Weekly Roberts Agricultural Commodity Market Report
Mike Roberts Commodity Marketing Agent Virginia Tech
July 1, 2008
CORN on the Chicago Board of Trade (CBOT) finished limit down on Monday in response to a larger-than-expected USDA acreage report. As a result, CBOT corn futures limits will expand to 45.0¢/bu for Tuesday’s trading. The JULY’08 contract finished at $7.246/bu, off 30.0¢/bu but 92.2¢/bu higher than two weeks ago. The DEC’08 contract closed at $7.570/bu, off 30.0¢/bu and 8.0¢/bu lower than Monday before last. USDA’s acreage report was bearish for corn. The report showed that U.S. farmers expected to harvest nearly 78.9 mi ac of corn from 87.3 mi planted acres, off 9% from last year but still the second largest harvest on record since 1944. USDA March estimates for corn seedings were 86.014 mi acres. Big difference! These figures will most likely undergo some adjustment because the survey was taken during the first two weeks of June before most of the flooding in the Midwest. USDA said it intends to resurvey over 9,000 affected producers during the middle of July to allow time for flooded fields to dry somewhat (if no more rain falls) and so producers can more fully take stock of their situation and remaining cropping options. This will give a better picture of the corn situation. In addition, it was announced today that NASS will increase the number of corn and soybean fields selected for objective field measurements. This will allow the NASS August 12 Crop Production report to contain more accurate measurements of corn and soybean yield and production. Even though corn futures were limit down, believe it or not soaring outside crude oil markets and speculative influences that did not believe the USDA report was reflective of the impact of the worst flooding in 15 years were supportive. After trading ceased on Monday, USDA put the U.S. corn crop at 61% good-to-excellent condition, up from 59% last week. USDA placed corn crop silking 6% behind the 5-year average pace of 9%. Funds sold 10,000 lots! Volume for Monday was estimated at 302,156 futures and 105,222 options. CFTC trade data issued late last Friday had large speculators cutting net bull positions for the week ended June 24. It is still a good idea to have up to 60% of the ’08 crop priced and speculate with the rest of the crop. After this bearish news there is still plenty of upside potential. Trading will most likely be very volatile as the market waits to see if the U.S. corn crop will be cut short in the next USDA post-flood assessment.
SOYBEAN futures on the Chicago Board of Trade (CBOT) surged upward on Monday based on fears that soybean stocks will fall to near record lows on USDA’s harvested acreage forecasts. USDA reported on Monday U.S. farmers expected to harvest more than 72 mi ac vs. 74.5 mi ac planted. This is the third largest on record and up 17% from last year. Keep in mind the USDA reassessment that will take place the middle of July as stated earlier in the corn section. The JULY’08 contract finished at $16.050/bu, up 23.4¢/bu from last week and 71.0¢/bu more than two weeks ago. NOV’08 soybean futures closed at $15.74/bu, up 14.4¢/bu. Even though planted acres were up, the USDA report shows stocks at 663 mi bu vs. 676 mi bu published in the June 1 report and 429 mi bu on hand one year ago. End-of-quarter positioning by large commodity funds were also supportive. Late on Monday USDA reported the U.S. soybean crop 58% in good-to-excellent condition. The market expected and received a 2% rating improvement. Volume was heavy at times with an estimated 168,250 futures and 23,186 options registered in trading. CFTC Commitment of Traders report last Friday had large speculators decreasing net bull positions in soybeans while expanding net bull positions in both soyoil and soybean meal for the week ended June 24. This action was supported by surging crude oil prices. Having up to 60% of the ’08 crop priced is still a good idea. Looks like higher soybean prices are in the offing for both the 2008 and 2009 crop. However, if the USDA survey work of July shows the soybean crop in better condition look for profit taking and lower soybean prices.
