Jul 30, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin


August 2009 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.

Hogs on a Hot Streak?

Aug 28, 2009

 

Market Watch Summary with Alan Brugler & Kyung Ra

August 28, 2009

 

Hogs on a Hot Streak?

 

It’s been a while since we’ve been able to talk about Hogs as one of the bull leaders for the Ag commodities.  They earned it this week, with October futures trading at the highest price since August 5.  The lean pork cutout, a composite of the values of the major primal cuts sold by packers from a hog, jumped to $58.57 on Thursday, and was up $7.24 from the low of the year set just 9 days earlier at $51.33.  Labor Day feature interest by retailers helped firm up the market, along with some school lunch program buying and suspected export interest.  Bears were still looking at historically high carcass weights, and the expected seasonal increase in 4th quarter slaughter.

 

Soybeans also had a strong bullish week, with most of the advance confined to the nearby September contract.  The Census Crush report on Thursday showed slightly larger monthly crush than expected (but well below the previous month).  The July 31 soybean meal stocks dipped below 350 thousand tons because the smaller crush tightened up supplies and forced the industry to draw on inventories.  That tightening was reflected this week in a sharp jump in September meal futures, with crushers having trouble originating old crop beans to squeeze and end users needing to book coverage.  Futures shorts were also buying back positions ahead of first notice day because they couldn’t obtain receipts to deliver.  Soy oil was a drag on the product value, with biodiesel use down and July 31 stocks over 3.3 billion pounds.  In addition to the bullish meal story, China continued to buy new crop soybeans aggressively, with another 2 cargoes announced on Friday under the USDA daily reporting system.

 

Corn was down 0.23% for the week, but essentially in a trading range.  On the one hand, private estimates are calling for record US average yields and the second largest crop on record if the weather holds.  That’s the bear argument.  On the other hand, there are several cold fronts projected to come through vulnerable areas of the northern US.  As the days shorten and the polar air mass cools, the risk of temperatures below freezing hitting some portion of the crop increases.  By some estimates, as much as one billion bushels could be affected by a broad, early freeze.  Our number is smaller than that, as we believe a chunk of the latest corn is destined to be silage corn and not counted in the harvested for grain acreage.

 

Wheat futures in CHI rallied smartly on Monday and Tuesday, aided by end of month profit taking, spread unwinding, and a successful export sale to Egypt.  The market was having trouble holding the gain though, with the International Grains Council boosting projected world wheat production to 662 million metric tons and several Australian banks re-affirming their production estimates for Australia in the 22-23 million metric tons range.

 

Cotton lost ground for the week, down 0.27 %.  Census data on Thursday put the annual 2008/09 US domestic mill use at 3.61 million bales, just fractionally above USDA’s August WASDE forecast.  Use was still down 21.57% from the previous year, making the US ever more export dependent.  Weekly export sales were stronger than expected, but China is still importing at a very low level because of large domestic stocks.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

Market Watch

 

 

 

 

 

Weekly

Weekly

 

07/31/09

08/07/09

08/14/09

08/21/09

08/28/09

Change

% Change

September Corn

$3.40

$3.22

$3.19

$3.22

$3.21

-0.01

-0.23%

September CBOT Wheat

$5.28

$4.90

$4.82

$4.60

$4.67

0.07

1.47%

September KCBT Wheat

$5.59

$5.25

$5.09

$4.94

$5.00

0.06

1.27%

September MGEX Wheat

$6.05

$5.73

$5.49

$5.32

$5.22

-0.11

-1.97%

September Soybeans

$10.44

$10.91

$10.23

$10.23

$11.36

1.13

11.02%

September Soy Meal

$332.50

$344.20

$319.40

$333.00

$387.00

54.00

16.22%

September Soy Oil

$35.24

$36.92

$37.18

$36.33

$36.07

-0.26

-0.72%

August Live Cattle

$84.70

$83.85

$84.65

$85.00

$84.65

-0.35

-0.41%

September Feeder Cattle

$102.55

$100.98

$100.20

$100.70

$98.15

-2.55

-2.53%

October Lean Hogs

$53.90

$44.90

$44.65

$47.85

$48.07

0.22

0.46%

October Cotton

$57.93

$60.53

$59.21

$56.45

$56.30

-0.15

-0.27%

September Oats

$1.98

$1.99

$2.01

$2.05

$2.11

0.06

2.80%

September Rice

$13.77

$13.87

$13.30

$13.13

$13.51

0.39

2.93%

 

