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Weekly Roberts Market Report

29 August 2012, at 10:02am

US - Corn futures on the Chicago Board of Trade (CBOT) closed down on Monday. The SEPT’12 contract closed at $7.944/bu; down 7.75 ¢ /bu and 20.75.75 ¢ /bu lower than last Monday’s close. The DEC’12 contract closed at $8.006/bu; down 7.75 ¢ /bu and 23.0 ¢ /bu over last report, writes Michael T Roberts.

A stronger U.S. dollar, lower DOW equities, weaker crude oil prices, profit taking, and trader worries on weakening demand amid the livestock and ethanol sectors weighed on prices. Exports were bearish with USDA putting corn-inspectedfor-export at 14.458 mb vs. estimates for 19-26 mb. This is well below the 37.9 mb needed this week to stay on pace with USDA’s demand projections of 1.55 bb. Next week’s report will need 60.8 mb to catch up on the pace. Please see chart:

Late Monday USDA lowered the U.S. corn crop in good-to-excellent 1% to 22% while raising the percentage of the crop in poor-to-very-poor condition to 52%. The market has factored this in with the U.S. corn crop being at 6% harvested vs. 4% last week and the 2% five-year average. The Pro-Farmer tour continues to show disappointing yield results. The cash corn market was steady-to-weak amid reports of corn movements stopped on account of Hurricane Isaac. The national average basis for cash corn was unchanged from last week at -5.0¢/bu under CBOT September futures.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday. The SEPT’12 contract closed at $17.296/bu; down 7.75 ¢ /bu but 26.0 ¢ /bu. NOV’12 futures closed at $17.186/bu; off 12.75 ¢ /bu and 35.25 ¢ /bu over last report. Profit taking, lower equities, and prospects for moisture that could fill pods pressured prices. Additionally, no fresh export news discouraged upward momentum. Lower-than-expected yield data from the Pro-Farmer tour were supportive. Fundamentally global stocks are stretched by drought-related declines in the U.S. and South America. Demand remains strong for soybeans and soybean products. Exports were steady-to-bullish with USDA putting soybeans-inspectedfor-export at 17.407 mb vs. estimates for 19-27 mb. This is well above the 8.7 mb needed to stay on pace with USDA’s demand projections for 1.35 bb.

USDA put the U.S. soybean crop in good-to-excellent condition at 30% vs. 31% last week. The percentage in poor-to-very-poor was raised 1% to 38%. Soybean basis lost ground Monday amid slow commercial demand and backed up barge traffic. The national average basis for soybeans was lowered 25.0 ¢ /bu from last week at this time to – 7.0 ¢ /bu under CBOT November futures.

WHEAT futures in Chicago (CBOT) closed down on Monday. SEPT’12 wheat futures finished at $8.620/bu; off 5.5 ¢ /bu and 14.5 ¢ /bu lower than last report. The JULY’13 contract closed at $8.492/bu; down 2.75 ¢ /bu and 4.5 ¢ /bu lower than last Monday at this time. The spring wheat crop was 89% harvested as of Sunday, up from 79% from last Monday and up 32% from this time last year. Profit taking and short covering pressured prices. The fact that the U.S. missed out on a key wheat purchase from Egypt and news that India plans to release portions of its wheat reserves was also negative for futures. Futures volume was light and cash trade was slow. Exports were bearish with USDA putting wheat-inspected-forexport at 18.884 mb vs. estimates for 18-24 mb and 24.1 mb needed to stay on pace with USDA’s 1.2 bb needed to meet USDA’s demand projections. Yearly exports are at 232.8 mb; 16% lower than what is 3 needed meet demand projections of 276.9 mb. Dry weather continues in Australia and across the European and former Soviet Union wheat belts. National average basis for Soft Red Winter wheat was lowered 17.0 ¢ /bu cents to -56.0 ¢ /bu vs. September futures; Hard Red winter wheat up 3.0 ¢ /bu from last report to -53.0¢/bu vs. Kansas City September futures; and Hard Spring Wheat at -82.0 ¢ /bu vs. Minneapolis September futures; down 1.0 ¢ /bu from this time last week.