WHEAT futures in Chicago (CBOT) closed down on Monday on news of better global supplies. The JULY’08 contract closed at $8.434/bu, off 52.0¢/bu and 33.0¢/bu lower than Monday before last. JULY’09 wheat futures closed off 47.6¢/bu at $9.220/bu and 28.4¢/bu lower than two weeks ago. USDA ending stocks figures were bearish placed at 306 mi bu vs. trade estimates for between 254-261 mi bu. Also weighing on the market were harvest pressure and plunging corn prices. Late Monday Egypt issued a quick tender for 55,000 – 60,000 tonnes (2.0-2.2 mi bu) for shipment in late July or early August. Jordan placed a tender for 100,000 tonnes (3.7 mi bu) while Bangladesh tendered for 100,000 tonnes (3.7 mi bu) as well. This improved export demand for U.S. wheat is expected to be supportive on Tuesday. Also late on Monday USDA placed the U.S. winter wheat crop at 36% harvested vs. 22% a week ago while still lagging behind the 48% 5-year harvest average for this time of year. Wet weather is blamed for the delay. Meanwhile, USDA placed the U.S. spring wheat crop in 74% good-to-excellent condition; up 2% from the previous rating last week. Funds sold net 4,000 CBOT wheat futures amid an estimated CBOT volume of 92,023 futures and 11,367 options. The CFTC Commitment of Traders report supplement of last Friday had large speculators decreasing net bear positions in CBOT wheat by 2,800 contracts to 23,304 lots for the week ended June 24. Hopefully the entire 2008 wheat crop has been sold by now. It is a good idea to price up to 20% of the 2009 crop.
LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) were off on Monday. The JUNE’08LC contract expired at noon. The AUG’08LC contract closed at $100.600/cwt, off $0.375/cwt. OCT’08LC futures were down $1.675/cwt at $103.425/cwt. Profit taking; end-of-quarter positioning; and lower lean hog prices pressured cattle prices. Cash prices were steady-to-higher amid good packer demand. The USDA 5-area average price was placed at $98.28/cwt vs. $93.18/cwt two weeks ago. Early on Monday USDA placed the choice boxed beef cutout at $168.25/cwt, up $1.39/cwt from Friday. According to HedgersEdge.com the estimated average packer margin was a positive $88.95/hear based on a breakeven of $103.58/cwt vs. the average buy of $96.51/cwt. In export news, USDA said that beef export sales last week came in at 14,700 tonnes to top buyers Mexico, Japan, Russia, and Canada while South Korea is expected to resume imports of U.S. beef amid mild protests by South Korean residents. Cash sellers should consider selling cattle as soon as they are ready. Pricing a portion of corn inputs on these prices breaks is not a bad idea.
FEEDER CATTLE at the CME closed higher on Monday except for the JAN ’09FC contract which closed down $0.10/cwt at $115.500/cwt. AUG’08FC futures were up $0.150/cwt at $111.875/cwt; up $2.225/cwt from week before last. The SEPT’08 contract finished the day at $113.550/cwt, off $0.275/cwt but $2.050/cwt higher than two weeks ago. Feeders were supported by short covering, lower CBOT corn, and premiums of the CME Feeder Cattle Index which was posted at $109.53/cwt, up $0.45/cwt from Friday; $2.160/cwt higher than a week ago. Funds were noted buyers of October futures. It is a good idea to consider pricing feeders and some corn inputs (if needed) at this time.
LEAN HOGS on the CME closed down on Monday. The JULY’08LH contract finished at $71.775/cwt, down $1.425/cwt; $1.120/cwt lower than week before last. The AUG’08LH contract closed at $70.900/cwt, off $1.800/cwt while OCT’08LH futures closed down $2.425/cwt at $69.450/cwt. Packers had plenty of hogs to choose from amid limited demand. Packers were generally thought to have most supplies bought for the short kill week. The average pork plant margin was estimated at a positive $8.20/head vs. $6.10/head last Friday and $6.45/head this time last week, according to HedgersEdge.com. This was calculated on an estimated breakeven of $57.38/cwt vs. the average buy of $52.24/cwt. Late Monday USDA put the pork cutout at $78.81/cwt, off $0.99/cwt from Friday. Weighing on the market were lower cash prices and last Friday’s bearish USDA report showing the U.S. hog herd at 106% of a year ago vs. trade estimates for around 104-105%. Market hog supply was placed at 107% of last year vs. expectations for 105% while the breeding herd number was decreased to 99% of last year at this time, about what the market expected. The latest CME Lean Hog index was off $0.12/cwt at $76.46/cwt. It is a very good idea to keep hog marketings current while considering pricing some short term corn inputs.
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Remember, when working with futures, risk is involved. Past performance does not indicate a promise of future results.
For comments or questions you may contact Mike Roberts at mrob@vt.edu,
804-733-2686 (work), 804-720-1993 (cell)