5 November 2008

4 minute read

North America

Grain and wheat markets may be showing a bottom.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were up Monday except for the February contract. The DEC’08LC contract closed at $93.325/cwt up $0.625/cwt and $4.550/cwt higher than last Monday. FEB’09LC futures closed down $0.10/cwt at $94.150/cwt. Packer buying and shorter numbers of ready-cattle are expected to push sales later this week. This and short covering were supportive while December/February spreading limited gains. USDA put the 5-area price at $90.45/cwt, up $0.66/cwt over last Monday. USDA on Monday put the Choice Box Beef price at $142.55/cwt, up $0.34/cwt. Packers are expected to trim demand later in the week on weaker margins. According to HedgersEdge.com, the average packer margin was lowered $7.65/head from this time last week to a negative $46.05/head based on the average buy of $90.80/cwt vs. the average breakeven of $87.23/cwt. It might be a very good idea to buy up another 40%-50% of the 2009 feed needs. Corn may be headed up if the financial markets strengthen after the elections.

FEEDER CATTLE at the CME were up on Monday except for the October contract. The NOV’08FC contract finished at $99.700/cwt, up $1.075/cwt and $4.150/cwt higher than this time last week. JAN’09FC futures finished at $99.175/cwt, up $1.25/cwt. Higher live cattle and lower feeder numbers were supportive. Lower feed costs are locked in for a while on lower corn prices. The CME Feeder Cattle Index was placed at $96.06/cwt; up $0.19/cwt from Friday but $1.55/cwt lower than this time last week.

CORN futures on the Chicago Board of Trade (CBOT) were up on Monday. The DEC’08 contract closed at $4.030/bu; up 1.5 ¢ /bu from Friday and 17.75 ¢ /bu higher than a week ago. MAR’09 corn futures closed at $4.206/bu; up 1.5 ¢ /bu but 15.75 ¢ /bu lower than this time last Monday. Short covering by funds advanced prices while lower crude oil and lower than expected exports limited gains. The CFTC’s Commitment of Traders report from last Friday showed funds increasing short positions to net-bear positions for the first time since January 2006. Large speculators increased net-bear positions by 12,500 lots to 19,484 contracts. USDA placed corn-inspected-for-export at 17.245 mi bu vs. expectations for between 25-29 mi bu. In other news, ethanol processor VeraSun Energy Corp filed for bankruptcy protection on Friday. The market has been aware of financial troubles for that company ahead of that announcement so little fundamental impact is expected. More ethanol plants following suit could impact prices later on. Ethanol futures ended lower. Cash corn in the U.S. Midwest was higher amid slow farmer selling. Even lower barge rates weren’t attracting too much business. Cash corn in the U.S. Mid- Atlantic States was up slightly ranging from 1.0 ¢ /bu – 2.0 ¢ /bu higher in most places. It will most likely pay to store what’s not priced.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up slightly on Monday. NOV’08 soybean futures closed at $9.282/bu; up 3.0 ¢ /bu and 35.25 ¢ /bu higher than a week ago. The JAN’09 soybean contract closed at $9.374/bu; up 4.4 ¢ /bu and 40.0 ¢ /bu higher than last Monday. Good export numbers, harvest-delaying weather, and good cash markets were supportive. USDA placed soybeansinspected- for-export at 49.399 mi bu vs. expectations for between 35-40 mi bu. The CFTC’s Commitment of Traders report had large speculators flipping back to net bull positions by 7,641 lots. Large index funds were net buyers of 2,000 contracts. Cash prices in the U.S. Mid-Atlantic states mimicked corn going slightly higher amid slow farmer selling. Wait to price soybeans. Consider storing.

WHEAT futures in Chicago (CBOT) closed up on Monday. The DEC’08 contract closed at $5.620/bu, up 25.75 ¢ /bu and 32.75 ¢ /bu higher than a week ago. JULY’09 wheat futures were up 25.75 ¢ /bu at $6.096/bu and 34.5 ¢ /bu higher than this time last week. Chart based selling and short covering were supportive. Exports were disappointing with USDA reporting wheat-inspected-for-export at 13.243 mi by vs. expectations for between 19-23 mi bu. Rains in Australia were helpful to that country’s crop. Funds bought net + 3,000 contracts. The CFTC Commitment of Traders report had large speculators cutting net bear positions by 1,800 lots to 38,894 contracts. Wheat in Kansas City and Minneapolis were gainers. It might be a good idea to price another 5%-10% of the 2009 crop getting to 30%-40% priced.