DAIRY CLASS III futures on the Chicago Mercantile Exchange (CME) closed mixed to mostly unchanged on Monday. AUG’12DA futures closed at $17.72/cwt; even with last week’s close but $0.07/cwt over last report. The SEPT’12DA contract closed down $0.02/cwt at $19.08/cwt; but $0.03/cwt higher than a week ago. DEC’12DA futures closed at $19.20.05/cwt; up $0.2110/cwt and $0.18/cwt higher than last week at this time. School milk demand and nearly unchanged milk production were supportive. High cull rates continue amid high feed costs and good beef prices. Seasonal demand during the holidays could further support prices. It has been reported that milk plants are offering incentives to encourage milk production but are getting few takers. Cheese and butter prices are stable. Class III futures were: 3 months out = $18.92/cwt ($0.96/cwt lower than last report); 6 months out = $19.44/cwt ($0.14/cwt higher than a week ago); 9 months out = $19.35/cwt ($0.48/cwt higher than last Monday); and 12 months out = $19.20/cwt ($0.40/cwt over last report). This week variable cost of production for the average North Carolina conventional 200 cow dairy with a 23,000 lb average is $24.21/cwt; $0.48/cwt higher than last report.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday. The AUG’12LC contract closed at $118.400/cwt; down $1.475/cwt and $2.950/cwt under last report. DEC’12LC futures closed at $127.250/cwt; off $0.625/cwt and $1.025/cwt lower than this time last week. APR’13LC futures closed at $135.975/cwt; down $0.425/cwt but $0.275/cwt over last report. The August contract will expire on Friday. The seasonal trend in slower demand and recent influx of cattle for bid have pressured prices lower. Profit taking and chart selling were also noted. Retailers are through buying for the upcoming Labor Day holiday. Late Monday USDA put boxed-beef prices at $191.98/cwt; down $0.16/cwt and $1.87/cwt lower than last report. Cash cattle on Monday were mostly flat in thin trade. On Monday USDA put the 5-area weekly steer average at $120.34/cwt; $0.18/cwt under last report. Please see graph:

Fundamentally, tighter supplies of slaughter-ready animals are expected through the fall and winter months following herd reductions in the southwest a year ago during the severe drought. Additional 4 cutbacks in breeding animals are expected this year due to the worst drought in the central U.S. and Midwest in decades. That could lead to tighter beef supplies for the second half of 2013 and all of 2014. Processor margins are still healthy. According to HedgersEdge.com, the average packer margin was lowered $17.60/head to a positive $32.35/head based on the average buy of $120.48/cwt vs. the breakeven of $122.51/cwt.

FEEDER CATTLE at the CME finished lower on Monday with the exception of the January 2013 contract. The AUG’12FC contract closed $0.225/cwt lower at $140.275/cwt; $0.375/cwt lower than last report. NOV’12FC futures closed at $145.500/cwt; off $0.150/cwt but $0.550/cwt higher than a week ago. The January contract was a feature of bull spreading. Short-covering and near-term profit taking weighed on prices. For Monday 8.27.12; estimated receipts at the closely watched Oklahoma City market were put at 6,000 head vs. last week’s 6,174 head and 5,580 head this time last year. The Oklahoma National Stockyards will be closed next Monday for Labor Day. Compared to last week heavier feeder steers (over 750 lbs) and heifers over 700 lbs were steady-to-$2 higher. Steer and heifer calves were $3-$5 higher. Demand was extremely good for light weight feeder cattle as numbers of these are expected to be limited going into the final quarter of the year. Demand was very good for calves as more rain made spring pastures green up somewhat. Quality was plain to average.

The CME feeder cattle livestock index was placed at 139.94; down 0.22 and 0.26 lower than last report. Please see chart:

LEAN HOGS on the CME finished up on Monday. OCT’12LH futures finished $0.875/cwt higher at $73.250/cwt but $2.65/cwt over last report. The DEC’12LH contract closed at $71.050/cwt; up $0.475/cwt but $2.550/cwt under last report. Chart strength, the wide discount to cash prices, and lower corn costs encouraged the bulls. Corn losses and the belief among traders that the U.S. hog herd growth is on hold encouraged prices. Cash hogs were weaker-to-$1.50/cwt lower. In the not too distant past USDA has reported some groups of early weaned pigs weighing 10-12 lbs selling for as low as $1/hd. Last week the average price for negotiated sales in the eastern Corn Belt was $8.36/hd compared to $30.05/hd a year ago. Cash hogs at the terminal markets traded flat-to-$5.50/cwt lower on a live basis with tops from $51- $57/cwt. Monday USDA put the lean-hog-carcass cutout price at $84.72/cwt; down $1.60/cwt and $6.93/cwt lower than a week ago. According to HedgersEdge.com, the average packer margin was lowered $0.50/hd to a positive $4.75/head based on the average buy of $60.22/cwt vs. the breakeven of $62.00/cwt. The CME Lean Hog index for Monday; 8.27.12 was estimated at 85.77; up 0.93 but 4.60 lower than a week ago.