Jul 26, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin


November 2008 Archive for Market Watch

RSS By: Alan Brugler, AgWeb.com

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

A Real Turkey

Nov 21, 2008
The markets didn’t wait until the 27th to turn in a turkey of a performance. Actually, a lot of the time lately it feels like the bullish market addicts have quit cold turkey. They are having withdrawal symptoms, but haven’t quite cleared all of that index fund bullishness out of their system yet. Those funds continue to unwind about 10-15,000 contracts per week in order to meet year end redemption requests of hedge fund clients, etc. For corn, options expiration also was a bummer, as nobody wanted to own long futures after expiration. The final “pin” was $3.38 1/2, leaving long Dec 340 calls worthless, along with the 350’s many had expected would be in the money. Needless to say, some who had sold Dec 340 puts to finance other options positions suddenly found themselves in danger of being exercised and had to buy their way out of the options at a loss.
 
Below is a table showing the net weekly change of selected agricultural futures contracts:
 
Market Watch
 
 
 
 
 
 
 
 
 
 
 
Wkly
Wkly
 
31-Oct
7-Nov
14-Nov
21-Nov
Change
% Change
Dec Corn
$4.02
$3.75
$3.80
$3.39
0.42
-10.98%
Dec CHI Wht
$5.36
$5.21
$5.54
$4.99
0.55
-9.97%
Dec KC Wht
$5.73
$5.68
$5.93
$5.34
0.60
-10.07%
Dec MGE Wht
$6.48
$6.40
$6.58
$5.87
0.71
-10.80%
Jan Soybeans
$9.33
$9.21
$8.96
$8.40
0.56
-6.25%
Dec Soy Meal
$273.00
$271.70
$265.50
$249.90
15.60
-5.88%
Dec Soy Oil
$33.60
$33.90
$32.60
$30.70
1.90
-5.83%
Dec Lv Cattle
$92.70
$92.80
$90.05
$84.90
5.15
-5.72%
Jan Fdr Cattle
$98.05
$99.23
$95.28
$89.40
5.88
-6.17%
Dec Ln Hogs
$54.80
$55.40
$55.57
$56.87
1.30
2.34%
Dec Cotton
$44.58
$42.07
$41.15
$40.99
0.16
-0.39%
Dec Oats
$2.32
$2.34
$2.16
$2.06
0.09
-4.41%
Jan Rice
$15.28
$15.19
$14.28
$13.32
0.96
-6.73%
 
Soybeans futures lost 56 cents on the week. The November soybean contract expired one week ago, leaving January as the front month. But soybeans were not alone in the complex with meal and bean oil losing nearly 6% for the week. Pressure from Wall Street and energies kept market bulls aside, giving bears all the momentum. Export sales were reasonable YTD but were 65% higher than the previous week, lending support to a weak market. Harvest should be near complete Monday when USDA releases their weekly crop progress report, due to better harvesting conditions and weather.
 
Wheat futures stumbled lower at all three exchanges, falling close to 10% for the week in nearby December futures contracts. US wheat bulls were unable to shrug off bearish fundamentals of world wide economic woes and a global record wheat crop, latest estimates surpass 680 MMT. Foreign wheat importers are passing on the more expensive US wheat and purchasing from other countries like Russia, which is flooding the market with their bumper production this year. The US Dollar continues to improve in value, creating homeland goods more expensive. 
 
Cotton futures finished marginally lower, thanks to an impressive rally at the close on Friday. Outside markets were major influences in cotton futures this week. Cotton lost less than ½ % for the week, December moved into delivery period Thursday and had a surprising 1720 notices issued on first notice day. Volatile equities, falling crude oil, and renewed strength in the US Dollar pressured prices for much of the week and limited any gains.
 
