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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.

No Foolin'...The Bulls Are Still Alive

Apr 01, 2011

Market Watch with Alan Brugler

April 1, 2011

No Foolin, The Bulls Are Still Alive

 

The calendar has turned to April and a young man’s thoughts turn to ....spring planting!  Well, at least for the two million folks USDA classifies as farmers in the United States. For the rest of the world, the focus is about what it was in March. Regime change is still in the air in the Middle East, which has crude oil trading above $107 and cash again headed to the sidelines for the weekend. The rising energy prices and a weaker US dollar boosted a number of commodities, and shifting fundamental news did the rest. The bulls are running in nice green pasture.

 

Corn posted a third consecutive higher weekly close, up 47 cents thanks to a limit up move on Thursday and another strong performance on Friday. USDA fed the bull some nitro, with the March 1 Grain Stocks report showing only 6.522 billion bushels still in inventory. That was below trade estimates by 167 million bushels, and requires the market to slow use at least 2% below last year’s second half, just to keep ending stocks at USDA’s current 675 million bushel forecast. Since second quarter use was up 9.7% year over year; that means standing on the usage brakes, not just tapping them here and there. The weekly export sales total of 1.9 MMT, the largest of the year, shows that even a two week price correction gives end users the signal to keep on buying. The Planting Intentions report on Thursday was generally expected to show 91-93 million acres, and USDA delivered at 92.178 million.

 

The soybean complex was higher this past week. Soybean futures were up 36 cents for the week. Meal futures were boosted by the rise in corn and DDG prices. Soy oil was up 3.24%, buoyed by tighter than expected Census soy oil stocks that implied more biodiesel use. Global veg oil use for biodiesel is also rising, with Argentina and Brazil confirming rising domestic use.  The USDA Grain Stocks report on Thursday put March 1 soybean inventory at 1.249 billion bushels. That was about 40 million bushels below the average trade estimate, and implied a large residual use for the quarter. Futures were up 35 cents or so on Thursday because of that tighter stocks estimate. Soybean planting intentions were below the average trade guess at 76.609 million acres, but some recent private surveys had suggested only 75 million, so there was some backlash on Friday.

 

Wheat bulls found their footing after a multi-week slide, and built gains of 3 to 6% this week to close higher for the third week in a row.  KC futures were the strongest, as crop condition ratings for most of the HRW production states continued to decline, taking production prospects with them. The USDA Grain Stocks report was seen as modestly bearish at 1.425 billion bushels. The Other Spring Wheat acreage intentions were also well above trade expectations at 14.427 million. That nicked MPLS futures on the spreads, but the continued snow cover across much of spring wheat country raised questions about whether producers are really going to be able to get all that wheat planted.

 

Cotton futures were down a sharp 4.37% after being up 2.7% the previous week. Old crop stocks are tight, weekly export sales are still running larger than anticipated, and domestic mill use is showing improvement as the US economy strengthens. US unemployment dropped to 8.8% in March from 8.9% in February. Trade guesses for US planting intentions ran from 12.8 to 13.3 million acres, but USDA found fewer acres than that. March intentions were only 12.566 million acres, below the NCC survey intentions from back in January. All states showed increased plantings, just not as large of an increase as the market had convinced itself was coming. We believe the gap between USDA and trade perceptions is primarily due to acres that are currently still in poor looking winter wheat, or so dry that the producer wasn’t willing to commit to cotton without a change in the weather pattern.

 

 

Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

03/11/11

03/18/11

03/25/11

04/01/11

Change

% Change

May

Corn

$6.64

$6.84

$6.90

$7.36

0.47

6.74%

May

CBOT Wheat

$7.19

$7.23

$7.33

$7.60

0.26

3.58%

May

KCBT Wheat

$8.23

$8.43

$8.55

$9.07

0.51

6.02%

May

MGEX Wheat

$8.59

$8.68

$8.81

$9.23

0.41

4.71%

May

Soybeans

$13.35

$13.63

$13.58

$13.94

0.36

2.61%

May

Soybean Meal

$350.00

$367.90

$357.20

$360.90

3.70

1.04%

May

Soybean Oil

$55.90

$55.77

$56.84

$58.68

1.84

3.24%

Apr

Live Cattle

$117.13

$111.65

$118.60

$122.08

3.48

2.93%

Apr

Feeder Cattle

$134.53

$129.18

$133.73

$138.10

4.38

3.27%

April

Lean Hogs

$88.15

$88.33

$92.48

$94.23

1.75

1.89%

May

Cotton

$204.94

$199.12

$204.49

$195.55

8.94

4.37%

May

Oats

$3.51

$3.52

$3.49

$3.75

0.26

7.45%

May

Rice

$13.01

$13.64

$14.30

$13.81

0.48

3.39%

 

Cattle futures set new record highs this week, and by Friday night they were up 2.93% for the week. Cash cattle set record levels, with southern cattle trading at $122 to $123 and Nebraska trading at $200.00 in the dressed.  Wholesale prices are not yet at the highs seen in 2003, when Choice boxes reached $200.03. The Choice was up $1.59 for the week on a Thursday/Thursday basis but was still at $188 and change.  Weekly beef export sales were 15,300 MT.

 

Hog futures were $1.75 higher. The pork cutout value was up 2.33% for the week on a Thursday/Thursday basis, with pork bellies showing a big gain. Back month hog futures showed big gains, with traders betting that high feed costs will trim summer farrowing intentions and/or cut average slaughter weights. Both result in smaller total pork production and could mean higher prices if demand holds up. Pork production for the year to date is up 0.7% from last year, which makes the strength in the pork prices all the more notable.

 

Market Watch:  The calendar has turned to April, and a lot more North American farmers will be getting planters out of the machine shed. Cattle traders will be dealing with the effects of record high prices last week, and some unexpected April options exercises on Friday.  Monday is first notice day for April cattle futures deliveries, and Friday will be the last trading day for May cotton options. USDA’s main report for the week will be the monthly WASDE supply/demand report on Friday morning. That report will reflect all of the changes required by the Grain Stocks data, but USDA will usually not issue 2011 crop production estimates and S&D tables until May.

 

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.  

 

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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