9 July 2008

4 minute read

North America

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed down Monday. The AUG’08LC contract closed at $102.300/cwt, off $1.500cwt but $1.700/cwt higher than last Monday’s close. OCT’08LC futures were down $1.8505/cwt at $109.675/cwt but $6.250/cwt higher than a week ago. Profit taking by funds, lower grain and soybeans, lower crude oil, and a stronger U.S. dollar weighed on prices. However, higher cash cattle were supportive. USDA’s 5-area price for Monday, July 7 was $101.18/cwt - $101.39/cwt; between $3-$3.50/cwt higher than a week ago. Packer demand was supportive as USDA put the choice boxed beef cutout at $172.42/cwt, up $0.84/cwt. According to HedgersEdge.com on Monday, the average packer margin was estimated at a positive $80.45/head based on an average buy of $98.960/cwt vs. a breakeven of $105.220/cwt. The Nebraska beef expansion of its voluntary beef recall of over 5 mi pounds of ground beef is expected to have a negative impact on prices. Cash sellers should consider selling cattle as soon as they are ready.

FEEDER CATTLE at the CME closed moderately lower on Monday. AUG’08FC futures were off $0.550/cwt at $111.025/cwt; up $0.030/cwt from last Monday. The SEPT’08 contract finished the day at $112.725/cwt, off $0.475/cwt and $0.825/cwt lower than a week ago. Feeders, influenced by live cattle, gave up gains made early on. October/September and September/August spreading took place on the day. Cash feeders were steady to $1/cwt higher last Friday in Oklahoma City. The latest CME Feeder Cattle index for July 2 was placed at $109.100/cwt, up $0.23/cwt. It is a good idea to keep feeder pricing current.

CORN on the Chicago Board of Trade (CBOT) finished limit down again on Monday with the exception of the JULY’08 contract. Falling corn prices were a result of long liquidation, minor profit taking, and forecasts for better weather in the Corn Belt. The JULY’08 contract finished at $7.164/bu, off 29.4¢/bu and 8.2¢/bu lower than last Monday. The DEC’08 contract closed at $7.470/bu, off 30.0¢/bu and 10.0¢/bu lower than this time last week. Sinking crude oil prices and a strengthening U.S. dollar also pressured prices. As huge fund positions sink due to falling crude oil they balance risk by taking money out of grain and livestock futures. This need to balance the portfolios of all those teachers, state employees, and mutual fund investors influences the flow of money into and out of commodity futures. Also putting corn prices on the defensive was the passage of House bill H.R. 6377 which directs the CFTC to “use all authority, including emergency powers, immediately to curb the role of excessive speculation in the energy and swaps futures markets and take other corrective actions as necessary to eliminate any market disturbance that prevents energy markets from accurately reflecting the forces of supply and demand.” If this bill becomes law, funds may be forced to get out of large energy market positions triggering a ripple effect downward in agriculture commodity markets as they liquidate. Late Monday USDA put the U.S. corn crop at 62% good-to-excellent condition vs. trade expectations for between 63%-65%. USDA placed corn-inspected-for-export at 32.422 mi bu vs. estimates for between 30-35 mi bu. The Mississippi river opened to limited barge traffic on Monday after flood waters continued to recede. This helped river bids for cash corn. Cash corn in the U.S. Mid-Atlantic states were 1.0¢/bu – 3.0¢/bu lower. Hopefully up to 60% of the ’08 crop has been priced. Trading will most likely remain very volatile.

SOYBEAN futures on the Chicago Board of Trade (CBOT) fell on Monday amid profit taking and long liquidation despite news that Argentinean farmers may continue their strike because of high export taxes. The JULY’08 contract finished at $15.890/bu, down 69.0¢/bu from last Friday’s close and 16.0¢/bu lower than a week ago. NOV’08 soybean futures closed at $15.610/bu, off the limit 70.0¢/bu from Friday’s close but only 13.0¢/bu cents lower than last Monday. USDA placed the U.S. soybean crop at 59% good-to-excellent vs. 65% this time last year. Also on Monday USDA put U.S. soybeans-inspected-for-export at 9.095 mi bu vs. expectations for between 8 – 12 mi bu. Cash soybeans bids were steady along the river while 10.0¢/bu – 12.0¢/bu weaker in the U.S. Mid-Atlantic states. Hopefully 60% of the ’08 crop priced has been priced.

WHEAT futures in Chicago (CBOT) closed down on Monday on harvest pressure and weakness in soybeans and corn. The JULY’08 contract closed at $8.220/bu, off 50.6¢/bu and 21.4¢/bu lower than last Monday. JULY’09 wheat futures closed off 47.4¢/bu at $9.020/bu and 20.0¢/bu lower than this time last week. Looks like the global wheat crop is going to be a good one as harvest figures come in. News of drought in Iraq’s wheat belt was supportive while reports of rain in Argentina were seen as bearish. In export news USDA on Monday placed wheat-inspected-for-export at 18.411 mi bu vs. expectations for between 15-20 mi bu. Pakistan bought 516,000 tonnes (20 mi bu) of optional-origin wheat last week while the market expects that much more to be tendered for this week from there. Iraq tendered for 50,000 tonnes (1.85 mi bu) of any-origin wheat as well. Japan tendered for 128,000 tonnes (4.7 mi bu) of food wheat while South Korea reissued a tender for 19,000 tonnes (698,000 bu) of U.S. wheat. Wheat in Kansas City and Minneapolis fell also. Hopefully the entire 2008 wheat crop has been sold by now.