28 November 2007

6 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed mixed on Monday in light trading action. DEC’07LC futures finished up $0.125/cwt at $96.900/cwt and $1.725/cwt higher than a week ago. The FEB’08LC contract closed at $98.525/cwt, down $0.175/cwt but $1.125/cwt higher than last Monday. Prices were pressured by some hedge selling pressured and concerns over how much higher cattle prices can go amid an abundance of meat protein in the supply chain. Cash prices were mixed on Friday but up from one week earlier. The 5-area price posted by USDA came in right at $95.00/cwt, about $2.25-$2.50 higher than the previous week. USDA raised the choice cutout price by $0.57/cwt from Wednesday to $148.55/cwt. This was $4.48 higher than one week ago. Cash sellers should definitely push market-ready cattle out of the door. It might be a good idea to hold off pricing short term corn supplies.

FEEDER CATTLE contracts at the CME were up on Monday with the exception of the winding down November contract. NOV’07FC futures closed at $108.660/cwt, $0.190/cwt lower than last Friday and dead even with last Monday on minor profit taking. As predicted by indicators last week, the JAN’08FC contract finished at $110.950/cwt, up $0.250/cwt and $2.125/cwt higher than a week ago. The MAR’08FC contract closed at $111.250/cwt, up $0.150/cwt. Gains in live cattle prices and losses in the corn sector were helpful. The latest CME Feeder Cattle Index was placed at $109.14/cwt; up $0.12/cwt. Feeder sellers ought to consider pricing more cattle sales while holding off on pricing more short-term feed needs.

LEAN HOGS on the CME closed mostly lower on Monday except for the December ’07 contract and the April ’08LH which post a small gain. DEC’07LH futures closed even with last Friday at $55.60/cwt but $3.600/cwt higher than last Monday. FEB’08LH futures were off $0.250/cwt at $62.575/cwt but $2.3750/cwt higher than a week ago. Prices sank amid selling due to pressure brought on by the premium of futures to cash. Trading was light. Cash hogs did trade higher on Monday amid sluggish tenders. The latest CME average cash hog price was $49.07/cwt. Pork plant margins were in the black amid huge slaughter levels and good cash prices. USDA estimated Saturday’s kill at 310,000 head and Sunday’s at 18,000. The rare Sunday slaughter was in response to ample supplies. USDA on Friday put the pork carcass cutout value at $59.10/cwt, up $1.02/cwt. According to HedgersEdge.com, the average pork plant margin for Monday was a positive $17.65/head, off $4.70/head from a week ago. Cash sellers should sell market-ready hogs only when ready to maximize carcass prices. It might be a good idea to hold off pricing short-term feed needs.

CORN on the Chicago Board of Trade (CBOT) closed down on Monday. The DEC’07 contract finished at $3.856/bu, off 3.2¢/bu but 8.2¢/bu higher than a week ago. MAR’08 futures finished down 2.4¢/bu at $4.032 but 8.8¢/bu higher than last Monday. The DEC’08 contract finished at $4.311/bu, 1.0¢/bu lower than last close and 10.1¢/bu higher than last week at this time. Profit taking was the play of the day as crude oil and wheat prices sank amid a sluggish soybean market. Before ethanol mandates and this year’s boom in demand, corn was tied more to the price of food than fuel. It is now affected by crude oil prices as well. A weak U.S. dollar also created good demand for U.S. corn amid lower-than-expected export sales. USDA on Monday put the number of bu of corn inspected for export at 47.6 mi bu, below expectations for between 49-56 mi bu. Even lower-than-expected, this is a still a very good pace for U.S. exports. The U.S. corn harvest is mostly complete now so weather watchers are watching events in South America. Cash bids for corn in the U.S. Midwest on Monday were so-so while prices in the U.S. Mid- Atlantic States were steady. The December ’07 corn contract is trading above all key moving averages with support in the 20-day MA at $3.796/bu. The 9-day Relative Strength Index (RSI) finished at 56.73. A contract is said to be overbought at or above an RSI of 70. Resistance is at $3.904/bu. It might be wise to price up to 30% of the ‘08 crop. There is no fresh bullish news for corn at this point.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JAN’08 contract finished at $11.036/bu up 3.4¢/bu and 33.2¢/bu higher than last Monday. NOV’08 soybean futures ended at $10.374/bu, up 4.0¢/bu and 21.0¢/bu higher than a week ago. Prices may have gone higher but for weaker crude oil, a weaker U.S. dollar, and profit taking in early trading. Good export numbers, especially to China, and the bidding war for planting acres next year underpinned the market. USDA placed soybeans inspected for export at 32.238 mi bu vs. estimates of 26-31 mi bu. For the year, 281.9 mi bu were inspected for export, down 17.6% from 342.2 mi bu inspected for export last year by this time. High bean prices have slowed world demand for U.S. soybeans. However, good planting weather in Brazil took some wind of upward price movement. The Brazilian crop was 73% planted as of November 23. The Argentinean crop was 50% planted due to dry conditions. Argentina expects to grow 47 mi tonnes (1.8 bi bu). Cash bids for U.S. Midwestern soybeans were weaker early Monday after Friday’s prices triggered producer selling. Funds bought 3,000 lots. The CFTC Commitment of Traders report for futures and options combined, had bullish funds increasing by 3,694 lots to 152,323 contracts. The ’07 crop is sold. It might be a very good idea to price up to 40% of the ’08 crop.

WHEAT futures in Chicago (CBOT) closed down on Monday amid profit taking and declines in corn and crude oil. DEC’07 wheat futures closed 12.4¢/bu lower at $8.140/bu but 57.8¢/bu higher than a week ago. The JULY’08 contract closed at $7.100/bu, off 3.4¢/bu but 31.0¢/bu higher than last Monday. However, worries about dry weather in the U.S. Plains provided some support. Talk of possible yield losses due to frost in Argentina was helpful as well. After the close, USDA put the U.S. winter wheat crop good-to-excellent condition rating at 44% compared to 53% a year ago. USDA put bu inspected for export at 15.109 mi bu vs. expectations for between 18-24 mi bu. India, which doesn’t usually purchase U.S. wheat, tendered an offer to buy 350,000 tonnes (12.8 mi bu) of wheat. Any purchase of that size will tighten world stocks of wheat. Russian wheat prices have come up in the last week on expectations that the constraints on exports will be lifted soon. Producers should have sold all ’07 wheat stocks by now. It might be a good idea to pricing up to 40% of the ’08 crop at this time. It also might be a good idea to price a small portion of the 2009 and 2010 crops.

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