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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.

Low Prices Cure Low Prices

Dec 28, 2012

 

Brugler

Market Watch with Alan Brugler

December 28, 2012

Low Prices Cure Low Prices

 

There is a very old market axiom (I’ve been using it for 30 years and I don’t think I started it) that the cure for low prices is low prices. While grain prices are still much higher than they were a couple years ago, they have also come down quite a bit since late August and September. Wheat is the latest example of the axiom in action. Due to a sharp drop in price during December, US wheat is the cheapest in the world right now, and the most available wheat until new crop Aussie and Argentine wheat reaches the world market in larger quantities. Actually Argentine wheat may not be that available, with exporters being asked to give back export allocations because of a lack of wheat to ship out. But, I digress. Wheat prices dropped to the lowest levels since July 3 on the continuation chart. Weekly wheat export sales topped the 1 MMT level for the first time since February 2011. It will take a few more weeks of that to make a serious run at the USDA forecast for the year, but it is a start.

 

Corn futures lost 1.14% this week. About all that can be said is that the rate of loss slowed from the previous two weeks. There was yet another poor weekly export sales report on Thursday. Old crop bookings were only 104,300 metric tonnes. Cumulative commitments are now 44% of the USDA forecast for the year. They would usually be around 57% by this time. A USDA cut in the export projection for the year is anticipated in the January WASDE report.

The soy complex was down 0.47% this past week. Export sales were still positive, but a Chinese cancellation announced the previous week limited the incremental gain in commitments. The sales pace is still well ahead of that needed to meet the USDA forecast, with 83% of the export bushels already committed. The 5 year average for this date would be only 72%. Weekly soybean meal sales were 124,700 MT, a bit of a slowdown from recent weeks. Despite the 50% hike in projected soy oil exports in the last monthly WASDE estimate, it appears that they are being conservative. Commitments are 77% of the revised number. The 5 year average is only 44%.  It is no secret that shipments are expected to slow dramatically next spring and summer. Brazilian growing weather continues to be mostly favorable for vegetative growth. Argentina remains on the wet side.

KC and CHI wheat futures continued to leak lower, down 1.9 and 1.7% respectively. Minneapolis was also 1.6% lower. The ongoing drought in the central US is a threat to US production in 2013, but soil moisture did improve as some snow and rain made its way into the central US. Old crop export sales for the week ending December 21 were much larger than expected at 1.004 MMT.

KC showed 5-6 cent pushes in protein basis bids for anything over 12.8% protein on Friday.

 

Cotton prices were down 2.05% for the week, giving up all of last week’s advance, and most of the week before. Cotton export sales were within trade expectations at 283,300 RB of upland cotton in 2012/13 and another 3,900 running bales for 2013/14. Pima sales hit 14,700 running bales. US cotton export sales commitments are 78% of the USDA projection for the year. That is running ahead of the 72% average for this date. Sales are doing well considering the rise in US prices over the past month and the record large global ending stocks forecast. US cotton acreage is expected to decline in 2013/14 due to comparatively high prices for competing field crops.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/07/12

12/14/12

12/21/12

12/28/12

Change

% Change

Mar

Corn

$7.37

$7.31

$7.02

$6.94

($0.08)

-1.14%

Mar

CBOT Wheat

$8.61

$8.14

$7.92

$7.79

($0.13)

-1.67%

Mar

KCBT Wheat

$9.10

$8.64

$8.42

$8.26

($0.16)

-1.93%

Mar

MGEX Wheat

$9.18

$8.85

$8.82

$8.68

($0.14)

-1.59%

Jan

Soybeans

$14.72

$14.96

$14.31

$14.24

($0.07)

-0.47%

Jan

Soybean Meal

$450.50

$460.10

$433.80

$427.70

($6.10)

-1.41%

Jan

Soybean Oil

$50.82

$49.63

$48.71

$48.94

$0.23

0.47%

Dec

Live Cattle

$125.88

$126.90

$129.28

$129.40

$0.13

0.10%

Jan

Feeder Cattle

$148.78

$153.08

$152.15

$152.03

($0.13)

-0.08%

Feb

Lean Hogs

$83.48

$85.40

$86.98

$86.38

($0.60)

-0.69%

Mar

Cotton

$73.79

$75.13

$76.22

$74.66

($1.56)

-2.05%

Mar

Oats

$3.98

$3.90

$3.65

$3.49

($0.16)

-4.32%

Jan

Rice

$15.27

$15.42

$15.21

$14.96

($0.25)

-1.64%

 

Cattle futures were up 13 cents for the week.  Weekly beef export sales were a strong 23,700 MT, with 11,000 MT to be shipped in the last 10 days of December and the balance for 2013. Weekly estimated slaughter was 476,000 head, compared to 633,000 head the previous week. Estimated carcass weight this week was 17 pounds larger than the actual number from last year, offsetting part of the reduction in slaughter numbers. Wholesale prices were higher this week, supported by the improved export interest. Choice boxes were up 40 cents, and Select was up $2.50 on a Friday/Friday basis. The Choice/Select spread narrowed $2.10 to $13.20.  In recent years it has dropped close to zero in the March time frame. Weekly beef production was up 9.9% from the same week in 2011, with total YTD production 1.3% smaller and broadly price supportive.

Hogs were down 0.69% this past week. Estimated weekly slaughter is 1.755 million head, down 25% from the preceding week. Weekly pork production was down more than 24% from the week before, due to holiday closures. It was also down 11.3% from the same week in 2011. YTD pork production is now only 1.8% larger than in 2011. Estimated carcass weights for this week were 2 pounds lower than last year’s 209 pound actual figure. The pork carcass cutout dropped 1.86% for the week. The USDA quarterly Hogs & Pigs report on Friday afternoon showed larger than expected hog numbers. The breeding herd was 100.2% of year ago, with All hogs at 100%. There was a dip in the lightest weight group, with the <50 pound pigs at 99.6% of year ago. USDA made several revisions to previous quarters to reconcile the numbers with slaughter data.

 

Market Watch:

 

Grain traders will begin the week looking at January futures deliveries or the lack thereof, for soybeans, soybean meal and soybean oil. USDA will be back to its regular weekly Export Inspections report on Monday, barring another executive order giving them the day off like the one issued for Christmas Eve. Futures will be closed on Tuesday in the US for New Years Day.  Weekly export sales, and likely the weekly EIA ethanol report, will be delayed until Friday release because of the holiday early in the week. Hog traders will be reacting to Friday afternoon’s Hogs and Pigs report, which included revisions of up to 1.5% in the summer numbers as well as new December 1 figures.

 

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. Visit our web site at https://www.bruglermarketing.com for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

Copyright 2012 Brugler Marketing & Management, LLC

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