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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.

Weather, China, Outside Markets....

Jul 31, 2009

 

Market Watch with Alan Brugler & Kyung Ra

 

Week Ending July 31, 2009

 

Weather, China, Outside Markets…

 

Soybeans were the bull leader for the week, up 11% from the previous Friday. The August soy complex (beans, meal oil) rallied on Thursday due to better than expected weekly export sales of soybeans and soy meal, coupled with a huge sale announcement of China's purchase of 1.8 million metric tons of US soy exports for 2009/10 delivery coupled by a 120,000 MT purchase for 2008/09 delivery. That was made under USDA’s daily reporting system.  The continuing concern over the tightening of old crop soybeans and soy meal lent a supportive tone to the soy complex this week. With cash prices above delivery equivalents, August futures rallied in anticipation of a short squeeze. News reports out of Argentina indicate that a new round of conflicts between the Argentine government and farmer groups over the export taxation of soy has started.

 

            Good crop weather over much of the central part of the US, marked by mildly below normal temperatures, and some periods of rainfall was the dominant underlying bearish influence on new crop corn futures and the new crop soy complex.  Overall good crop condition ratings for both corn and soybeans as reported weekly by the USDA reflected the effect of this recent string of favorable crop weather.  Harvest of the remaining winter wheat crop and development of spring wheat crops also benefited from the recent string of good weather along the nation’s midsection.

 

Below is a table of selected futures prices as of the close of pit trading on Friday for the past four weeks.  The weekly gain or loss from this week to last week and the weekly percentage change are also shown.

 

Market Watch

 

 

 

 

Weekly

Weekly

 

07/10/09

07/17/09

07/24/09

07/31/09

Change

% Change

September Corn

$3.28

$3.22

$3.16

$3.40

0.23

7.35%

September CBOT Wheat

$5.19

$5.15

$5.16

$5.28

0.12

2.32%

September KCBT Wheat

$5.48

$5.67

$5.49

$5.59

0.10

1.87%

September MGEX Wheat

$6.03

$6.16

$5.92

$6.05

0.14

2.28%

August Soybeans

$10.45

$10.10

$10.21

$11.34

1.13

11.07%

August Soy Meal

$344.80

$317.50

$323.20

$361.00

37.80

11.70%

August Soy Oil

$32.73

$34.82

$33.89

$35.06

1.17

3.45%

August Live Cattle

$83.48

$86.38

$84.52

$84.70

0.18

0.21%

August Feeder Cattle

$102.93

$104.60

$102.55

$102.35

-0.20

-0.20%

August Lean Hogs

$63.60

$64.67

$59.05

$56.02

-3.03

-5.13%

October Cotton

$60.39

$62.10

$57.39

$57.93

0.54

0.94%

September Oats

$2.12

$2.15

$1.95

$1.98

0.03

1.54%

September Rice

$13.02

$12.97

$13.40

$13.77

0.37

2.72%

 

            Corn

            Better than expected USDA export inspections on Monday and export sales on Thursday lent support to corn futures this week.  On the export front, Argentina, the US's chief competitor for corn exports reportedly will reduce its 2009 corn production by a third.  The second auction this week by China to sell 2 million MT each week of corn from its grain reserves brought in 928,300 metric tons in sales.  China has an estimated 40 million MT of corn in its grain reserves.  In its first week, the Chinese auction brought in 745,900 MT in sales.

 

            Wheat

            Wheat futures at all three grain exchanges this week had a net percentage gain from 1.87% to 2.32%.  Support to wheat came from the corn and soy rallies, and better than expected export sales numbers on Thursday.  After the close of pit trading this past Thursday, the Wheat Quality Council tour calculated average 2009 hard red spring wheat yield at 46.2 bushels per acre, up from the 2008 average at 37.7 bpa.  Average 2009 durum yield was estimated at 36.2 bpa, up from 2008’s 23.7 bpa.  These numbers were derived from scouts surveying for three days in spring wheat areas of North and South Dakotas, Minnesota and Montana.  These yield forecasts were higher than the current 2009 USDA yields at 38.8 bpa for HRS, and 33.1 bpa for durum.

 

            Live Cattle

            Multi-year lows in July on-feed numbers lent a supportive tone to live cattle futures and resulted in a higher close for the week. However, Boxed beef cutout values for choice and select were lower compared to last Friday, due to continuing light wholesale beef demand. Earlier this week cash fed cattle were expected to trade $1 higher on a live basis compared to last week, but ended this week trading $1 lower. That forced futures down, as they had been carrying a larger premium to the cash market.

 

            Feeder Cattle

            Historical lows in the US cattle herd and calf crop along with better weekly pasture conditions provided support to feeder cattle futures.  On Monday cash feeders at the Oklahoma City auction sold for $2 lower compared to the previous week which weighed on futures this week.  Spillover from the live cattle pit provided support.  August contracts trading at a premium to the CME cash feeder index this week limited futures, as did the rise in corn prices.

 

            Lean Hogs

            Three times this week the August lean hog futures kept reaching a new 9-month low.  Weakness in the cash hog markets and lower average pork prices in wholesale trading brought strong downside moves which kept futures in negative territory during 3 out of the 5 pit sessions this week. End of month profit taking brought prices back up a little on Friday.

 

            Cotton

            Moves in crude oil futures and the US dollar index provided outside market influences to cotton futures this week, allowing prices to close nearly 1% higher.  Better weekly crop condition ratings coupled with periods of rains this past weekend and the latter part of this week over west Texas weighed on futures due to improving the crop's outlook.  Spillover support from grains also affected cotton contracts this week.

 

            On Friday, July 31 the Commerce Department’s Bureau of Economic Analysis reported real GDP for the 2nd Quarter of 2009 at -1.0% annual rate.  This is the 4th consecutive quarter of negative real GDP percentage change, and the first time of occurrence since 1947.  Based on this figure, the US economy since 3rd Quarter of 2008 has been in a recession for two consecutive periods.  (Recession is officially defined as two consecutive quarters of negative real GDP annual rate.)

 

            Since the close of pit trading last Friday, front month crude oil gained $1.40 or up 2.06% at $69.45 per barrel.  Front month gold gained for the week 60 cents per contract at $953.70.  The US dollar index as of last Friday lost 40.5 points to be at 78.344 by today.

 

Market Watch:  On tap for next week are some key economic reports:  ISM manufacturing index on Monday, personal income on Tuesday, factory orders and ISM non-manufacturing index on Wednesday, jobless claims on Thursday, and unemployment on Friday.  These along with this week's reports will shed light on the current health of the US economy which will ultimately affect the outlook for commodities.  Besides the usual weekly USDA crop condition reports on Monday, the weekly API/EIA energy stocks report on Wednesday could also affect future prices mainly for corn and soybeans since they are tied in with petroleum through uses as renewable fuel stock. Cattle traders will also be positioning for the expiration of the August cattle options on the 7th.

 

Past performance is not indicative to future results.  Trading in futures and option on futures involve risks.

 

© 2009 Brugler Marketing & Management, LLC

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