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RSS By: Alan Brugler,

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

Too Many Feed Grains?

Dec 14, 2012



Market Watch with Alan Brugler

December 14,2012


Too Many Feed Grains?


The global stocks/use ratio is record tight for corn, and the tightest in 4 years for wheat. You couldn’t have guessed that from the price action this week. Prices were very bearish in wheat after the WASDE report on Tuesday and we saw corn dragged down by association. It felt like there was too much feed available for the number of animals consuming it. A little drop in wheat prices triggered ideas of more wheat feeding. That would mean less corn feeding, and thus lower corn prices. USDA recognized lower than expected wheat export sales, while deferring any move in corn until January.  Of course, any surplus of corn supplies is contingent on USDA leaving production UNCH in the January crop report. There are still potential surprises in both production and 1Q feed use, but we won’t get that data until January.

Corn futures lost 1.9% this week after being down more than 2% the prior week. There was yet another poor weekly export sales report on Thursday. Old crop bookings were 258,900 MT, with another 13,700 MT of new crop (about a fourth of one Panamax ship). Weekly ethanol production fell back from the previous week, as did imports. However, ethanol stocks rose to 20 million barrels due to narrow blending margins and weak gasoline demand. Ethanol blend gasoline (E-10) dropped below $3.00 per gallon in Council Bluffs, IA.

The soy complex was up 1.6% this week, thanks to another very strong weekly export sales report that raised questions about US ending stocks for next summer. The sales pace is well ahead of that needed to meet the Tuesday USDA forecast, with 81% of the bushels already committed. USDA also increased projected domestic crush use by 10 million bushels. USDA increased projected US soy oil exports by 50% in one shot on Tuesday, reflecting the heavy sales made in mid-November. Weekly soybean meal sales were strong for the third week in a row. Soybean export bookings for the week ending December 6 were much larger than trade expectations, over 1.3 MMT. Total commitments are now 81% of the USDA forecast for the full year. The marketing year runs until August 31.

KC and CHI wheat futures both fell more than 5% as their December contracts moved to expiration on Friday. The ongoing drought in the central US is a threat to US production in 2013, but also on the other side of unknown winter snowfalls. It is supportive but not definitive.  Old crop export sales are definitive, and they haven’t been very good. USDA cut projected US exports by 50 million bushels on Tuesday, and those all flowed into leftover ending stocks. There is a fairly narrow window for the US to make big sales before new crop Argentine and Australian wheat become common in the world market. The US is competitive right now, finally making sales to Egypt and picking up some volume with Japan. The drop in prices this week should help move some other business forward.
















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 Cotton prices were up 1.8% this past week. Weekly export sales were softer than the week before, but USDA trimmed projected US production and increased projected exports for the 2012/13 marketing year by 200,000 bales. The projected ending stocks dropped to 5.4 million bales from 5.8 million. China is active in the market, despite holding major stockpiles of domestic production and imported Indian cotton. US cotton acreage is expected to decline in 2013/14 due to high prices for competing field crops. That is also supportive for deferred futures.

Cattle futures were up 0.8% for the week, with most of the gain on Friday. Weekly beef export sales for the week ending December 6 slowed. The consumer will be focused on ham and turkey in the next couple weeks, less so on beef. Weekly estimated slaughter was 632,000 head including Saturday. That would be 7,000 head below the previous week and 12,000 below year ago. We would appear to be backing up a few cattle in the lots. Estimated carcass weight this week was 24 pounds larger than the actual number from last year. Wholesale prices were stronger this week. Choice boxes were up 0.2% and Select was up 1.14% for the week on a Friday/Friday basis. Weekly beef production was 1.3% larger than the same week in 2011, but total YTD production has still been 1.4% smaller and broadly price supportive. Cash cattle trade on Friday afternoon was $124-124.50, about 50 cents higher than the previous week.

Hogs were down 0.36% this week. Estimated weekly slaughter is 2.304 million head, down 45,000 from the same week in 2011. Weekly pork production was down 2.3% from the post-holiday week, and also down 2.5% from the same week a year ago. Estimated carcass weights are down 1# from last year, having risen less rapidly than usual out of the fall low. Pork production YTD has still been 1.9% larger than last year, but is declining on a relative basis each week because average carcass weights are lower this year. The pork carcass cutout rose 0.27% from last week. Strength in picnics and bellies was countered by weakness in pork loins.

Market Watch:

The main reports this week will be in the livestock sector, with USDA releasing Milk Production on Wednesday, and both Cattle on Feed and Cold Storage on Friday. Friday will also mark the expiration of a huge number of options contracts in the financial sector, and also the January options for corn, wheat, soybeans, meal, oil, canola, rice and oats. Weekly export sales will also be of interest on Thursday morning, as well as the weekly Export Inspections numbers on Monday. The futures market will be open on Monday December 24 in an orphan session, closing at 12 or 12:15 pm for the Christmas Eve and Christmas holidays.

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 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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