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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.

It Glitters but is it Gold?

Aug 26, 2011

Brugler

Market Watch with Alan Brugler

August 26, 2011

It Glitters, but is it Golden?

 

Gold set new all time record highs again this week as investors diverted money into something they hoped would hold its value through Euro banking moves and the Jackson Hole speech by Bernanke on Friday. 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.  It shook off a nasty correction to close higher on Thursday and Friday. The Chairman’s speech was seen as neutral to friendly. Corn and soybeans were also glittering, with the Dec corn contracts setting life of contract highs on Friday. Soybeans closed above their trading range of the past several months. Whether this was fool’s gold or the real thing will be confirmed this coming week. US fundamentals are supportive, with yield estimates dropping.

 

Corn closed 41 ½ cents higher for the week, nearly a 6% advance. USDA dropped the projected US average yield to 153 bushels per acre in the August crop report, but crop tour and weather service estimates released at the end of the week were in the 145-148.7 bushels per acre range. The trade is still worried that the yield is declining. Export sales were again slow, as there is resistance to buying corn at $7+ futures even when world coarse grain stocks are record tight.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/05/11

08/12/11

08/19/11

08/26/11

Change

% Change

Sep

Corn

$6.93

$7.02

$7.11

7.525

0.4150

5.84%

Sep

CBOT Wheat

$6.79

$7.03

$7.31

7.6225

0.3150

4.31%

Sep

KCBT Wheat

$7.80

$7.98

$8.19

8.6325

0.4425

5.40%

Sep

MGEX Wheat

$8.28

$8.61

$9.45

9.5625

0.1100

1.16%

Sep

Soybeans

$13.32

$13.37

$13.60

14.1475

0.5500

4.04%

Sep

Soybean Meal

$345.20

$348.60

$354.10

376

21.9000

6.18%

Sep

Soybean Oil

$54.90

$54.60

$55.39

56.6

1.2100

2.18%

Aug

Live Cattle

$114.13

$117.90

$114.30

114.3

0.0000

0.00%

Aug

Feeder Cattle

$133.70

$135.85

$133.30

132.6

0.7000

0.53%

Oct

Lean Hogs

$91.85

$89.47

$88.38

87.1

1.2750

1.44%

Oct

Cotton

$101.48

$101.25

$106.76

103.92

2.8400

2.66%

Sep

Oats

$3.35

$3.45

$3.49

3.79

0.3050

8.75%

Sep

Rice

$16.28

$16.81

$16.75

16.99

0.2450

1.46%

 

Wheat futures were up anywhere from 1.1 to 5.4%. The former bull leader in Minneapolis was undermined by a larger than expected Stats Canada production estimate, by increased harvest supplies in the US, and by spread trading against the other two wheat markets. Weekly export sales were  347,100 MT compared to trade estimates of 400 to 950 thousand MT. Egypt continued to buy Russian and Romanian wheat aggressively for last October and early November shipment. The US is not competitive in those tenders from either a FOB price or freight cost perspective.

 

Soybeans were up 4% on the week, poking above $14. The Pro Farmer Tour group found lower pod counts than last year in all of their survey states except for Ohio. While the crop is not far enough along to be sure you will keep all of those pods (and the group doesn’t count beans per pod or bean size) the lower counts were seen as confirming USDA’s cut in estimated yield. Export sales continue to be lackluster, as China and other buyers clean up the remaining South American old crop supplies before delving into US new crop bookings that will eventually have to run close to 40 million bushels per week.


Cotton prices were down 2.66% for the week. We’re several weeks into the new crop marketing year, but so far it looks like the old one. Cancellations of existing contracts continue to outstrip new sales. The fad this past week was changing contracts from US origin to optional origin, which on paper is a drop in US sales commitments. Texas cotton areas have been receiving some scattered showers. On the other hand, the East Coast was seeing way more water than they wanted from Hurricane Irene. Cotton with bolls open does not tolerate 100 mph hurricane winds and multiple inches of rain without losing both yield and quality. Fortunately, the hurricane stayed away from Georgia, so the states with the most risk were the Carolinas and Virginia. Most of the crop in those states is still in the squaring stage.

 

Cattle futures bulls and bears fought to a draw. Prices were UNCH fromm the previous week, despite having to digest the monthly Cattle on Feed report and some volatile outside market activity. Wholesale prices were lower, with buying interest dropping off much harder for the select cuts. Choice boxed beef was down 0.3%, while select was down 2.4%. Beef production YTD is up 0.4%. Estimated production this week was 530 million pounds, down 2.6% from the same week in 2010. 

 

Lean Hog futures were down 1.4% this past week. The pork carcass cutout value dropped 5.45% on a Friday/Friday basis, putting serious pressure on cash hog prices and more gradually on futures. Futures were already at a substantial discount to cash in anticipation of seasonal weakness in the cutout and the CME Index. Thus, futures should not be expected to drop in lockstep with the cash market or the products. Preliminary data shows pork production up 3.1% this past week, although smaller than the same week in 2010.

 

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 grain trade will begin the week dealing with surprise futures positions held by call writers who were caught in Friday’s run up to new highs for the move. Emphasis will quickly shift to the Monday afternoon USDA crop condition ratings, wondering if things are as bad as the crop tours make them look. We’ll also be heading into month end asset allocation trades, with funds selling winners and buying losers. Wednesday will also mark first notice day for September grain futures deliveries.  Friday will mark expiration for September cattle options, and also the monthly employment report. It will also mark the beginning of the Labor Day weekend in the United States, with trading population expected to be down. The US markets will be closed on September 5.

 

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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