21 March 2007

5 minute read

North America

LIVE CATTLE in Chicago on the Chicago Mercantile Exchange (CME) finished higher on Monday. APR’07LC futures closed at $97.80/cwt, up $0.700/cwt but $4.225/cwt lower than last week at this time. Support in this contract is now at $96.225/cwt. Just think, this contract set three-year highs last week. This uptick didn’t last the expected two weeks. The JUNE’07LC closed up $0.575/cwt at $94.850/cwt, over $3.50/cwt lower than last Monday. Live cattle closed higher on short covering after losing lots of steam on Friday on technical trading. Cash markets late last week were disappointing fueling price declines. Futures rebounded on Monday amid technical corrections with the JUNE’07LC contract holding above the 40-day moving average. Spreading accounted for most of the volume as funds started rolling April positions. Last week’s selling is seen as a possible high point with cash cattle down in most places. USDA placed the choice beef cutout at $163.83/cwt, off $0.36/cwt. The choice beef cutout reached a high of $167.53/cwt last Wednesday not seen since Nov. 18, 2003. The setbacks in wholesale beef cut into packer margins. According to HedgersEdge.com, the average beef plant margin for Monday was estimated at $6.25/head, down $12.85/head from last Friday and off $9.10/head lower than a week ago at this time. Cash sellers should sell cattle as soon as they are ready amid prospects for lower cash cattle this week. Be ready to price more feed inputs within the next few days.

FEEDER CATTLE at the CME finished higher on Monday. The MAR’07FC contract finished at $106.525/cwt, up $0.300/cwt and $0.650cwt higher than last Monday. The APR’07FC contract closed up $0.475/cwt at $107.925/cwt and $0.800/cwt higher than last week at this time. Upward price movement was aided by early fund buying, a firm cash market, and lower CBOT corn futures. Cash feeders have been making a stronger-than-expected showing for a while now. Instead of the usual February decline, prices have held pretty firm. The latest CME Feeder Cattle Index for March 16 was placed at $105.12/cwt, up $1.15/cwt. Cash sellers should think about selling feeder cattle when they are ready in order to take advantage of these good prices. As with live cattle feeders, be ready to price more feed inputs within the next few days.

CORN on the Chicago Board of Trade (CBOT) closed mostly up on Monday with the exception of the two nearby contracts. The MAY’07 contract finished at $3.98/bu, off 1.4¢/bu. The DEC’07 contract finished at $4.060/bu, up 3.0¢/bu and 3.4¢/bu higher than last Monday’s close. DEC’08 futures finished up 8.2¢/bu at $3.934/bu and 7.0¢/bu higher than this time last week. The market lacked follow-through support from last Friday. Unwinding bear spreads pressured the May contract amid prospects for wet weather in the corn belt seen as slowing corn seedings. Trade volume was lack luster. USDA put weekly export inspections for U.S. corn at 40.8 million bu, just over expectations of between 35-40 million bu. The Argentina corn harvest is almost 12% complete now but rains there are slowing harvest progress. I will be in Argentina next week and will try and give somewhat of a different report than usually appears in this column then. In other export news, South Korea and Japan are seen as wanting to buy corn for June and July shipments with Japan expected to seek the smaller amount. Cash corn in the Midwest early on Monday was slow. Mid-Atlantic corn bids were bumped early Monday trying to entice more cash corn to come in to elevators. Friday’s CFTC Commitment of Traders report had large speculators slashing net long positions in corn by about 30,000 contracts to 240,629 lots. Index funds trimmed net long positions to 361,044 contracts. News of President Bush’s announced commitment to trade more ethanol with South America has the corn markets jittery. If trade barriers are lifted and processor incentives lowered, corn may lose some of its luster in the coming days. Crude oil futures slid over the weekend. If this continues corn priced last week and the week before will look really good. Hedgers on short positions in DEC’07 corn in the $3.90/bu range should be smiling. This market still shows signs of losing steam, at least through late March and early April, on declining crude prices, increasing crop acres, and now shaky ethanol support from the U.S. government. Cash sellers should consider pricing up to 40% of next year’s production at this time.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed higher on Monday. The MAY’07 contract finished at $7.594/bu, up 6.0¢/bu. NOV’07 futures also closed up 9.4¢/bu at $8.030/bu and 22.6¢/bu higher than a week ago. The vernacular statement circulating soybeans is that, “soybeans are trying to buy acres from corn ahead of the USDA March 30 report.” USDA placed weekly export inspections at a lack-luster 21.2 million bu, on the low end of trade expectations of 20-25 million bu. South Korea was noted as making it known it wanted beans earlier than usual because it expects U.S. soybeans to cost more. Rain is slowing field prep in the U.S., as well as harvest in Brazil. Brazil’s harvest was placed at 42% of the crop as of March 16, compared to 31% the week before. Yield reports from Argentina are showing high yields there despite harvest delays due to rain. Cash soybeans were mostly steady in the U.S. Midwest and firm to higher in the Mid-Atlantic on Monday. The CFTC Commitment of Traders report for Friday had large speculators growing net long positions to 64,114 contracts s as of March 13. Similarly, index funds grew net long positions to 135,695 lots. Producers should consider having at least 60% of the 2007 crop priced. These prices should hold or get a little better prior to March 30.

WHEAT futures in Chicago (CBOT) were off on Monday with the MAY’07 contract closing at $4.550/bu, off 5.6¢/bu and 5.0¢/bu lower than this time last week. JULY’07 wheat futures finished down 4.0¢/bu at $4.700/bu and 13.2¢/bu lower than last Monday. Trading volume was thin on the day and pressured by long liquidation in the corn market. USDA reported disappointing export numbers at 13.5 million bu, below trade estimates for 15-20 million bu. Good wheat weather in the U.S. Plains weighed on prices. Cash bids for Mid-Atlantic State sellers were firm to higher on Monday. The CFTC Commitment of Traders report for last Friday showed large speculators widening net short positions in CBOT wheat to 13,335 contracts for March 13. Index funds cut net long positions to 192,701 lots. Producers should now consider pricing between 60%-80% of the ‘07 crop. Hedgers should consider short positions in the JULY/07 contract near $4.605/bu to get orders filled.

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