Cattle futures lost $5.15/cwt in nearby December for week. Rumors of a potential mad cow case in Texas sent traders into a frenzy, liquidating positions adding stress to an already vulnerable market. Current economic conditions create nervousness and uncertainty in wholesale beef prices and overall demand. Choice/Select spread is starting to widen suggesting improvement in demand. USDA indicated cattle on feed in November were only 93% of year ago, 89% October placements versus last year, and 97% marketings vs. October 2007. The trend remains in placing feeder cattle, feed lots are still placing heavier cattle rather than lighter weights. 
 
Hogs were the lone commodity from the above that posted weekly gains. Seasonal demand for hams has boosted pork carcass cutout values. Improvement in carcass value, better cash bids, and declining slaughter weights combined to helped Lean Hogs gain $1.30/cwt, jumping 2.34% for the week. Pork exports continue to underpin the market but declines in export sales since summer may turn trouble some for prices.
 
Market Watch: This will be another screwy week. Options expiration on Friday left a lot of people with “surprise” futures positions or a lack thereof. The corn “pin” in particular was at a different strike price than most had expected. After that, you have a short trading week due to Thanksgiving holiday on Thursday, and futures trade only until noon CST on Friday (yes they are trading on Friday). Friday will also be month end, which has caused some adjustments from spec fund types and asset allocation plays. Friday will also be first notice day for December contract deliveries on grains.
 
 
 
 
There is a substantial risk of loss in futures & options trading. Past performance is not necessarily indicative of future results.
 
Copyright 2008 Brugler Marketing & Management LLC. 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 Ag Market Professional or SRR subscription information or visit the web site @ www.bruglermktg.com.

Cracks in the Bear Wall

Nov 14, 2008
Corn and wheat were able to post higher closes this week. December Corn futures set a new low for the year on Tuesday, but rallied roughly 20 cents from that low by the end of the day on Friday. The net result was a 5 cent gain for the week despite another poor weekly Export Sales report (355,500 MT) on Friday morning.
 
Wheat was where the real bullish action was developing. CHI futures rose 6.38% for the week, with lesser gains of 4.45% and 2.73% at the other two exchanges. Goldman Roll selling kept December contracts on the defensive, but liquidity in the grains is sufficient to keep the impact of the position rolling less visible than in the cattle and hogs. Weekly wheat export sales were down 32% from the prior week, at only 248,300 MT. Bulls did get excited about a Japanese purchase, since they had been out of the market for more than a month because of food safety rule changes that were a major risk factor. Those rules were modified this past week, and Japan is now presumed to be short bought and likely to make larger purchases to make up for the lack of activity in October.
 
Below is a table showing the net weekly change of selected agricultural futures contracts:
 
Market Watch
 
 
 
 
 
 
 
 
 
 
 
Wkly
Wkly
 
24-Oct
31-Oct
7-Nov
14-Nov
Change
% Change
Dec Corn
$3.72
$4.02
$3.75
$3.80
0.05
1.29%
Dec CHI Wht
$5.16
$5.36
$5.21
$5.54
0.33
6.38%
Dec KC Wht
$5.47
$5.73
$5.68
$5.93
0.25
4.45%
Dec MGE Wht
$6.01
$6.48
$6.40
$6.58
0.18
2.73%
Nov Soybeans
$8.63
$9.25
$9.12
$8.78
0.34
-3.69%
Dec Soy Meal
$268.30
$273.00
$271.70
$265.50
6.20
-2.28%
Dec Soy Oil
$31.47
$33.60
$33.90
$32.60
1.30
-3.83%
Dec Lv Cattle
$87.55
$92.70
$92.80
$90.05
2.75
-2.96%
Nov Fdr Cattle
$93.83
$98.62
$98.95
$96.70
2.25
-2.27%
Dec Ln Hogs
$58.50
$54.80
$55.40
$55.57
0.17
0.31%
Dec Cotton
$46.49
$44.58
$42.07
$41.15
0.92
-2.19%
Dec Oats
$2.50
$2.32
$2.34
$2.16
0.19
-8.06%
Nov Rice
$14.41
$15.45
$15.17
$14.32
0.86
-5.64%
 
