Monday, April 16,
2007
888-452-8751
Fundamentals:
CBOT May corn futures took on a depressed tone throughout Monday's
session, as weather forecasts seem to be allowing for fieldwork and
plantings to get underway after a drying period this week. It's
obviously no surprise that we going to get the crop planted, but
there are several questions that remain surrounding weather
developments, acres, yield prospects, etc… And only time is
going to reveal the answers to these questions. In the meantime the
corn market still sees stout demand and tight balance sheets, so
any glitches in production potential stand to generate a price
response, and we would be hesitant to be too negative to prices
during periods of sustained weakness. In the news,
South Korea announced over the weekend that they would seek 495,000
tons of US corn for Oct-Nov shipment. Also, the weekly export
inspections release came out this morning and inspected corn
shipments for last week came in at 29.9 million bushels, over the
27.5 million last week, with totals for the year running nearly 13%
ahead of the year-ago levels. Looking forward, perfect planting and
growing weather will surely eat away at any price premium that has
been built into the market. But, we still foresee robust demand in
a market that has tight balance sheets. So, in our opinion, we
would rather hold a friendly longer-term bias to the market,
especially during periods of sustained weakness, as corn's demand
base will only likely grow, especially at lower price levels. Also,
it's still far, far too early to say we've planted and made the
crop, so the trade should look to keep at least some risk premium
in the market as we will need every bushel we can grow if we are to
lift ending stocks above "pipeline" levels. This afternoon's crop
progress report revealed only a 1% increase in plantings this week
versus last, which was largely below the trade's estimates and may
prove somewhat price-supportive over the near
term.
Technicals:
None today.
Recommendations:
Speculative:
4-11-07: Bought 1 July Corn @ $3.75 - Reverse
and go short on a close under $3.70 stop close only.
Hedge Positions:
3-9-07: Bought December $4.00 Puts / Sell December $5.60 Calls @
~$.25
Soybeans:
Fundamental:
Soybeans futures finished out
Monday's session with moderate weakness, with old crop July
contracts finishing down 1¾ cents at $7.53¼ per
bushel and new crop Nov down 1¼ at $7.82½. The main
focus of the trade was weather, and the prospect of potentially
less moisture problems during corn plantings gave the beans mild
support. Lessening concerns over growing acreage prospects, if
producers are able to get corn planted in a timely manner, seemed
to offer up some light support throughout, but a mixed bag of news
added to the mixed price action of the trade Monday. This morning's
monthly report from the National Oilseed Processors Association
pegged the US crush pace for March at 147 million bushels, which
was a bit over trade estimates of 144 million. Soybean oil stocks
were seen on the rise as usual, while soybean meal exports were a
shade lower than last month's total. Weekly shipments inspected for
export showed a sharp drop off down to 12.5 million bushels, versus
27.5 million last week. This seems to be just another reminder on
how US demand is expected to slump, as the South American crop
comes on-line and begins to compete with US market share on the
global export stage. In the product trade, we saw a correction in
the meal versus oil spreads after the soybean oils gained
significant ground on meal since the latest USDA release. But, the
NOPA figures may have added a bit of speculative trading in those
inter-market spreads that helped favor meal over oil today. For now
we are left watching the weather forecasts to get a handle what
final soybean acreage will be, and then how Mother Nature will
treat the 2007 crop after that. But, given the current glut of
supplies in both domestic and global markets, it is hard to
envision a sustained push higher without any major crop problem
this growing season.
Technicals:
None today.
Recommendations:
Speculative:
4-17-07: Buy 1 July Soybean
on a close above
$7.64
Hedge Positions:
3-9-07: Bought November Soybean $7.80 Put / Sell November $10.40
Call @ ~$.35
Wheat:
Fundamental:
Wheat futures ended a shade weaker Monday, in-line with other
agricultural commodities as weather forecasts are improving for
plantings and growing conditions. Chicago July wheat futures
finished down 1¾ cents after trading a 7½ cent range
amid moderate volumes. Although the market did close on the lower
end of the range, it still found some light support in the
unwinding of long corn versus short wheat spreads. Speculation that
crop condition ratings would show further declines for a second
straight week was also a mildly supportive factor. In fact crop
conditions ratings did drop 9% week-on-week, and now only 55% of
the winter crop is rated in the good-to-excellent category. Also,
spring wheat plantings are seen at only 6% complete, versus 9% last
year. But, the fall in crop conditions was largely expected by the
trade, and that's the main reason prices have rallied 65 cents off
their lows seen earlier this year. Looking forward, we may continue
to favor spring wheat crops if planting delay problems re-emerge
and possibly even lower that expected acreage number. But, other
wheat classes may not find much in the way of continued upside
potential if weather conditions remain favorable. The large
divergence between corn and wheat values may also curb wheat used
for feed, and the world is attempting to replenish depleted
stockpiles by growing larger crops around the globe - which may
make for fewer dependants on the US as the main
supplier.
Technicals:
None today.
Recommendations:
Speculative:
4-16-07: Buy 1 July KC Wheat @ $4.92 - Reverse and go short on a close under $4.90
Livestock:
BEEF:
It appeared that short covering and spread activity lifted live
cattle futures in late action on Monday. Today's kill was pegged at
117,000, above last year and could help some traders reach the
conclusion that near term lows may be established in the cash and
wholesale beef. Last week's abrupt turn in futures and sharp turn
downward in pricing psychology leads credence to the thought that
the spring tops are in place. The upcoming cattle on feed report
likely will show a sharp increase in placements and in combination
with sluggish marketing numbers could bring on-feed inventory
toward year ago levels. This would tend to drag down feedlot
leverage toward the beef packer. Look for near term short covering
with resistance near 9400 to 9450 basis the June live cattle. The
cattle on feed is scheduled for Friday afternoon at 2:00.
PORK:
Strong packer demand continues to drive the cash hog prices upward
with the CME lean hog index gaining about 50 points per day since
the beginning of the month. While the board is trading a premium to
the cash, the strong seasonal tendency toward higher cash hog
prices should stifle any aggressive selling. Recent export data
shows massive gains by the U.S. pork exporters over the past four
years. The USDA now indicates the U.S. is the number one pork
exporter in the world. Recent hog & pig data shows extremely
mild expansion intentions in the U.S. Taken all together look for a
continuation of bullish attitudes toward summer hog prices. Look
for a challenge of contract highs with resistance in the June hogs
at 7900 and support at 7700. Cash hogs are called steady to mostly
higher for Tuesday AM.
Positions:
Speculative:
4-11-07: Sold 1 June Live Cattle @ 95.40 - Liquidate @ 93.45 stop close only
4-12-07: Sold 1 August Feeder Cattle @ 110.35 - Liquidate @ 111.20 Stop close only
Recommendations:
4-17-07: Sell 1 June Lean Hog @ 76.95 - Stop close only