Live Cattle futures declined by 0.41% for the week, but only in the August contract.  The back months were losing their premiums to the nearby amid doubts about late in the year export sales potential and post-Labor Day demand.  August saw some deliveries against the futures contract, implying futures were high vs. cash, but at the end of the week cash cattle were trading at $84-85 and a dollar higher for the week.  August futures were in the same vicinity and prices didn’t have to change much to adjust to the cash.

 

October Crude Oil futures for the week closed near $73 per barrel, after reaching a high at $75 on Tuesday, and dropped to a low at $70.60 on Thursday.  The US dollar index pretty much traded sideways this week within a choppy range.  Economic indicators this week were mixed as uncertainty in consumer confidence kept any bullish news and the major US stock markets at bay.

 

Market Watch:  Monday will be first notice day for September grain futures contracts.  No deliveries are currently expected against September soybeans or soybean meal, and it would be surprise if there were.  There will again be interest in the weekly crop progress numbers in Monday night’s USDA report, with particular attention on the % of the corn crop reaching dent stage or maturity.  The % of the crop setting pods and/or dropping leaves will also be important, as traders try to assess how much of the crop is vulnerable to a normal freeze date.  Friday will be the last trading day for September cattle options.  It will also be the last trading day before the Labor Day holiday, and a number of traders will likely be absent.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.

© 2009 Brugler Marketing & Management, LLC

US Export Demand Plus a Falling Dollar

Aug 21, 2009

 

 

Market Watch with Alan Brugler and Kyung Ra

 

Week Ending August 21, 2009

 

US Export Demand plus a Falling Dollar

 

This week crude oil rose $7.14 per barrel from Monday to Friday.  Along with a higher crude oil, the US Dollar Index saw a 125.5 point drop for the week.  Weakness in the US dollar allows US exports to have a price advantage over foreign goods.  With this help, corn and soybean exports continue to have strong demand.  Monday, the USDA reported weekly export inspections for corn and soybeans at nearly 40.88 million bu and 5.62 million bu, respectively, which was better than expected by traders.  Thursday the USDA reported weekly export sales for corn and soybeans at nearly 1.43 million MT and 858,000 MT, respectively, which also beat trade estimates. 

 

China’s appetite for US soybeans continued this week.  A total of 896,000 MT of US soybeans were purchased.  Though this week’s purchases were for 2009/100 delivery, they lent a supportive tone to both old crop and new crop soybean futures. The most recent NOPA report indicated this: soybean crushing was down in July which led to a decrease in monthly soy meal production and is leading to the firmer basis. Tightness in the deliverable-grade soy meal supply also lent a bullish tone for September meal futures.

 

Soybean oil futures were the only contract in the soy complex that didn’t have a net weekly gain.  Lower than expected export sales of soy oil, trading activity in Malaysian palm oil, and a continuing large domestic supply of soy oil weighed on the contract.  Supportive factors from soybeans, soy meal, and crude oil limited some of the downside moves.  On Friday Statistics Canada reported a larger than estimated decline in 2009 canola production at 9.54 million metric tons.  This caused soy oil futures to rally on Friday, but they still ended the week in negative territory.

 

The 2009 Pro Farmer tour occurred this week, and it affirmed through its forecast that this season’s corn and soy crop will be close to the USDA projections.  On Friday Pro Farmer estimated 2009 corn production at 12.807 billion bu, with an average yield at 160.1 bushels per acre. This estimate is NOT directly derived from the crop tour data. 2009 soybean production was forecasted at 3.15 billion bu, with an average yield at 41.0 bpa.  The figures for the corn crop fell above the August USDA projections, while the figures for the soybean crop were close to that of the USDA.  One factor that can greatly affect the outcome will be weather.  Speculation concerning an early frost this fall continues due to the recent string of cooler, below normal temperatures this summer and late plantings this spring.

