Jul 31, 2014
Home | Tools| Events| Blogs| Discussions Sign UpLogin

AgDay Blog


Market Watch

RSS By: Alan Brugler, AgWeb.com

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

Another Black Friday

Nov 19, 2010

 

Market Watch with Alan Brugler
November 19, 2010
Another Black Friday
 
For the second Friday in a row, futures were sharply lower. Corn was down 21 cents per bushel, and soybeans fell 40 ½. Cotton was again limit down, this time the expanded 600 point limit.. Behind the selling were concerns about the Chinese economy. China raised bank reserve requirements for the 5th time this year. They are trying to dry up the money in circulation and slow inflation, while likely also reserving against some of the bad loans on the books. The worry is that they will buy less cotton and fewer U.S. soybeans. They aren’t currently buying U.S. corn, but corn was guilty by association!
 
The soybean complex was hit hard by Chinese efforts to slow down food inflation. January bean futures were down 5.3% for the week, and soy oil plunged 6.8%. The price spreads between Chinese soybean futures and the U.S. futures narrowed, making imports potentially less attractive. Since China is currently projected to take over 59% of all global bean shipments, anything that slows their demand down is bearish at current price levels. As with the Fed QE2 program in the U.S., the question is whether the increased reserve requirements for Chinese banks and higher interest rates actually work as intended.
 
Corn prices were down 13 cents for the week, with all of the loss occurring on Friday. Get me out selling was the main feature, with December options contracts expiring November 26th and delivery notices beginning 4 days later. The dollar was firmer while corn was trading on Friday, adding to the bearish spin, but the buck faded and ended the day lower. Corn export sales have been weak for the past month, but we’re starting to get indications of improved interest. South Korea bought several vessels this week, after having relied on feed wheat purchases when corn was charging toward $6 prior to the crop report.
 
Wheat futures were down 2.5% for the week in MPLS, but down 3.7% in Chicago. Weekly export sales were strong at 986,900 MT, and Egypt was booking some business that should show up in next week’s report. However, wheat has the same problem that corn does, with upcoming options expiration and delivery notices. The fund type buyers were liquidating when given the opportunity.
 
Cotton collapsed. For the week, prices were down 8.76%, the largest loss among the tracked commodities. Weekly export sales for the prior week held up well, but the longs were heading for the exits. They are nervous about Chinese efforts to tighten the money supply and credit, which have caused Chinese cotton futures to drop sharply. Shorts are nervous about December deliveries, given very tight cert stocks. Thus, they were willing to buy back when the spec longs wanted to sell back.
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
10/29/10
11/05/10
11/12/10
11/19/10
Change
% Change
Dec
Corn
$5.82
$5.88
$5.34
$5.21
0.13
2.48%
Dec
CBOT Wheat
$7.17
$7.29
$6.69
$6.45
0.25
3.70%
Dec
KCBT Wheat
$7.71
$7.86
$7.30
$7.10
0.21
2.81%
Dec
MGEX Wheat
$7.77
$7.97
$7.45
$7.26
0.19
2.55%
Jan
Soybeans
$12.36
$12.84
$12.69
$12.02
0.67
5.32%
Dec
Soybean Meal
$337.70
$348.00
$339.70
$325.80
13.90
4.09%
Dec
Soybean Oil
$49.30
$52.22
$52.53
$48.96
3.57
6.80%
Dec
Live Cattle
$98.83
$97.55
$98.40
$101.45
3.05
3.10%
Nov
Feeder Cattle
$110.33
$110.60
$112.40
$117.40
5.00
4.45%
Dec
Lean Hogs
$66.20
$66.95
$68.98
$69.13
0.15
0.22%
Dec
Cotton
$125.26
$142.23
$140.18
$127.90
12.28
8.76%
Dec
Oats
$3.68
$3.75
$3.40
$3.53
0.14
4.05%
Jan
Rice
$14.73
$14.98
$14.07
$13.90
0.18
1.24%

 
Cattle futures were up a smart $3.05/cwt. this week, a 3.1% gain that featured new life of contract highs for the February contract among others. Cash cattle prices were steady at $98-98.50, but that was firmer than some had expected a week ago. On a Thursday/Thursday basis, choice boxed beef was up 1% and select was up .7%. Those supported packer margins. After the close on Friday, USDA indicated that the number of Cattle on Feed November 1 was 103.2% of last year at the same time. October placements were 101.2% of year ago, while October marketings were smaller at 98.8%. That was as expected.
 
Hogs had a barely positive week, up 0.22%. On a Thursday/Thursday basis the cutout value of the hog was up an average of $.43. That gave packers a little more spending money, but the market runs are still large enough to allow the packers to be limited in their generosity. Estimated slaughter for the week was 2.326 million head, which would be .6% larger than the previous week and .2% above last year for the same week. Both packer and producer had incentive to get the hogs moved before the Thanksgiving holiday messed with the scheduling. Pork production year to date is still down 3.6%, which is helping to keep prices above last year’s levels.
 
Market Watch:  The trading population will be thinner this week, with the Thanksgiving holiday on Thursday in the United States. The CME Group will be trading on Friday, which is also the expiration day for December grain options. Weekly Export Sales will be delayed until Friday. Cattle traders will begin the week by reacting to Friday’s Cattle on Feed report. On Monday afternoon, USDA will release its monthly Cold Storage report.  Tuesday will be first notice day for December cotton deliveries. Census is due to release the monthly Census Crush report and Cotton Consumption report on Wednesday morning.
 
I look forward to seeing many of you at the Marketing Rally in St. Charles, IL on December 1-2.
 
There is a risk of loss in futures and options trading. Such trading is not appropriate for all individuals. Past performance is not necessarily indicative of future results.  Comments made in this article are in no way to be seen as an endorsement of futures and options trading. 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 our individualized subscription and consulting services.
 
 Copyright 2010 Brugler Marketing & Management, LLC
 
Log In or Sign Up to comment

COMMENTS

No comments have been posted, be the first one to comment.

MARKETS

CROPSLIVESTOCKFINANCEENERGYMETALS
Market Data provided by Barchart.com
Enter Zip Code below to view live local results:
bayer
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions