CORN on the Chicago Board of Trade (CBOT) closed down on Monday amid mild profit taking, falling crude oil, and a stronger dollar.  The DEC’07 contract finished at $3.790/bu, off 7.6¢/bu but 3.8¢/bu higher than last Monday.  MAR’08 futures finished down 8.0¢/bu at $3.960 but 2.0¢/bu higher than a week ago.  The DEC’08 contract finished at $4.244/bu, 7.0¢/bu lower than last close and 0.8¢/bu lower than last week at this time.  Last Friday, in its World Agriculture Supply Demand Estimates (WASDE) report, USDA lowered U.S. corn ending stocks for the 07/08 crop to 100 mi bu due to lower production offsetting reduced feed and residual use.  Corn feed and residual use was lowered 50 mi bu.  Production forecasts were lowered 150 million bu to 13.2 mi bu on lower yields.  The season average farm price was raised 30.0¢/bu on both ends of the range to $3.20-$3.80/bu due to strong cash prices despite a record crop year.  This news has been fully factored into the market now.  Corn is competing against soybeans for next year’s acres as harvest winds down and producers start thinking about what to plant next year.  Cash corn was mostly steady in the U.S. Midwest while corn bids in the U.S. Mid-Atlantic States were slightly weaker amid good farmer selling.  Funds sold 5,000 contracts on Monday amid a backdrop of huge long positions in corn by large speculators (funds).  This has left the market very fragile to sharp setbacks amid expected profit taking as funds continue to add to bullish positions because of strong fundamentals in place despite the record U.S. corn crop.  The CFTC Commitment of Traders report for Friday as of last Tuesday shower bullish funds increasing long positions by 32,891 lots to 245,409 contracts.  Funds in short positions were down 544 contracts to 86,385 lots.  It might be a good time to price up to 70% of the ’07 corn crop while pricing up to 30% of the ‘08 crop.   The market may suffer sharp declines due to fund selling ... or … it may not.  This market is still very volatile.

SOYBEAN futures on the Chicago Board of Trade (CBOT) closed down on Monday amid bulls taking profits, sliding crude, and a stronger dollar.  Soybeans and corn are neck and neck in a competition for acres next spring!  NOV’07 futures closed at $10.326/bu, off 10.2¢/bu from Friday but 27.0¢/bu higher than a week ago.  The JAN’08 contract finished at $10.462/bu off 9.6¢/bu but 25.2¢/bu higher than last Monday.  NOV’08 soybean futures ended at $9.820/bu, down 6.6¢/bu.  USDA lowered U.S. soybean production by 4 mi bu to 2.594 bi bu on a 41.3 bu/acre yield.  Ending stocks were estimated at 210 mi bu, down 5 mi bu from last month.  Soybean prices for the ‘07/’08 crop were raised 65.0¢/bu on both ends of the range to $8.50-$9.50/bu due to decidedly higher cash and futures prices.  Good harvest weather is expected to continue which may further pressure prices.  Cash soybeans in the U.S. Midwest were steady to firm in early buying Monday while starting bids for soybeans in the U.S. Mid-Atlantic States was very strong.  The CFTC Commitment of Traders report had funds expanding net short positions in CBOT soybeans by 10,000 contracts to 125,812 lots as of last Monday.  Further selling may be expected as the 14-day Relative Strength Index (RSI) for November ’07 soybeans closed near overbought status at 63.42.  A contract is considered overbought at or above 70.  The ’07 crop should be sold while considering pricing up to 20% of the ’08 crop.

