Corn
Corn futures are trading 25 to 30 cents higher this morning. The new spot contract September finished within 15 cents of the July contract on Friday night and was intent on closing the rest of the expiration gap in Sunday night Globex activity. That was accomplished. Our general rule is that you can't have a drought if it keeps raining, even if the rain is lighter than normal. However, it is also not certain that we have fully assessed damage already done, and that is solid incentive for further buying. Above normal temperatures also continue across much of the country. An estimated 70% of the Corn Belt saw some rainfall over the weekend, with additional showers expected Tuesday to Thursday on 60-70% of the crop area. The 5-day accumulation map shows the KS/OK area being missed. The weekly CFTC report showed Managed Money added 28,773 contracts to their net long from the previous week. High current corn prices are having a significant impact on demand. Mexico shifted their 120,000 MT corn tender from optional origin to non-U.S. origin according to private exporters reporting to USDA. Higher corn prices are also impacting ethanol plants causing many to take extended downtime as shown in the weekly production reports.
Soybeans
Soybeans are currently 34 to 40 cents higher, posting new life of contract highs. They were up 22 cents for the week last week. Managed Money increased their net long in the soybeans by only 710 contracts from the previous week. Private exporters on Friday announced the sale of 7,500 MT of soybeans for 2011/12 delivery and 142,700 MT for 2012/13 delivery to an unknown buyer. The NOPA crush report this morning showed June soybean crush at 134.15 million bushels. The average trade guess appeared to be around 133 million ahead of the report. NOPA soy oil stocks also declined to 2.306 billion pounds from 2.312 billion in May. Chinese futures at Dalian shot up 73 cents per bushel this morning, with strong gains in the heretofore passive palm and soy oil futures.
Wheat
Wheat futures are trading 12 to 29 cents higher, with the strength in the front end as you would expect. They were up 51, 52 and 22 cents on the CBT, KC and MGEX respectively last week. The weekly CFTC report showed Managed Money added to their net wheat long from the previous week. Weather services are talking about a potential El Nino event for Australia and the US in September October but is in a neutral stage at the moment. EU wheat futures are up 2.8% this morning and closing in on life of contract highs. Russian wheat export prices appear to be up about $10/MT from last week. Morocco is confirming a smaller crop, and Syrian wheat is being privately estimated at 2.3 MMT vs. 3 MMT last year.
Cattle
Cattle futures are called steady to 25 lower this morning. Feeder cattle are called $1.50 to $3.00 lower due to the sharp jump in corn prices. Futures were down $2.00 for the week last week. Feeder cattle were down $7.53 for the week. The weekly CFTC report showed Managed Money had decreased their net cattle long by 1,993 contracts from the previous week. Cash cattle sold $2 lower at $114 to $115 late last week. Sales in Nebraska were also light to moderate at $2 lower compared to last week at $115 in the live on Thursday. Packer margins are good, but high temps are slowing grilling demand. Wholesale beef prices were lower again on Friday. Choice was down $2.09 and Select was down $0.85. The monthly beef export total for May was down 11.6% from May 2011 at 207.65 million pounds. At some point prices will have to rise to reflect higher feed costs, because the consumer will not tolerate a sharp reduction in beef supply.
Hogs
Lean Hog futures are expected to open 25 lower to 25 higher Hogs were up $1.00 for the week last week. July Lean Hogs expire today at noon CDT. Pork trading was slow to moderate with light to moderate demand and offerings on Friday. The Carcass cutout has been on a steady downhill slide since the end of June. The bright spot has been pork bellies, which are $8.42/cwt above last year at this time. The Lean Hog Index moved 0.59 lower as of July 11th to 99.25. Cash hogs were $4.32 lower in IA/MN on Friday, $4.10 lower in the WCB and $2.28 lower in the ECB. That should put pressure on the CME Lean Hog Index for tomorrow. The Economic Research Service reported May 2012 pork exports were 448.2 million pounds compared to 408.7 million pounds in May 2011.
Cotton
Cotton futures are trading 15 lower to 50 higher this morning, with buying focused on the nearby October. They were up 98 points last week, with lead month October up 240 and Dec up 273 on Friday. The lower U.S. dollar was a benefit to cotton prices. China economic news showed GDP up 7.6% from a year ago giving a boost to cotton prices. China is the largest importer of Upland cotton at 5.2 million RB as of July 5th. The weekly CFTC report on Friday afternoon showed Managed Money had increased their cotton net short by over 2,000 contracts. The Indian monsoon rain for the week ending July 11th was up 1% over the long term average when last week rains were 49% below the average. Certificated stocks were at 129,247 with 519 new certs and 1,356 awaiting review.
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.
