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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.

Fleeing All But Food and Gold

Aug 19, 2011

Brugler

Market Watch with Alan Brugler

August 19, 2011

Fleeing Everything But Food and Gold

 

While the stock market action wasn’t as volatile as the previous week, the fear factor was just as pernicious. The US dollar index fought with the euro over who was the ugliest dog, with neither winning as far as we can see. The real winners were gold bugs and those hoping for the destruction of the world banking system. Short sellers (legal or otherwise) had a field day beating up on bank and insurance company stocks. The economic numbers were ugly, with unemployment up and manufacturing down and consumer sentiment almost as bad as it was at the lows in the recession. It seems to be excessive, this bearishness, but with Congress, the President, the Europeans and the Muslims mostly on vacation or otherwise pre-occupied (Ramadan) there seemed to be little government action likely before September to halt the slide. Maybe that dependence on government moves is part of the problem? Gold set new all time record highs as investors diverted money into something they hoped would hold its value. Gold is clearly in a parabolic move to a blow off top, but those can go further than you think before the tipping point is found.  They usually end badly.

 

Corn closed 9 ¼ cents higher for the week, adding to the 8 ¾ gain posted the previous week. USDA dropped the projected US average yield to 153 bushels per acre in the crop report the prior week, but the trade is still worried that the yield is declining from that level due to dry weather in some areas and excessive heat in others. Prices also got support from the Farm Service Agency (FSA), which showed larger than expected prevented planting claims for corn and thus potential for USDA to trim acreage totals in future reports. Export sales were slow, as there is resistance to $7 futures even when world coarse grain stocks are record tight.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/29/11

08/05/11

08/12/11

08/19/11

Change

% Change

Sep

Corn

$6.66

$6.93

$7.02

$7.11

0.0925

1.32%

Sep

CBOT Wheat

$6.73

$6.79

$7.03

$7.31

0.2825

4.02%

Sep

KCBT Wheat

$7.67

$7.80

$7.98

$8.19

0.2150

2.70%

Sep

MGEX Wheat

$8.31

$8.28

$8.61

$9.45

0.8400

9.75%

Sep

Soybeans

$13.54

$13.32

$13.37

$13.60

0.2275

1.70%

Sep

Soybean Meal

$351.60

$345.20

$348.60

$354.10

5.5000

1.58%

Sep

Soybean Oil

$55.65

$54.90

$54.60

$55.39

0.7900

1.45%

Aug

Live Cattle

$112.63

$114.13

$117.90

$114.30

3.6000

3.05%

Aug

Feeder Cattle

$137.05

$133.70

$135.85

$133.30

2.5500

1.88%

Oct

Lean Hogs

$92.40

$91.85

$89.47

$88.38

1.0950

1.22%

Oct

Cotton

$102.08

$101.48

$101.25

$106.76

5.5100

5.44%

Sep

Oats

$3.46

$3.35

$3.45

$3.49

0.0350

1.01%

Sep

Rice

$16.12

$16.28

$16.81

$16.75

0.0650

0.39%

 

Wheat futures were higher at all three exchanges, with Minneapolis the bull leader by far. The September contract in MPLS was up 9.75% for the week after FSA confirmed prevent planting acres that appeared to be larger than those assumed by NASS in the crop production report. That translates to smaller potential production, and that fear was magnified by slow harvest progress in spring wheat country. Only 13% has been harvested, down 26 points from the 5 year average pace.

 

Soybeans were up 1.7% for the week, with proportional gains of 1.6% in meal and 1.5% in soy oil. About 70% of the US crop was setting pods as of Sunday, down 8 points from average while condition ratings were unchanged from the prior week at 61% good/excellent. The Chinese market was choppy, with product values rising ahead of the major fall consumption period. Once again the government is rumored to be selling reserve stocks to favored processing firms at below market prices, in exchange for those firms producing more veg oil and holding down retail price inflation.


Cotton prices rebounded sharply, up 5.44% for the week despite putrid US export sales. Even the new crop 2011 production purchases are being cancelled or deferred. It is very unusual to see net cancellations of old crop in the middle of August, but USDA showed net reductions of 337,000 RB on Thursday. Sales for 2012/13 were up by more than that, as a larger buyer clearly deferred a purchase or purchases for a whole year. Cotton harvesting is underway in Texas, with an estimated 10% of the crop out of the field in that state. Scattered shower activity raised hopes for what is left, but production there will be down sharply from last year. Yield potential is better in the Southeast.

 

Cattle futures sold off a steep 3.05% this past week, as bulls lost confidence in consumer demand and anticipated a big jump in numbers as USDA reported the monthly Cattle on Feed totals. The USDA Cattle on Feed report on Friday afternoon was expected to show a dramatic increase in July placements, resulting in a 7% jump in on feed numbers. USDA showed a 22% jump in placements, and a 7.5% hike in cattle on feed. Those were the largest July placements since records began in this format in 1996. The marketings number was larger than the trade expected at 100.4% of year ago, but still the second smallest for July since 1996. The larger than expected marketings kept the on feed total close to trade estimates and should minimize any price shock on Monday morning. Boxed beef prices were up 3.9% for the week, running counter to the futures selling. Beef production YTD is up 0.5% from last year, and the production this past week was down 2.3% from the same week in 2010.


Lean Hog futures were down 1.2% for the week, as the wholesale prices retreated from their all time high, and packers immediately took big chunks out of the cash hog bids. Pork production for the week was expected to be UNCH, but down 1.8% from the same week in 2010. The reported cutout value of the hog was down 2.3% for the week on a Thursday/Thursday basis. 

 

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 


Market Watch: The cattle market will begin the week trying to shake off the effects of the Cattle on Feed report from Friday. Grain traders will be looking for improvement in the crop condition ratings from USDA on Monday night, based on milder weather and a reduction in the number of areas that have been totally missed by rain. If they don’t get those reductions, the bull game may still be on. August feeder cattle futures expire on Thursday. Thursday will also mark the monthly Census Crush report and Census Cotton Consumption reports, as well as the weekly USDA Export Sales report. The September grain options will expire on Friday.


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 2011 Brugler Marketing & Management, LLC

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