WHEAT futures in Chicago (CBOT) closed off on Monday influenced by corn and soybeans.  DEC’07 wheat futures closed 1.0¢/bu lower at $7.610/bu and 24.0¢/bu lower than last Monday.  The JULY’08 contract closed at $6.760/bu, down 5.4¢/bu but 5.6¢/bu higher than a week ago.  USDA’s latest WASDE report placed the U.S. wheat supply and use projections mostly unchanged.   Imports were raised 5 mi bu accounting for red spring wheat shipments from Canada.  Ending stocks for the ‘07/’08 crop year were raised 5 mi bu to 312 mi bu due to those imports with all other categories remaining unchanged except for projected season-average farm price.  The price range thinned 10.0¢/bu on both ends to $5.90 - $6.30/bu.  Funds finished up 2,000 contracts.  Spreading was active as funds rolled December positions forward boosting volume to an estimated 107,857 futures and 20,486 options.  Concerns about further dry weather in the southern U.S. Plains underpinned the market.  Traders expected USDA’s crop ratings report to show a decline in the crop on Tuesday, a day later than usual due to the Veteran’s holiday.  In export news, India issued a tender for an unspecified amount of wheat.  However an official with the state-owned MMTC Ltd said the firm is expected to buy 350,000 tonnes (12.9 mi bu).  Russia instituted a 10% export duty meant to contain grain, flour, and bread prices on Monday.  The wheat harvest in Argentina was about 8% complete as of last Friday.  Initial numbers show a good harvest there.  The CFTC Commitment of Traders report had funds increasing net bear positions in CBOT wheat by 4,200 lots to 15,847 contracts.  Producers should have sold all ’07 wheat stocks by now.  It might be a good idea to price more of the ’08 crop at this time because of the overbought status of wheat.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday. DEC’07LC futures finished up $1.125/cwt at $95.850/cwt and $0.500/cwt higher than last week at this time. The FEB’08LC contract closed at $98.750/cwt, up $1.150/cwt. Prices may be starting to work higher due to upcoming holidays and tighter supplies. Futures were supported early by hedge lifting and short covering. Cash, fat cattle were steady near $93/cwt in the Plains. The 5-area price was placed at $91.77/cwt. Packers were paying up for cattle despite negative cutout margins. According to HedgersEdge.com, the average beef plant margin for Monday was around a negative $80.25/head, $3.30/head worse than Friday and $8.10/head worse than last Monday. Processing rates were lower than expected prompting USDA to revise Saturday’s rate downward. USDA estimated Monday’s slaughter at 122,000 head vs. estimates for between 126,000 – 129,000 head. 130,000 head were processed this time last week and 127,000 head this time last year. Boxed beef rose somewhat. USDA put the choice beef boxed beef cutout at $139.34/cwt, up $1.35/cwt. Cash sellers should try to sell on these rallies while packers are willing to pay.

FEEDER CATTLE futures on the Chicago Mercantile Exchange (CME) closed down on Monday.  DEC’07LC futures finished off $0.400/cwt at $95.100/cwt.  The FEB’08LC contract closed at $97.950/cwt, down $0.375/cwt.  Cash cattle sales were disappointing at the end of last week as the market cranked up amid light trade.  Goldman Sachs and other funds rolled about 10,000 contracts on Monday.  Packers were not aggressively buying cattle amid slow slaughter while another month of higher-than-expected placements was noted.  Tumbling lean hogs also proved bearish to cattle.  USDA on Monday put the choice boxed beef cutout at $141.23/cwt, up $1.23/cwt.  Cash sellers should not hurry to sell until packers are willing to pay up.  Hold pricing short term corn supplies but watch for opportunities to do so in the near future.

LEAN HOGS on the CME closed down on.  DEC’07LH futures closed down $1.350/cwt at $52.550/cwt and nearly even with last week.  FEB’08LH futures were down $2.150/cwt at $59.300/cwt.  Fund selling influenced the market lower as sell stops came into play after the run-up last Friday was overdone.  Cash prices remained relatively weak but are not expected to slide this week.  USDA raised its forecast for pork production by 80 mi lbs while holding export expectations the same.  Next year’s production is seen as backing off to 60 mi lbs while exports look like they will come in around 95 mi lbs.  USDA on Friday put the pork carcass cutout at $59.37/cwt, up $0.56/cwt.  The latest CME Lean Hog Index was off $0.79/cwt at $51.41/cwt.  Local traders were unwinding bear spreads while funds continued rolling contracts into the next months.  Cash sellers should sell market-ready hogs only.  Hold off on buying short-term feed supplies.  Look for opportunities to do that over the next few days as corn makes its way through these ups and downs.

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Remember, when working with futures, risk is involved. Past performance does not indicate a promise of future results.

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