Weekly Roberts Report

US - Agricultural US Commodity Market Report by Mike Roberts, Commodity Marketing Agent, Virginia Tech.
calendar icon 10 December 2008
clock icon 4 minute read

Michael T. Roberts
Extension Agriculture Economist,
Dairy and Commodity Marketing,
NC State University

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were up on Monday on short covering encouraged by a higher stock market. Traders also said a weaker U.S. dollar was helpful in that it should help exports. The DEC’08LC contract closed at $83.100/cwt; up $1.550/cwt but $2.35/cwt lower than a week ago. FEB’09LC futures closed up $1.225/cwt at $82.675/cwt but 3.05/cwt lower than last Monday. Last week a weaker cash cattle market, negative economic news, and fund liquidation on technical selling and oversold conditions sank prices. USDA on Monday put the Choice Beef Cutout at $143.97/cwt; up $0.82/cwt. Cash cattle on Monday were weaker as USDA put the 5-area price at $86.24/cwt; $3.58/cwt lower than last Monday. Packers are seen as cutting back on their processing pace due to large negative profit margins. According to HedgersEdge.com, the average packer margin was lowered $65.20/head from last week to a negative $74.95/head based on the average buy of $88.04/cwt vs. the average breakeven of $82.14/cwt. Hopefully short-term feed needs were priced last week as nearby corn lost ground to below $3.00/bu. Corn markets will most likely uptick again on any good financial news.

FEEDER CATTLE at the CME followed live cattle and outside markets up on Monday. JAN’09FC futures finished at $87.900/cwt, up $1.25/cwt from Friday but $1.725/cwt lower than last Monday. The MAR’09FC contract settled at $86.925/cwt; up $1.65/cwt but $2.925/cwt lower than this time last week. The rebound came after the market reached its lowest point in 4 ½ years last Friday. The CME Feeder Cattle Index for December 4 was placed at $91.17/cwt; off $0.70/cwt and the lowest since March 30, 2004. Hopefully short-term feed needs were bought last week.

CORN futures on the Chicago Board of Trade (CBOT) closed up ~ 7 per cent amid technical buying on Monday after easing back from below the $2.934/bu mark posted in the December contract last Friday. On Monday the DEC’08 contract closed at $3.142/bu; up 20.75 ¢ /bu from Friday but 19.0 ¢ /bu lower than last week at this time. MAR’09 corn futures closed at $3.300/bu; up 20.75 ¢ /bu but 19.25 ¢ /bu lower than last Monday. Good news in the U.S. economy regarding bailouts and government intervention buoyed commodities by way of outside markets. Exports were disappointing as USDA placed corn-inspectedfor- export at 21.340 mi bu vs. estimates for between 27-30 mi bu. China announced a plan to keep its annual economy growth rate at an even 8 per cent. This is seen as good news for U.S. corn and soybean exports. In news holding back gains Argentina and Brazilian corn growers got some much needed rain boosting crop prospects. Funds bought 5,000 contracts. Cash corn was firmer in the U.S. Midwest while weaker in the U.S. Mid-Atlantic states ranging 25.0 ¢ /bu– 30.0 ¢ /bu lower in many areas. It should still pay to store waiting to see if support in deferreds gain ground. A put option is still not out of the question.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed up on Monday. The JAN’09 soybean contract closed at $8.204/bu; up 37.0 ¢ /bu but 25.75 ¢ /bu lower than this time last week. MAR’09 soybean futures closed at $8.254/bu; up 38.25 ¢ /bu but 28.75 ¢ /bu lower than last Monday. The price rally came on technical buying via short covering and spillover from outside markets amid anticipation of what the President-Elect’s market intervention policies will look like. Good soybean-growing-weather in South America weighed on prices. USDA placed soybeans-inspected-for-export at 40.633 mi bu vs. expectations for between 35-40 mi bu. China was responsible for buying 29.7 mi of those bushels due to new economic strategies in that country. Cash soybeans in the U.S. Midwest were steady-to-weaker as farmers sold soybeans in a panic after last Friday’s collapse in prices. However, buyers in the U.S. Mid- Atlantic states were betting prices will go lower as cash bids were noted much weaker ranging 27.0 ¢ /bu – 40.0 ¢ /bu lower. Large speculators decreased net-bull positions in CBOT beans as funds were net buyers of over 3,000 contracts. Consider selling stored beans on these up-ticks. A put option is still not out of the question.

WHEAT futures in Chicago (CBOT) were up on Monday even though global fundamentals remain bearish. The DEC’08 contract closed at $4.730/bu; up 15.25 ¢ /bu but 36.75 ¢ /bu lower than this time last week. JULY’09 wheat futures were up 15.25 ¢ /bu at $5.166/bu but 38.0 ¢ /bu lower than two weeks ago. Gains in other commodities, higher hopes for the U.S. economy, and Australian weather concerns were supportive. Heavy global stocks, lower-than-expected exports, and acceptable weather in the U.S. Plains weighed on prices. USDA placed wheat-inspected-for-export at 12.577 mi bu vs. 15-20 mi bu. The Ukrainian and Argentinean wheat harvests are reported shorter than expected. Large speculators increased net bear positions while funds bought 2,000 lots on the day. How much this market will rebound will depend upon outside market strength. Hopefully 30 per cent-40 per cent of the new crop has been priced on previous advice. It is a good idea to price another 10 per cent of the ’09 crop on these upticks.

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