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Weekly Roberts Market Report

by 5m Editor
1 February 2012, at 7:00am

US - It would be a good idea for corn producers to consider pricing a portion of the 2012 corn crop at this time, writes Michael T. Roberts.

LEAN HOGS on the CME finished lower on Monday. The FEB’12LH contract closed at $86.450/cwt; off $0.225/cwt and $0.25/cwt lower than last report. MAY’12LH futures closed at $96.025/cwt; up $0.150/cwt and $0.225/cwt lower than a week ago. AUG’12LH futures finished down $0.175/cwt but $0.325/cwt higher than last Monday at $97.025/cwt. Wholesale markets reflecting slack demand continued to pressure prices. Pork processors, much like beef packers continue to face dauntingly negative margins on sluggish domestic demand. Several processors interviewed last week said they plan to trim slaughter numbers again this week. USDA put Monday’s slaughter at 406,000 head, down 21,000 head from a week ago but 25,000 head over this time last year. USDA put pork carcass cutout at $83.26/cwt; down $0.03/cwt from Friday and $2.335/cwt lower than a week ago. Cash hog prices were steady-to-weak with cash prices ranging from $59-$62/cwt on a live basis. According to HedgersEdge.com, the average packer margin was placed at a negative $7.45/head based on the average buy of $62.45/cwt vs. the breakeven of $59.74/cwt. Late Monday the CME lean hog index was placed at $87.71; up $0.36 and $2.32 over last Monday.

CORN futures on the Chicago Board of Trade (CBOT) finished down on Monday. MAR’12 futures closed at $6.316/bu; down 10.0¢/bu but 11.75¢/bu over this time last week. The DEC’12 contract closed at $5.646/bu; off 6.25¢/bu but 8.5¢/bu higher than a week ago. Short covering, profit taking, a higher US dollar, improved weather in South America, and lower-than-expected exports weighed on corn prices. The dollar rose against the euro indicating a bearish signal for US grains. Crop-friendly rainfall is expected this week through all of Argentina and also Brazil. Several sources polled indicate bearish feelings that US corn prices may fall by as much as 15% by the end of the year. Much will depend upon the next key USDA expected plantings report. Exports were bearish for US corn. Late Monday USDA put corn-inspected-for-export at 22.690 mi bu vs. estimates for 29-33 mi bu. In addition, economic sanctions on Iran are holding up grain movements in the area increasing transportation costs. Iranian assets are frozen so cargoes will not be unloaded until someone agrees to pay for the grain. A recent graph by ERS shows that the US is still the world’s largest corn exporter. See below:

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The MAR’12 contract closed at $11.852/bu; down 33.75¢/bu and 32.25¢/bu lower than a week ago. NOV’12 futures closed at $11.944/bu; down 27.75¢/bu and 13.0¢/bu off from last report. Better crop weather in South America and a stronger US dollar weighed on prices. Exports were supportive. USDA put soybeans-inspected-for-export at 41.503 mi bu vs. estimates for 24-32 mi bu. One interesting development in soybean exports from Argentina allowed increased exports from that country. Port authorities in Argentina’s Rosario grains hub dislodged a vessel that ran aground earlier this month, and all delayed ships have been able to get going with their grain cargoes. This will most likely create pressure on US exports as importers meet needs with cheaper soybeans. Argentina is one of the world’s top suppliers of soybeans and soybean by-products. It might be a good idea to price a good portion of the 2012 crop at this time.

WHEAT futures in Chicago (CBOT) were down on Monday. The MAR’12 contract closed at $6.446/bu; down 2.5¢/bu but 25.0¢/bu higher than last report. JULY’12 wheat futures finished at $6.712/bu; off 3.5¢/bu but 17¢/bu lower than last week at this time. Prices were pressured on news from the USDA attaché in Australia report that wheat production in that country continues to increase. In the past the Australian wheat crop has been damaged by wet weather reducing wheat acceptable for export. Year-on-year production of wheat, barley, and sorghum has yielded back-to-back record wheat crops and are projected to support another banner year. See graph below:

Production declines in Europe on bitter cold temperatures are price supportive. Exports were somewhat supportive with USDA placing wheat-inspected-for-export at 18.655 mi bu vs. estimates for 15-19 mi bu. Wheat producers should not feel pressured to price the 2012 wheat crop at this time.

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