08; down $0.57.

CORN futures on the Chicago Board of Trade (CBOT) closed up on Monday. SEPT’11 futures closed at $7.342/bu; up 8.25¢/bu. The DEC’11 contract closed at $7.454/bu; up 9.0¢/bu.

Commercial buying on lower prices and USDA’s September crop report released Monday were supportive. USDA cut its harvest outlook for the second straight month on weather related concerns. USDA put 2011 US corn production at 12.497 bi bu, 22 mi bu lower than expected and 395 mi bu lower than the August report.

USDA put 2010/11 old-crop ending stocks at 920 mi bu; 35 mi bu lower than estimates. 2011/12 ending stocks were placed at 672 mi bu. USDA lowered corn yield while keeping harvested acres the same as last report.

Corn was supported by spreading with traders buying corn and selling soybeans or wheat. Funds bought 9,000 corn contracts and sold net 9,000 soybean and 2,000 wheat contracts. High US corn weakened exports with USDA putting corn-inspected-for-export at 16.542 mi bu vs. expectations for 22-27 mi bu. Corn-for-ethanol demand remained sharp amid positive margins for biofuel producers.

Prices will limit use in the coming weeks. Economists are now predicting food prices will be increasing next year due to the 2011 summer that was unseasonably hot. Corn producers should consider pricing up to 50 per cent of the 2011/12 crop. End users should price near-to-intermediate grain needs due to upside potential in corn price.

SOYBEAN futures on the Chicago Board of Trade (CBOT) fell on Monday. The SEP’11 contract closed at $13.674 /bu; down 29.0¢/bu. NOV’11 soybean futures closed 30.75¢/bu lower at $13.960/bu. The MAR’12 contract closed at $14.130/bu; off 29.5¢/bu.

Monday’s USDA report raised its US crop production outlook on increased yield expectations despite forecasts for a smaller crop due to hot, dry weather. USDA increased production 29 mi bu to 3.085 bi bu. Ending stocks were increased 10 mi bu to 165 mi bu. Larger global supplies, sluggish US exports, and poor external financial market prospects over European debt issues weighed on prices.

Export influence this week is positive with USDA putting soybeans-inspected-for-export at 11.757 mi bu vs. expectations for seven to 11 mi bu. China cut its US soybean imports by 15.7 per cent since July 2011.

Unwinding of long-soybean / short-corn inter-market spreads weighed on prices. South American soybean prices decreased over 3.3 per cent on world economic woes. It looks like storing soybeans won’t pay at the moment due to the carry. However, soybean producers should not be too eager to price their soybeans. Soybean users should consider pricing up to three months use at this time.

WHEAT futures in Chicago (CBOT) finished down some on Monday. SEPT’11 futures finished 1.25¢/bu lower at $6.996/bu. The DEC’11 contract closed at $7.272/bu; down 2.5¢/bu. JULY’12 wheat futures finished at $7.864/bu; off 3.0¢/bu.

Wheat fell again to a one-month low on USDA’s forecast for a large increase in US and global ending stocks. Session losses were limited on corn gains near closing. USDA raised its outlook three per cent from August due to increased output estimates for Canada, Europe, and the Ukraine US export predictions were decreased due to increased global competition.

USDA on Monday raised its estimate for 2011/12 US ending stocks by 90 mi bu (13 per cent) to 761 mi vs. expectations for 663 mi bu. Exports were bearish with USDA putting wheat-inspected-for-export at 15.716 mi bu vs. expectations for 18-23 mi bu. Wheat prices were also supported by spillover strength from CBOT corn and hoped-for-increases in domestic consumption. Livestock producers seem to be turning more to wheat for feed due to high corn prices. Wheat producers should consider pricing up to 40 per cent of the 2012 crop. End users should think about pricing only near-term needs.

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