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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.

More Bread

Oct 29, 2010

 

Market Watch with Alan Brugler
October 29, 2010
More Bread
 
Wheat futures took over the bull leader position. Maybe the cotton and corn and soybean bulls were just tired! Anyway, KC futures were up 7.2% for the week and the CBT and MGE markets were close behind. Weekly export sales were supportive, with over half being spring wheat. The rally got its legs when USDA reported the poorest initial crop condition rating for winter wheat since the early 1990’s. This reinforced fears that the dry weather seen all fall in the central U.S. is hurting stands and could limit yield potential in 2011. However, our analysis shows a very weak correlation between fall condition ratings and subsequent spring yields. The key yield development period is after the crop greens up in the spring.
 
Corn recovered from its lower weekly close a week earlier, posting a 3.93% gain and taking away any arguments of a developing downtrend. Harvest is winding down in many areas, so supply is fading as an issue and demand rationing is getting more attention. There is great industry debate about what USDA will show for U.S. average corn yield in the November crop report. Harvest is just now hitting some of the best corn (relative to average yields) in the country, which could limit downward adjustments. On the other hand, some traders believe that Iowa’s yield may be as much as 5 bushels below the most recent USDA estimate. Corn use for ethanol continues to be strong, with average daily production over the past month at an all time high. Despite ethanol futures prices that are above gasoline, ethanol use remains strong and so are ethanol exports. There are at least temporary signs of price rationing in the livestock sector and the export sector.
 
Soybeans added another 2.2% to their multi-week rally, with similar 2.06% and 2.07% gains in the meal and oil. Weekly export sales were very strong for the week ending October 21, at 2.026 MMT. That’s 74.4 million bushels. To meet USDA’s forecast for the year, China needs to buy 38.8 million bushels per week somewhere in the world. With cheap basis new crop supplies now available, the U.S. is the source of choice for the next few months.
 
Cotton again set new modern era highs during the week, peaking at 130.50 on Tuesday before succumbing to profit taking and some mill resistance to paying these breathtakingly high prices. USDA’s smallish weekly export sales number for the week ending October 21 suggested that some resistance is being seen to prices over $1 per pound. December cotton options also expire in a couple weeks, and the market is volatile enough to make traders nervous about being in there without options protection. On Thursday, USDA announced that the Average World Price or AWP set an all time high of 119.30.


 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
10/08/10
10/15/10
10/22/10
10/29/10
Change
% Change
Dec
Corn
$5.28
$5.63
$5.60
$5.82
0.22
3.93%
Dec
CBOT Wheat
$7.19
$7.05
$6.71
$7.17
0.47
6.93%
Dec
KCBT Wheat
$7.59
$7.45
$7.19
$7.71
0.52
7.23%
Dec
MGEX Wheat
$7.65
$7.54
$7.28
$7.77
0.49
6.66%
Nov
Soybeans
$11.35
$11.85
$12.00
$12.26
0.27
2.21%
Dec
Soybean Meal
$316.20
$328.20
$330.90
$337.70
6.80
2.06%
Dec
Soybean Oil
$46.62
$47.77
$48.30
$49.30
1.00
2.07%
Dec
Live Cattle
$98.88
$100.13
$101.70
$98.83
2.88
2.83%
Nov
Feeder Cattle
$107.65
$109.38
$112.55
$110.33
2.22
1.98%
Dec
Lean Hogs
$73.85
$68.90
$70.65
$66.20
4.45
6.30%
Dec
Cotton
$107.17
$109.87
$119.71
$125.26
5.55
4.64%
Dec
Oats
$3.69
$3.70
$3.57
$3.68
0.11
3.08%
Nov
Rice
$13.25
$13.59
$14.24
$14.43
0.19
1.33%

 
Cattle futures dropped back to about where they were 3 weeks earlier. The net loss for the week was 2.83%. Cash cattle trade broke out early in the week at $100, about $2 weaker than the prior week. Boxed beef prices were actually up 1% for the week on a Thursday/Thursday basis, but the expiration of the October futures contract, fund rolling out of the December and other mechanical issues limited the ability of futures to rally.
 
Hogs were the largest losers for the week, down 6.3%. Seasonal pressure on prices has developed as the fall hog run has expanded. Average carcass weights have risen, whether due to favorable weather, better quality feed, or producer attention on grain harvest at the expense of prompt marketing. Coupling the largest weekly slaughter of the year with higher average weights created a surplus of pork that needed to be moved and a backlog of hogs and products sufficiently large for packers to take down bids in a big way. On a Thursday/Thursday basis, the pork carcass cutout value was down more than $3.00.
 
Market Watch: The calendar turned to November, and market attention for the grains turns to the November 9 USDA crop report and accompanying WASDE estimates. November soybeans and November rice are into the delivery process. There are no major USDA reports expected this week, just the usual Crop Progress and Export Inspections reports on Monday and the Weekly Export Sales report on Thursday morning. It should also be noted that the Fed Open Market Committee will meet on Tuesday and Wednesday. Tuesday is also, of course, Election Day in the United States. The issue will be whether the Democratic party retains control of the House, the Senate or neither. Direct market impacts are extremely difficult to foresee, due to the long term nature of the political process.
 
Looking for professional help with your agricultural marketing decisions? Consider subscribing to our daily Ag Marketing Professional service or Special Research Reports. Call our office for details at 402-697-3623, or visit www.bruglermarketing.com. Ask also about our Harvest Special subscription price for Ag Marketing Professional, good only for those subscribing between November 1 and November 15 and only for AgWeb Market Watch readers. You must mention the keyword “MW2010”.
 
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
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