The soybean complex was lower for the week. November soybean futures expired on Friday with a net loss of 34 cents for the week. January futures were stronger on Friday, and have an 18 cent premium to where November went off the board. Weekly export sales were as strong as expected at 478,300 MT. However, that was down 47% from the previous week and Chinese purchases were smaller than in the past couple weeks at 207,800 MT. Of those, 55,000 MT were a switch from unknown and not a new sale. NOPA soy oil stocks were only 1.984 billion pounds as of November 1, despite a 23 million bushel increase in monthly crush. This implies strong domestic or export use. However, declining heating oil and diesel prices continued to put pressure on the veg oil’s value as a fuel molecule.
 
Cotton futures probed the lowest price levels since 2002, but came back strong on Thursday and held most of that gain on Friday. Early week weakness was tied to declining world cotton consumption estimates, including those in USDA’s monthly WASDE report. Weekly export sales were neutral, but bulls drew a little inspiration from shipments. The Thursday bounce in the Dow Jones averages provoked short covering in December cotton, with a brief hope of more consumer demand. The 338 point drop in the Dow on Friday took a lot of the shine off of that belief. Major retailers were also reporting very poor sales results for October. The USDA loan program is the de facto cotton market right now, with the LDP over 15 cents per pound.
 
Cattle futures had a tough week, despite seeing strong price increases for beef at the wholesale level. The choice cutout ended the week at $157.02. Index funds were doing their monthly roll out of December into February, and that selling pressure on the December contract until Friday. Cash trade was at $93 in the south and $92 in the north this week, $1 below the previous week.
 
Hogs eked out a 17 cent net gain for the week despite a late week fade in the value of the cutout. December futures now have a premium to the CME Lean Hog Index after trading at a $3-4 discount for most of October. Market runs are still seasonally large, but below the levels suggested by the September Hogs & Pigs report.
 
Market Watch: With Thanksgiving being late this year, the market has another full week of activity before getting the interruption of a short week. We get the usual Export Inspections and Crop Progress reports on Monday, with soybean harvest just about done and corn likely in the 80-90% range. Census will release the monthly Crush report on Thursday, along with Cotton Consumption. Thursday will also be the last trading day for November Feeder Cattle and first notice day for deliveries against December cotton. USDA gets back in the act on Friday afternoon with the monthly Cattle on Feed and Cold Storage reports. Friday will also be the last trading day for December options on the grain futures.
 
There is a substantial risk of loss in futures & options trading. Past performance is not necessarily indicative of future results.
 
Copyright 2008 Brugler Marketing & Management LLC. 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 Ag Market Professional or SRR subscription information or visit the web site @ www.bruglermktg.com.

Bulls Have Little Leverage

Nov 07, 2008
Corn prices are still trying to put in a harvest low, having failed to decisively do so in October. The problem is still the level of index fund investment, which as it declines is putting selling pressure on prices that normally isn’t there in mid-November. Friday’s CFTC report showed another 5,532 contract drop in the net index fund long in the most recent report week. Export sales commitments have also been lagging year ago by a considerable amount, although they are on track with USDA’s lower expectations for 2008/09. Broiler egg sets were down 10% in the most recent report, a cut back sponsored by credit problems as much as by feed costs. Corn futures were still more than a dime above the lowest October trade, but a lower weekly close after a higher close last week was not the way to build a rally.
 