 

Wheat futures continue to succumb to the ongoing sentiment of ample global wheat supply and weak US wheat export demand.  Though spillover activity from other grains and a weaker US dollar lent some support, wheat contracts continued their downward slide. On Friday, Statistics Canada estimated 2009 Canadian wheat production at 23.61 million metric tonnes, which fell above trade expectations. Some potential improvements in wheat’s outlook took place this week. The impact of drought in parts of India, Argentina, Ukraine and Russia has the potential to boost the US market share in exports. 

 

The table below lists the Friday’s close of selected commodity futures for the past four weeks as well as this week’s net changes.

 

Market Watch

 

 

 

 

Weekly

Weekly

 

07/31/09

08/07/09

08/14/09

08/21/09

Change

% Change

September Corn

$3.40

$3.22

$3.19

$3.22

0.02

0.78%

September CBOT Wheat

$5.28

$4.90

$4.82

$4.60

-0.22

-4.46%

September KCBT Wheat

$5.59

$5.25

$5.09

$4.94

-0.15

-2.90%

September MGEX Wheat

$6.05

$5.73

$5.49

$5.32

-0.17

-3.14%

September Soybeans

$10.44

$10.91

$10.23

$10.23

0.01

0.05%

September Soy Meal

$332.50

$344.20

$319.40

$333.00

13.60

4.26%

September Soy Oil

$35.24

$36.92

$37.18

$36.33

-0.85

-2.29%

August Live Cattle

$84.70

$83.85

$84.65

$85.00

0.35

0.41%

August Feeder Cattle

$102.35

$101.35

$100.70

$100.15

-0.55

-0.55%

October Lean Hogs

$53.90

$44.90

$44.65

$47.85

3.20

7.17%

October Cotton

$57.93

$60.53

$59.21

$56.45

-2.76

-4.66%

September Oats

$1.98

$1.99

$2.01

$2.05

0.04

1.86%

September Rice

$13.77

$13.87

$13.30

$13.13

-0.18

-1.32%

 

Live cattle futures ended the week in positive territory, but feeder cattle contracts ended on the downside.  Positioning ahead of the USDA Cattle on Feed report was a feature.  Uncertainty of the pace of economic recovery in the US held the cattle complex at bay.  Increase in weekly jobless claims reflected a reduced demand for beef, which affected wholesale beef prices and in turn affected cash cattle trading.  Some improvements in US beef exports lent a supportive tone where monthly US exports for June at nearly 174 million pounds were higher compared to the previous month and weekly beef export sales at near 11,440 metric tons were also higher. The Cattle on Feed report showed much larger than expected July placements on feed, at 113% of year ago. The trade had been looking for 107%. Because of this, the August 1 inventory was larger than expected at 98% of year ago.

 

Lean hog futures finished the week higher compared to the previous week.  Recovering from a low of $51.33 per cwt in the average wholesale pork price on Tuesday, pork prices improved on wholesale demand ahead of the Labor Day holiday weekend.  A joint effort of Statistics Canada and the USDA indicated that the combined hog supply on June 1 of this year had the largest, negative percentage change since June of 2003.  This along with Friday’s USDA report of total frozen pork held in cold storage for July at nearly 574.33 million pounds indicate that though the hog supply may be at multi year lows, existing pork supply is still exceeding demand.

 

Market Watch: Key commodities reports coming up this week:  monthly US Census Oilseed Crushing & Cotton Mill Consumption – Thursday, beyond the usual weekly reports by the USDA on Monday (export inspections and crop progress) and on Thursday (Export Sales). On tap for next week also are some key economic reports:  Consumer Confidence – Tuesday, Durable Goods & New Home Sales – Wednesday, 2nd Quarter GDP & Jobless Claims – Thursday, and Personal Income – Friday.

 

Past performance is not indicative to future results.  Trading in futures and option on futures involve risks.

