Weekly Roberts Agricultural Commodity Market Report

Mike Roberts
Commodity Marketing Agent
Virginia Tech

January 8, 2008

CORN on the Chicago Board of Trade (CBOT) closed down somewhat on Monday. The MAR’08 contract finished off 0.4¢/bu at $4.662/bu. The DEC’08 contract also closed down 0.4¢/bu at $4.856/bu. Deferred months in 2009 were near even. Plunging crude oil prices, weakness in soybeans and wheat, a stronger U.S. dollar, and forecasts for moisture in Argentina and Brazil applied downward pressure on prices. Export demand was steady to weaker as South Korea bought 385,000 tonnes (15.1 mi bu). USDA placed corn-inspected-for-export at 31.344 mi bu vs. estimates for between 40-45 mi bu. Several floor sources stated they were waiting for the funds to start balancing positions ahead of USDA’s World Agriculture Supply and Demand Estimates (WASDE) due out on Friday the 11th. Even though contracts are trading above key moving averages this market is technically overbought with the 9-day Relative Strength Index (RSI) for the March ’08 contract at 84.09 and the December ’08 9-day RSI closing at 88.19. An RSI over 70 is considered overbought while one at or below 30 is considered oversold. Supplemental information to the CFTC Commitment of Traders report from last Friday had funds growing net bull positions by 8,000 contracts to 233,470 lots. Funds in bearish positions increased those positions by 2,508 contracts to 81,776 lots. It might be a very good idea to get the ’07 crop sold this week. It also might be a good idea to have up to 30% of the ’08 corn crop priced in Hedge-to-Arrive or cash forward pricing contracts.

SOYBEAN futures on the Chicago Board of Trade (CBOT) were off on Monday with two ’08 deferreds breaking even while ’09 contracts made modest gains. The JAN’08 contract finished at $12.360/bu off 13.0¢/bu. The NOV’08 soybean futures ended at $11.674/bu, up 6.6¢/bu. Expectations for fund selling to balance positions and prospects for rain over Argentinean and Brazilian soybean fields provided pressure on prices. Like corn, this market is also technically overbought and may be due for some setback. The RSI for January ’08 and November ’08 futures are 75.82 and 81.94 respectively. A firmer U.S. dollar slowed export pace. Soybeans-inspected-for-export came in below estimates for between 25-30 mi bu as USDA placed that number at 24.798 mi bu. A supplement to the CFTC’s Commitment of Traders report from Friday showed funds shrinking bullish positions in CBOT soybeans by 6,100 contracts to 120,543 lots. It might be a good idea to consider staying with 40% of the ’08 crop priced.

WHEAT futures in Chicago (CBOT) declined on Monday amid a stronger U.S. dollar and expectations for large funds to start rebalancing positions by selling soybeans and wheat and buying corn. However, this market is still supported by tight global wheat stocks. The JULY’08 contract closed at $8.040/bu, off 13.2¢/bu. Mar’09 futures were the highest closing contract on Monday at $8.230/bu. USDA put wheat-inspected-for-export at 17.691 mi bu vs. expectations for between 16-22 mi bu. Taiwan tendered an offer for 80,000 tonnes (2.94 mi bu) while South Korea put out notice it was seeking 21,300 tonnes (0.78 mi bu) of U.S. wheat. A top Indian spokesperson stated on Monday that India would produce 75 mi tonnes (2.8 bi bu) of wheat in 2009. This would match last year’s production. The supplement for last Friday’s CFTC Commitment of Traders report had bullish funds cutting CBOT wheat positions by 2,000 contracts to 11,405 lots. It was suggested in this report three weeks ago to sell up to 40% of next year’s crop. If you didn’t do it then you might want to hold of pricing anymore wheat until next week.

LIVE CATTLE futures on the Chicago Mercantile Exchange (CME) closed up on Monday. FEB’07LC futures finished up $0.050/cwt at $94.600/cwt but was limited by April/February spreading. The APR’08LC contract closed at $97.350cwt, up $0.400/cwt. Short covering was the name of the game as the Goldman Sachs rolled. Funds start rolling long positions from the current contract month forward to the next on the fifth to the ninth of the month. Speculators are betting on tighter fed supplies in the coming months. Cash cattle were up amid another mid-western snow storm. Packers need supplies and were willing to pay to get them there. No cash cattle sold on Monday due to the weather but are expected to trade $1-$1.50/cwt higher later in the week. Another winter storm is expected overnight in central and western Kansas amid already dropping steer weights. Bad weather in December ’07 caused slaughter weights to drop. USDA early Monday put choice boxed beef cutout at $148.55/cwt, up $0.98/cwt. Cash sellers should sell cattle only when ready. Try and price corn inputs on technical breaks.

FEEDER CATTLE contracts at the CME were up on Monday. JAN’08FC futures closed at $100.425/cwt, up$0.100/cwt. The MAR’08FC contract finished at $103.700/cwt, up $0.350/cwt. Live cattle prices were supportive as fewer feeder cattle are expected to come of wheat pastures meaning lighter feeders that will take longer to market. Feeders had been lower amid ample supplies due to the reluctance to feed valuable wheat to cattle. Weaker cash feeders and a declining CME Feeder Cattle Index spurred some early selling. Trading turned higher on thinking supplies will shrink in the near term. The latest CME Feeder Cattle Index for January 3 was $99.59/cwt, off $2.20/cwt. Feeder sellers should sell cattle only when they are ready. Try to catch the technical breaks on grain inputs to price them.

LEAN HOGS on the CME were down on Monday. FEB’08LH futures were off $0.700/cwt at $55.700/cwt. The APR’08LH contract closed at $61.450/cwt, off $0.450/cwt. Lows were set for the 6th straight time before bouncing back somewhat on short covering. Cash prices for hogs were weak on Monday amid ample supplies, especially in the U.S. Midwest. Hog slaughter has been on record pace recently and may stay that way due to profitable packer margins and a bigger U.S. herd. The average pork plant margin for Monday was estimated at $14.75/head, up $1.25/head from Friday but $0.75/head lower than a week ago, according to HedgersEdge.com. Hog processing set a record for the week ending December 22nd reaching almost 2.470 million head. That rate continued as USDA estimated Monday’s kill at 435,000 head. Supplies are expected to remain large for most of 2008. The most recent USDA Hogs and Pigs report showed about a 4% increase in hogs on farms as of December 1, 2008. On Friday, USDA put the pork cutout value at $56.15/cwt, down $0.18/cwt. The latest CME Lean Hog Index was placed at $50.89/cwt, also off $0.18/cwt. Cash sellers should try and keep sales current. Try to catch the technical breaks on grain inputs to price them.

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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)