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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.

Confusion in the Ranks

Dec 13, 2013

 Brugler

Market Watch with Alan Brugler

December 13, 2013

Confusion In the Ranks

 

Speculative traders will tell you "Never trade holiday markets". Then they try to do it anyway because that is the way they are! The concept is good, however, that end of year markets don’t follow the normal fundamental and technical trading rules because of other influences. The largest of those is year end book squaring. Fund managers are banking profits in order to pay taxes, and trying not to screw up performance with high risk trades that go bad. Funds that are heavy on asset allocation strategies are exiting winners and buying losers which they expect to outperform in 2014. On top of this stuff, you have confusion about the Fed policy moves relative to QE3 tapering. To see the confusion, just look at a US dollar index chart or a chart of 20 year or 30 year bond ETFs. Ag market action was equally confused, with soys, cattle and cotton up on the week, while feed grains and hogs were lower. Gold picked up about $7 for the week. Crude oil was down $1.15.

 

December corn futures erased all but 1 cent of their gain from the previous week, with all of the weakness on Thursday and Friday. Demand is a bright spot as low prices continue to work to cure low prices. Ethanol stocks did rise about 300,000 barrels, but imports have been zero for the past 10 weeks. USDA reported larger corn weekly export sales of 695,400 vs. 593,600 MT the prior week. Those included fresh sales to China, which has now rejected as much as 180,000 MT of arriving US corn cargoes in the past month for containing an unapproved GMO trait. US corn export commitments are already 72% of the upwardly revised December USDA forecast for the year. The 5 year average commitment for this time would be 52%. USDA gets a chance to revise that number on Tuesday. USDA is still showing Brazilian 2013/14 corn production down 14% from last year (11 MMT), due to lower acreage. Argentina is also seen down 500,000 MT.

 

Soybean futures were up 0.15% this week. Weekly US export sales were a larger than expected 1.52 MMT (56 million bushels) of combined old and new crop business. Total US export Commitments are now at 96% of the USDA forecast for the entire year, with more than 8 months remaining. Soybean meal export sales slowed, but 62% of the projected sales for the year are already booked. The average pace would be 49%. December meal futures jumped to $510/ton on the last day of trading, thanks to a short squeeze and zero deliveries vs. the contract. January meal was much tamer, up 1.3% for the week.

 

Wheat futures were lower at all three exchanges, with Chicago and KC the weakest as they caught up to selling that had hit MPLS the week before. USDA confirmed the jump in Canadian production by passing the entire amount through to global ending stocks of 182.78 MMT. That is still tighter than the 198.94 MMT in 2012, but the market is trying to make some of it disappear. Total US export commitments are still a larger % of the USDA forecast than usual for this date, currently at 77% vs. the five year average of 71%.  Weekly wheat export sales through November 28 were better than the prior week’s 229,200 MT at 372,200 MT.

 

Cotton futures rallied another 3.49% this week. Global ending stocks are still projected to be record large at 96.41 million bales, with USDA raising the projection from 95.71 million bales in the November report. Projected US ending stocks were left UNCH at 3 million bales. China is seen holding more than half of the world surplus. Weekly export sales for the week ending December 5 slowed to 177,400 RB of all classes and years. US Export commitments as a % of total exports (for upland cotton) are now at 68%, lagging the 5 year average.    

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

11/22/13

11/29/13

12/06/13

12/13/13

Change

% Change

Mar

Corn

$4.29

$4.24

$4.34

$4.25

($0.09)

-2.07%

Mar

CBOT Wheat

$6.57

$6.68

$6.51

$6.28

($0.23)

-3.53%

Mar

KCBT Wheat

$7.018

$7.09

$6.95

$6.72

($0.23)

-3.31%

Mar

MGEX Wheat

$7.07

$6.81

$6.63

$6.60

($0.03)

-0.45%

Jan

Soybeans

$13.20

$13.37

$13.26

$13.28

$0.02

0.15%

Jan

Soybean Meal

$421.00

$436.00

$427.00

$432.60

$5.60

1.31%

Jan

Soybean Oil

$41.45

$40.46

$40.49

$39.83

($0.66)

-1.63%

Dec

Live Cattle

$131.48

$133.48

$131.43

$131.88

$0.45

0.34%

Jan

Feeder Cattle

$163.50

$165.48

$164.48

$167.08

$2.60

1.58%

Feb

Lean Hogs

$89.67

$90.57

$89.00

$87.17

($1.83)

-2.06%

Mar

Cotton

$77.23

$79.35

$80.41

$83.22

$2.81

3.49%

Mar

Oats

$3.24

$3.31

$3.28

$3.40

$0.12

3.66%

Jan

Rice

$15.72

$15.96

$15.55

$15.55

$0.00

0.00%

 

Cattle futures rallied 45 cents this week.  Feeders were up 1.6% due to the cheaper feed and the modest gain in hedging potential for the finished animals. Cash cattle did fall back about a dollar from the previous week, with reports of $131 the south and $206 trades in the north. There is an old saying that "The beef is the grief". Wholesale beef prices were down 1.3% on a Fri/Fri basis in the Choice, and up 0.1%  in the Select. Weekly slaughter was down 5.1 % from the same week in 2012. Year to date beef production is down 1.2%.  Estimated carcass weights are running 6-7 pounds above last year’s actual of 800 pounds. USDA reported weekly beef export sales of 11,500 MT, up from 9,500 MT the previous week. There were another 9,300 MT sold for 2014 shipment, so the combined total for the week was pretty good.

 

Hog futures were down $1.83 after a $4.00 plunge the previous week. December futures went off the board at $81.25. Pork production YTD is down 0.9% from year ago. Pork production this week was 3.2% larger than the same week in 2012. Estimated slaughter totaled 2.311 million head, up 0.6% from last year. Year to date slaughter through 11 months is down 1.5%, with higher carcass weights (4-5 lbs) offsetting some of the lost head count. The pork carcass cutout value was down a hard $3.34 or 3.7% this week, with pork bellies (last week’s leader) the weakest component. USDA reported weekly pork export sales were a slow 5,300 MT vs. 9,900 MT the previous week. The weekly sales reports are still missing more than half of the export business to Japan, the largest buyer.

 

 Market Watch

 

The ag markets will begin the week reacting to Friday’s mass expiration of December grain and hog contracts. NOPA is expected to release its crush estimate for November on Monday or Tuesday. The FOMC will meet on Tuesday and Wednesday with the usual speculation about tapering of their interest rate subsidy program (QE3) and whether such tapering should matter to the markets. We will get the usual USDA Export Inspections report on Monday, and weekly Export Sales on Thursday morning. The main monthly USDA report will be Cattle on Feed, scheduled for Friday afternoon. Not to be overlooked, Winter officially begins on Saturday, December 21.

 

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

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.                  

Copyright 2013 Brugler Marketing & Management, LLC

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