CORN
The May/July corn spread is over 15 cents for only the third time ever. The first time was in 1996 when the corn market made new all time highs. Basis levels are steadily improving, which is also considered bullish to analysts. Everything about the old crop corn seems bullish except the charts. The July corn looks set for another day of consolidation and the bull spreading will likely keep the December contract from keeping pace with the old crop gains.
WHEAT
Analysts believe the wheat, like the corn, is set for another sideways trading day. There has been some talk of dry weather in Europe, which is supportive, but with a good crop in the US it will be difficult to draw down world supplies enough to matter. The main supporting factor right now is the huge net short position that the trading funds have in Chicago wheat. While not a reason to buy wheat, it is a reason for the market to quit going down for a while.
SOYBEANS
Bull spreading was active again overnight and the July contract is approaching $15.00 once again. The news is still the same. USDA has underestimated exports and old crop supplies will be much tighter than USDA has predicted. Meanwhile, new crop stocks will be very tight and demand must be slowed. The only way to do that is with higher prices.
CATTLE COMPLEX
June cattle saw periods of choppy trading during yesterday's session as the market finished with a weak close that left prices slightly higher on the day. Slower exports as well as weakness in pork were seen as pressuring the market early but higher beef prices and a sizable discount of futures to the cash market are thought to have provided support for prices. Some traders are waiting for a more active cash market this week but a few cattle traded Wednesday at $119.00-$120.00 as compared with $122.00-$123.00 last week. The new contract low and higher close for June cattle has many traders feeling that the market is near a seasonal low. Beef prices have recovered from the negative impact of "pink slime" and have risen to the highest level since March 20th. Weekly U.S. beef export sales for the week ending April 19th came in at 15,500 metric tonnes, compared with the prior 4-week average of 19,133 metric tonnes. Cumulative sales for 2012 have reached 343,000 metric tonnes, up 4.9% from last year's pace. The estimated cattle slaughter came in at 120,000 head yesterday. This brings the total for the week so far to 488,000 head, up from 472,000 head last week at this time and up from 481,000 head a year ago. Average dressed steer weights for the week ending April 14th came in at 837 pounds, down from 843 pounds the previous week but still up from 819 pounds last year. Beef production for the same week came in at 451.4 million pounds, down 5.5% from year ago levels. The drop in weight for the week is thought to a positive factor. Temperatures in the Texas Panhandle were 100-110 degrees yesterday, so weights may continue to push lower. Boxed beef cutout values were up 58 cents at mid-session yesterday and closed 25 cents higher at $190.74. This was up from $187.08 the prior week and the highest since March 20th.
CRUDE OIL
June crude oil prices trended lower throughout the overnight and early morning hours, registering a lower low in the process. News of a Spanish debt downgrade late Thursday was seen as a negative force that put added pressure on global crude oil demand. However, some traders pointed out that the crude oil market held up considerably well given the negative news, perhaps because it was already factored into the market. The outside market tone has flattened out as the market prepares for this morning's US first-quarter GDP data. Expectations are for the rate of growth to slow from the 3.0% pace seen during the final quarter of 2011. In the meantime, the strain on global oil supplies appears to be easing, helped by the return of Libyan production and easing tensions with Iran over their nuclear program.
There is substantial risk of loss to futures and options trading. Past performance is not indicative of future results.
By Donna Hughes
Lone Star Portfolio Advisors, Inc. was founded by Donna Hughes. Donna began her career in the industry in 1978 after graduating High School as a member of the Chicago Mercantile Exchange’s Inspection and Delivery Department where she was responsible for scheduling and facilitating the USDA grading and delivery for various Exchange Commodities. After 1 ½ years, she was offered a position working with George Segal, a prominent hedger in the Pork Belly market. It was through this relationship that she was mentored and taught the hedging process by working with Mr. Segal as well as other leaders of the Pork Industry. In 2004, Donna moved to Texas where her skills in the industry were utilized to help individual and corporate producers with their Risk Management Goals. Her Daily Market Commentaries are heard on the AllAgNews.com Radio Network broadcasting throughout Texas. She also contributes to magazines and periodicals including PetroEvents and Ag Monthly.
Donna created Lone Star and implemented strategic relationships with Daniels Trading and R.J. O’Brien leveraging their services to enable Lone Star to Build Lasting Relationships Thru Information, Execution and Research.