 

© 2009 Brugler Marketing & Management, LLC

The Big Hangover

Aug 14, 2009

           

 

Market Watch Summary with Alan Brugler

August 14, 2009

 

The Big Hangover

 

There was a lot of hype leading up to the August 12 USDA reports, with traders in several markets looking for price direction and an indication of 2009 production. While it wasn’t necessarily the party of the year, the markets were acting a little drunk ahead of the report, zigzagging around on positioning moves. Now that the reports are out, the grains appear to have a big hangover. The initial happy time (closing higher on report day) dulled quickly as corn, beans and wheat all headed lower on Thursday and Friday. Now it is a tough slog until Labor Day weekend, the traditional time to start seriously worrying about early frosts and actual harvest progress.

 

Corn futures were down a net 3 cents for the week, as a positive “buy the fact” reaction to Wednesday’s crop report quickly deteriorated into estimates for even larger production numbers in September. Doubts about livestock use of corn also became more pronounced as the hog market was under pressure during the first part of the week. The USDA report itself was a tinge bearish because USDA hiked projected average yield over 159 bushels per acre and didn’t reduce the planted acreage from the July report as the diehard bulls had insisted would be necessary following the re-survey effort.

 

Soybeans held up through the crop report fairly well, but collapsed on Thursday and Friday. August expired with an ignominious face plant, losing more than 87 cents on Friday. This was triggered by overnight delivery notices against the contract that apparently caught some longs flat footed. Basis retreated sharply in some markets, also raising questions about crush demand. The NOPA report on Friday morning showed a 32% drop in NOPA soy meal exports from June to July. Bean oil stocks were actually a bit smaller than the trade estimates, but weakness in the energies weighed on bean oil futures. NOPA’s actual monthly crush number was 120.92 million bushels. The USDA report itself put soybean ending stocks at 210 million bushels for 2010, down from the previous estimate because USDA trimmed the projected yield to 41.7 bushels per acre from 42.6 bushels. That reduced the production estimate despite an upward revision in planted acres. New crop Nov beans were down 57 cents for the week.

 

Wheat futures lost 1.5% to 4.06% for the week. Minneapolis was the largest loser because USDA sharply hiked the spring wheat production estimate on Wednesday. Higher yields and production were expected following the Wheat Quality Tour, but the extra bushels created a problem in the world market. World ending stocks estimates are still rising, and the US is still competing unsuccessfully with other origins for the wheat export business that is out there.  Lower prices are the answer, but it is a race to the bottom.

 

Cotton futures were down 2.3% for the week. The entire loss of 132 points came on Friday, with October futures plunging the full 300 point (3 cents/pound) daily limit. Earlier in the week, prices had briefly reached 10 month highs but a lack of fresh buying interest at that level doomed the move. The University of Michigan consumer sentiment index came in well below expectations, and knocked cotton back because hoped for back-to-school sales might be smaller if the buying public is in that bad of a mood about spending money.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

Market Watch

 

 

 

 

Weekly

Weekly

 

07/24/09

07/31/09

08/07/09

08/14/09

Change

% Change

September Corn

$3.16

$3.40

$3.22

$3.19

-0.03

-0.87%

September CBOT Wheat

$5.16

$5.28

$4.90

$4.82

-0.08

-1.50%

September KCBT Wheat

$5.49

$5.59

$5.25

$5.09

-0.17

-3.05%

September MGEX Wheat

$5.92

$6.05

$5.73

$5.49

-0.24

-4.06%

August Soybeans

$10.21

$11.34

$11.85

$11.00

-0.85

-8.28%

August Soy Meal

$323.20

$361.00

$374.50

$380.00

5.50

1.70%

August Soy Oil

$33.89

$35.06

$36.78

$37.18

0.40

1.18%

August Live Cattle

$84.52

$84.70

$83.85

$84.65

0.80

0.95%

August Feeder Cattle

$102.55

$102.35

$101.35

$100.70

-0.65

-0.63%

August Lean Hogs

$59.05

$56.02

$48.80

$49.12

0.32

0.54%

October Cotton

$57.39

$57.93

$60.53

$59.21

-1.32

-2.30%

September Oats

$1.95

$1.98

$1.99

$2.01

0.02

1.03%

September Rice

$13.40

$13.77

$13.87

$13.30

-0.57

-4.22%

 

Cattle futures managed a small gain for the week. Weekly beef export sales were over ten thousand metric tonnes, and boxed beef prices held together fairly well. Cash cattle traded $1 higher than the previous week on Friday, supporting the bullish premium being held in the futures. This is a key time for retailers to start filling the pipeline ahead of Labor Day specials, and packers have hopes of moving the wholesale prices higher while the demand is temporarily improved.