Below is a table showing the net weekly change of selected agricultural futures contracts:
 
Market Watch
 
 
 
 
 
 
 
 
 
 
 
Wkly
Wkly
 
17-Oct
24-Oct
31-Oct
7-Nov
Change
% Change
Dec Corn
$4.03
$3.72
$4.02
$3.75
0.26
-6.50%
Dec CHI Wht
$5.66
$5.16
$5.36
$5.21
0.15
-2.84%
Dec KC Wht
$5.98
$5.47
$5.73
$5.68
0.05
-0.87%
Dec MGE Wht
$6.40
$6.01
$6.48
$6.40
0.07
-1.16%
Nov Soybeans
$8.94
$8.63
$9.25
$9.12
0.14
-1.48%
Dec Soy Meal
$258.20
$268.30
$273.00
$271.70
1.30
-0.48%
Dec Soy Oil
$35.50
$31.47
$33.60
$33.90
0.30
0.89%
Dec Lv Cattle
$92.55
$87.55
$92.70
$92.80
0.10
0.11%
Nov Fdr Cattle
$98.65
$93.83
$98.62
$98.95
0.33
0.33%
Dec Ln Hogs
$56.30
$58.50
$54.80
$55.40
0.60
1.09%
Dec Cotton
$52.57
$46.49
$44.58
$42.07
2.51
-5.63%
Dec Oats
$2.82
$2.50
$2.32
$2.34
0.03
1.25%
Nov Rice
$15.23
$14.41
$15.45
$15.17
0.28
-1.81%
 
Soybean futures lost 14 cents on the week. They got help from soy oil, which performed quite well in the face of sloppy energy markets. However, soybean meal was down $1.30/MT and could have been down much more if it had tracked Chinese futures more closely. Livestock feed demand in China has been screwed up by the melamine contamination problems (deliberately added to boost protein test readings).
 
Wheat is struggling to encourage demand. High prices last winter damaged demand in a number of ways, and also stimulated record world production estimated at 677-683 MMT by FAO, IGC et al. Feed use is expected to regain all of the loss from last year and some more. That is in fact needed to dispose of the larger crop, but requires prices to be competitive with corn and other coarse grains net of freight costs.
 
Cotton sank to 6 year lows this past week. The global economic slow down hits textile demand pretty hard, as consumers “shop in their closet instead of the store”. On Friday US unemployment was reported at 6.5%, the worst since the middle of the Clinton administration. The US dollar posted a net gain for the week, not seen as supportive to export competitiveness. Export sales for the previous week, when the dollar was weaker, were stronger than the trade had expected.
 
Cattle futures were up one thin dime for the week after peaking out on Tuesday. Wholesale prices firmed up, and packers paid up for the cattle. Choice boxed beef quotes were up $8.04/cwt. for the week. This may have more to do with tighter cattle supplies than it does with lower gasoline and more jingle in consumer pockets. It is welcome in either event.  The Goldman roll had a definite impact on its first day, with the Feb/Dec spread widening 92 cents on Friday. That activity (selling Dec and buying Feb) is expected to continue through the 9th trading day of the month, which is Thursday. It doesn’t always mean lower nearby futures, but it will if other players fail to find reasons (or the cash) to resist it.
 
Hogs were up 60 cents for the week, as measured by the Dec contract. Pork belly futures were up sharply on Friday, hoping for a repeat of the firmer tone in the pork cutout on Thursday. That wasn’t going to happen, with the cutout down 53 cents on Friday to $56.27. Fresh bellies were quoted 95 cents lower. The Goldman Roll held back December compared to February and the 2009 contracts, but Dec benefitted from its discount to cash and got a little short covering rally going.
 
Market Watch: We start off the week with USDA Crop Production and WASDE reports at 7:30 am CST on Monday. The trade on average is looking for USDA to revise ending stocks estimates for all the major crops, despite revisions that were just made on October 28 in the “special” crop report.
USDA will have their regular crop progress report on Monday afternoon. The cotton market will also be dealing with no options protection in the December futures, since those options expired on 11/7. NOPA crush will be released on Friday. Weekly export sales from USDA are also expected to be delayed until Friday because of the Veteran’s Day holiday on Tuesday. Friday will also be the last trading day for November 2008 soybeans and rice.
 
There is a substantial risk of loss in futures & options trading. Past performance is not necessarily indicative of future results.
 
Copyright 2008 Brugler Marketing & Management LLC. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited.
 
Log In or Sign Up to comment

COMMENTS

 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions