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RSS By: Alan Brugler, AgWeb.com

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

Cracks in the Bear Wall

Nov 14, 2008
Corn and wheat were able to post higher closes this week. December Corn futures set a new low for the year on Tuesday, but rallied roughly 20 cents from that low by the end of the day on Friday. The net result was a 5 cent gain for the week despite another poor weekly Export Sales report (355,500 MT) on Friday morning.
 
Wheat was where the real bullish action was developing. CHI futures rose 6.38% for the week, with lesser gains of 4.45% and 2.73% at the other two exchanges. Goldman Roll selling kept December contracts on the defensive, but liquidity in the grains is sufficient to keep the impact of the position rolling less visible than in the cattle and hogs. Weekly wheat export sales were down 32% from the prior week, at only 248,300 MT. Bulls did get excited about a Japanese purchase, since they had been out of the market for more than a month because of food safety rule changes that were a major risk factor. Those rules were modified this past week, and Japan is now presumed to be short bought and likely to make larger purchases to make up for the lack of activity in October.
 
Below is a table showing the net weekly change of selected agricultural futures contracts:
 
Market Watch
 
 
 
 
 
 
 
 
 
 
 
Wkly
Wkly
 
24-Oct
31-Oct
7-Nov
14-Nov
Change
% Change
Dec Corn
$3.72
$4.02
$3.75
$3.80
0.05
1.29%
Dec CHI Wht
$5.16
$5.36
$5.21
$5.54
0.33
6.38%
Dec KC Wht
$5.47
$5.73
$5.68
$5.93
0.25
4.45%
Dec MGE Wht
$6.01
$6.48
$6.40
$6.58
0.18
2.73%
Nov Soybeans
$8.63
$9.25
$9.12
$8.78
0.34
-3.69%
Dec Soy Meal
$268.30
$273.00
$271.70
$265.50
6.20
-2.28%
Dec Soy Oil
$31.47
$33.60
$33.90
$32.60
1.30
-3.83%
Dec Lv Cattle
$87.55
$92.70
$92.80
$90.05
2.75
-2.96%
Nov Fdr Cattle
$93.83
$98.62
$98.95
$96.70
2.25
-2.27%
Dec Ln Hogs
$58.50
$54.80
$55.40
$55.57
0.17
0.31%
Dec Cotton
$46.49
$44.58
$42.07
$41.15
0.92
-2.19%
Dec Oats
$2.50
$2.32
$2.34
$2.16
0.19
-8.06%
Nov Rice
$14.41
$15.45
$15.17
$14.32
0.86
-5.64%
 
The soybean complex was lower for the week. November soybean futures expired on Friday with a net loss of 34 cents for the week. January futures were stronger on Friday, and have an 18 cent premium to where November went off the board. Weekly export sales were as strong as expected at 478,300 MT. However, that was down 47% from the previous week and Chinese purchases were smaller than in the past couple weeks at 207,800 MT. Of those, 55,000 MT were a switch from unknown and not a new sale. NOPA soy oil stocks were only 1.984 billion pounds as of November 1, despite a 23 million bushel increase in monthly crush. This implies strong domestic or export use. However, declining heating oil and diesel prices continued to put pressure on the veg oil’s value as a fuel molecule.
 
Cotton futures probed the lowest price levels since 2002, but came back strong on Thursday and held most of that gain on Friday. Early week weakness was tied to declining world cotton consumption estimates, including those in USDA’s monthly WASDE report. Weekly export sales were neutral, but bulls drew a little inspiration from shipments. The Thursday bounce in the Dow Jones averages provoked short covering in December cotton, with a brief hope of more consumer demand. The 338 point drop in the Dow on Friday took a lot of the shine off of that belief. Major retailers were also reporting very poor sales results for October. The USDA loan program is the de facto cotton market right now, with the LDP over 15 cents per pound.
 
Cattle futures had a tough week, despite seeing strong price increases for beef at the wholesale level. The choice cutout ended the week at $157.02. Index funds were doing their monthly roll out of December into February, and that selling pressure on the December contract until Friday. Cash trade was at $93 in the south and $92 in the north this week, $1 below the previous week.
 
Hogs eked out a 17 cent net gain for the week despite a late week fade in the value of the cutout. December futures now have a premium to the CME Lean Hog Index after trading at a $3-4 discount for most of October. Market runs are still seasonally large, but below the levels suggested by the September Hogs & Pigs report.
 
Market Watch: With Thanksgiving being late this year, the market has another full week of activity before getting the interruption of a short week. We get the usual Export Inspections and Crop Progress reports on Monday, with soybean harvest just about done and corn likely in the 80-90% range. Census will release the monthly Crush report on Thursday, along with Cotton Consumption. Thursday will also be the last trading day for November Feeder Cattle and first notice day for deliveries against December cotton. USDA gets back in the act on Friday afternoon with the monthly Cattle on Feed and Cold Storage reports. Friday will also be the last trading day for December options on the grain futures.
 
There is a substantial risk of loss in futures & options trading. Past performance is not necessarily indicative of future results.
 
Copyright 2008 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 subscription information or visit the web site @ www.bruglermktg.com.
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