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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.

Out Like A Lion

Mar 30, 2012

Brugler

Market Watch with Alan Brugler

March 30, 2012

Out Like a Lion

 

The traditional saying says that the month of March comes "in like a lion and out like a lamb". In other words, blustery early and warm and gentle late. The weather has been pretty weird this year, though!  The market weather definitely ended the month in lion mode, with huge daily gains on Friday following the USDA Prospective Plantings and Grain Stocks reports. While the reports had some explosive elements, the technical setup was also ripe for a big end of month jump out of oversold conditions, and that is what we experienced. Roar!

 

Corn futures dropped 2 cents per bushel for the week. Things were really ugly until the limit up move on Friday. Increased producer selling was a factor, but end of quarter profit taking was also apparent at times. A chart breakdown drew in fresh bears right before the slaughter. US export sales commitments are 77% of the USDA forecast for the year. The 5 year average commitment is 79%, so we appear to be on track to hit the USDA number. New crop corn continues to lose ground to soybeans in the revenue department, based on the soy/corn ratio. It was at 2.51:1 on Friday night. Historically, ratios over 2.3:1 start to attract swing acres to beans. Corn planting intentions at 95.9 million acres are the largest since 1937, if the rally in soybeans fails to change some minds. Old crop ending stocks are getting tight, however. The March 1 stocks of 6.01 billion bushels indicated that total second quarter disappearance was record large. If that pace continues, USDA will have to reduce projected ending stocks and move the stocks/use ratio closer to the all time record low set in 1995/96.

 

The wheat complex saw all three exchanges higher, although it was close for HRW in Kansas City. Much smaller than expected spring wheat acreage intentions tightened up the outlook for 2012/13 production and ending stocks. Spring wheat planting intentions were 11.976 million acres, when traders had been guessing 13.4 million. MPLS futures rose 2% for the week, all of it on Friday. The new spring wheat number brought expected US all wheat acreage down to 55.908 million for 2012.  Crop condition ratings for winter wheat are much better than last year in the Plains HRW states. Crop maturity is very much ahead of normal due to the warm temps.

 

Soybeans jumped 37 cents for the week. USDA reported 73.9 million acres intended for 2012, well below the 75.5 million acre average guess. That fired up the bulls and nearby futures were up 47 ½ cents on Friday alone. Soy oil rose 0.4% for the week after the big rally on Friday. Production estimates for Brazil continue to leak lower as the combines roll and the full extent of the drought damage is uncovered. The combined Brazilian and Argentine production estimates USDA put out a week ago are 349 million bushels smaller than the year before, and if the private estimates are correct that gap gets as much as 400 million bushels larger. The USDA global use projection is still 15 million bushels larger than last year, so the missing bushels have to come out of ending stocks or out of the US via increased export sales.

 

Cotton futures were up 3.89% for the week. Weekly export sales were acceptable, adding to total commitments which are now 110% of the USDA projection for the year. Outstanding sales currently on the books are 20% smaller than last year, but expectations are also diminished. US planting intentions as of March 1 were measured at 13.155 million acres, close to the trade average guess if you throw out a low ball estimate from Goldman Sachs.

 

 

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

03/09/12

03/16/12

03/23/12

03/30/12

Change

% Change

May

Corn

$6.43

$6.73

$6.47

$6.44

($0.02)

-0.39%

May

CBOT Wheat

$6.41

$6.72

$6.54

$6.61

$0.06

0.99%

May

KCBT Wheat

$6.84

$7.06

$6.95

$6.96

$0.02

0.25%

May

MGEX Wheat

$8.05

$8.23

$8.17

$8.34

$0.16

1.99%

May

Soybeans

$13.38

$13.74

$13.66

$14.03

$0.37

2.73%

May

Soybean Meal

$362.70

$374.40

$373.00

$388.70

$15.70

4.21%

May

Soybean Oil

$54.27

$55.50

$54.88

$55.10

$0.22

0.40%

Apr

Live Cattle

$126.03

$125.30

$124.50

$120.45

($4.05)

-3.25%

Mar

Feeder Cattle

$153.93

$153.40

$153.30

$148.83

($4.47)

-2.92%

Apr

Lean Hogs

$87.83

$85.88

$85.03

$83.43

($1.60)

-1.88%

May

Cotton

$88.80

$87.48

$89.63

$93.12

$3.49

3.89%

May

Oats

$2.88

$3.34

$3.33

$3.41

$0.08

2.48%

May

Rice

$14.15

$14.54

$14.60

$14.77

$0.17

1.13%

 

Cattle futures flirted with bullish thoughts on Friday morning, but ended up more than $2 lower. For the week, they were down $4.05 or 3.25%. Cattle have both a supply problem and a demand problem at the moment. The number of cattle available for slaughter is rising seasonally; aggravated by the surge in light weight placements forced into feedlots last summer because of the southern Plains drought. Those cattle are now finishing, and comparatively early because of benign spring weather. Estimated carcass weights are now 25 pounds above last March’s actual. Demand was hurt by the surge in wholesale prices into the $190’s. US consumers have always balked in that price range, and export customers also apparently took a pass.

 

Lean Hog futures were higher on Friday, but down 1.88% for the week. The pork carcass cutout value lost 0.2% on a Thursday/Thursday basis. Ribs were higher, but the other cuts lagged. Pork production year to date is up 0.6% from last year. Production this past week was 0.8% smaller than last week, but 0.3% larger than the same week in 2011. Production YTD is up 0.7%. Carcass weights are estimated at 209 pounds, which would be up 1# from the 2011 actual weight.  T

 

Market Watch: The hangover from the March 30 party will likely extend into Monday. Hog traders will also be reacting to the Hogs & Pigs report, which was released after the close on Friday evening. The main USDA reports this coming week will be Export Inspections on Monday and Export Sales on Thursday. The first weekly Crop Progress report of the season is expected to be released on Monday afternoon. Thursday will make the last trading day for April cattle options. US futures markets will be closed on Good Friday for the Easter holiday weekend.

 

 

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 2012 Brugler Marketing & Management, LLC

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