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Market Watch

RSS By: Alan Brugler, AgWeb.com

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

A Promising Beginning

Jan 05, 2009
  
We got the grain and livestock markets off to a modestly bullish start as the new year began. The January 2 closes were in positive territory vs. the previous week in all but the oats and rice markets. Admittedly, corn only gained a fraction of a cent vs. the Christmas week close, but it was a moral victory.
 
Hogs had a pretty convincing move, rising more than 8.3% for the week. A re-opening of the Mexican market for the bulk of the US meat packing industry helped firm up product value, as did the light holiday slaughter pace. Those product values had dropped to 5 year lows over the holidays. Packers were thought to need some hogs for the coming week and were expected to bid accordingly.  Some fund buying was also noted, and more could be in the works as the major index funds re-allocate for 2009. The market appeared willing to ignore the fact that the DJ-AIG index is cutting its model allocation for hogs by 12% vs. the 2008 allocation.
 
Below is a table showing the net weekly change of selected agricultural futures contracts:
 
Market Watch
 
 
 
 
 
 
 
 
 
 
 
Wkly
Wkly
 
12-Dec
19-Dec
26-Dec
2-Jan
Change
% Change
March Corn
$3.73
$3.81
$4.12
$4.12
0.00
0.06%
March CHI Wht
$5.13
$5.63
$5.99
$6.11
0.12
2.00%
March KC Wht
$5.38
$5.83
$6.16
$6.34
0.18
2.84%
March MGE Wht
$5.90
$6.25
$6.53
$6.55
0.02
0.34%
Jan Soybeans
$8.54
$8.68
$9.52
$9.70
0.18
1.89%
Jan Soy Meal
$257.70
$267.50
$297.70
$301.00
3.30
1.11%
Jan Soy Oil
$30.92
$30.60
$32.82
$33.58
0.76
2.32%
Feb Live Cattle
$83.32
$86.78
$86.10
$87.10
1.00
1.16%
Jan Feeder Cattle
$82.80
$93.50
$92.82
$95.60
2.78
3.00%
Feb Lean Hogs
$62.28
$61.70
$58.95
$63.85
4.90
8.31%
March Cotton
$43.34
$45.09
$46.18
$48.91
2.73
5.91%
March Oats
$2.13
$2.19
$2.31
$2.12
0.19
-8.23%
Jan Rice
$14.90
$14.89
$15.95
$15.30
0.65
-4.11%
 
 
 Cattle futures also played on the bull side, but almost the entire gain was on Friday. February futures were up $1.05 on Friday, closing in the lower part of the daily range. Cash cattle trade for the week was slow to develop, but some of the carcass based quotes in north were around $138, up $3 vs. the prior week. Wholesale prices didn’t do much for the week despite holiday shrunken slaughter.
 
Corn prices were fractionally higher for the week. They did manage to erase an ugly Monday by Friday’s close. Weekly export sales were again poor at less than 300 thousand metric tonnes. Ethanol futures have also refused to go up, keeping pressure on margins and fueling rumors of additional plant shut downs. The market blithely ignored those inputs and saw new buying come in on December 1 and January 2 that appears to be coming off of the sidelines in a bet that we will have an acreage war in 2008.
 
Soybean futures were up 18 cents for the week, with both meal and oil higher in support. It product exports driving the market, however, as soybean oil bookings were net negative for the week. Meal sales were also uninspiring. Dryness in about 20% of the Brazilian growing area is supporting the complex, as is China’s active buying of both US and South American soybean supplies.
 
Wheat futures were up at all three exchanges. Import tenders from the Middle East were geared toward high quality wheat, where the US is still a strong player. Weekly export sales for Christmas week were also stronger than expected, including an Iranian cargo. KC led the gains because of the export interest, and also because of some developing La Nina related dryness in the southern Plains and speculator ideas that it would continue. Chart action is positive in all three markets at the weekly chart level.
 
Cotton futures rose nearly 6% for the week. A stronger dollar didn’t seem to hold it back much. Loss of acreage in 2009 is a factor, and perhaps some bets that a firming stock market meant the worst was past in terms of the economy. USDA trimmed the LDP for the current week, due to higher average world prices. That means the futures have to rally again if they need to attract more cash cotton sales on a net price basis.
 
Market Watch:  This is the transition week between the year end holiday trade and the first major slug of USDA reports for 2009. Those will be released on January 12 (including Cotton Ginnings, Final Crop Production, Grain Stocks, Rice Stocks, Winter Wheat Acreage and WASDE). Asset allocation is already underway, with money parked in Treasuries coming out of that area in billion dollar chunks and being re-deployed into equities and commodities. Some of the major index funds have their annual allocation percentages scheduled to change this week. The Goldman Roll of existing GSCI February contract positions is also due to begin on Thursday.
 
There is a substantial risk of loss in futures & options trading. Past performance is not necessarily indicative of future results.
 
Copyright 2009 Brugler Marketing & Management LLC. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited. Call 402-697-3623 for information on Ag Market Professional or SRR subscriptions, or visit the web site @ www.bruglermktg.com.
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