 

It may surprise you, but August hogs actually closed higher for the week by 32 cents. Ultimately, they pushed further to the downside than the CME Index was going to drop. That resulted in some short covering type buying ahead of expiration. The CME Lean Index on Friday was at $50.29, but anticipated to drop in the two days remaining before final settlement of the expired August futures. The pork cutout on Friday was up 21 cents at $52.52.

 

Market Watch:  The August hog futures expired, and October has a premium. Traders will be watching to see if the market wants to close the gap, or if there is hope of a rebound before October deliveries. On Monday night, USDA’s crop condition ratings will again be viewed with great interest, along with the % of the corn crop in dough stage and the % of the crop setting pods. Maturity by the time of first frost is still a concern. The main USDA reports for the week will be on Friday, with the monthly Cattle on Feed report and the Cold Storage report. September grain options also expire on Friday.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.

 

© 2009 Brugler Marketing & Management, LLC

Corn Bull A Pretender?

Aug 07, 2009

           

 

Market Watch Summary with Alan Brugler

August 7, 2009

 

Corn Bull A Pretender?

 

Corn rallied sharply on Monday, and then died. There was nothing fancy about it. Bullish news items like a drop in condition ratings, and another week of more than 1 MMT of export sales, were ignored. Frost threats to the delayed crop were a hard sell with temp forecasts for high 90’s and 100’s in the Western Corn Belt for the weekend. The bottom line is that corn had one higher weekly close and couldn’t generate a second one ahead of the USDA Crop production report due on Wednesday morning. Poor livestock margins doubtless played a role in corn weakness, with hog and cattle feeding margins deeply in negative territory and banks reported to be getting antsy about some of their larger and more leveraged livestock production loans. An estimate from a private firm for final production near 12.99 billion bushels also proved to be the bearish multiplier that accelerated the selloff.

 

Soybeans rallied 4.95% for the week, with August in the lead. The rally started because cash prices were well above delivery value, making odds of delivery notices quite low and threatening shorts who don’t have the receipts. Cash was held high by tight old crop stocks and the discount of US prices to both South America and to the Chinese price support. Following the rally on Monday, US prices appeared to be above the Chinese government level, potentially making China’s estimated 6 MMT of reserve beans available to the market. That cooled the rally, but by the end of the week strong USDA reported export sales and a hot & dry forecast for this week forced a little weather premium back into the market.

 

Wheat ground to new life of contract lows this week, pressured by world fundamentals. World wheat production will still be smaller than last year, but the French wheat crop is now seen with record or near record average yield, and projections for US spring wheat production have been rising following the Wheat Quality tour. Early harvest results in South Dakota have also borne out the higher yield expectations. From a global perspective, US prices are chasing the market down, with Russian and EU origin wheat cheaper to destinations like Egypt. That country bought 210,000 MT of wheat this past week, but none of it was from the U.S. With over 700 million bushels of expected ending stocks, the US needs to encourage wheat feeding as well as human use. That is difficult given the slide in corn, and also the shrinkage in poultry numbers in the key Southeast rail market.

 

Cotton futures turned in a pretty good week (if you are bullish or grow the stuff), gaining 4.53% for the week. More than half of the gain for the week occurred on Friday as the dome of hot air solidified in the weather forecasts and jobless data for the US showed unemployment actually dipping a little to 9.4% from 9.5% the previous month. This number can still be revised upward, but was seen as another sign of stability if not potential for increased demand. A stronger dollar capped price gains and export sales.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

Market Watch

 

 

 

 

Weekly

Weekly

 

07/17/09

07/24/09

07/31/09

08/07/09

Change

% Change

September Corn

$3.22

$3.16

$3.40

$3.22

-0.18

-5.53%

September CBOT Wheat

$5.15

$5.16

$5.28

$4.90

-0.39

-7.51%

September KCBT Wheat

$5.67

$5.49

$5.59

$5.25

-0.34

-6.19%

September MGEX Wheat

$6.16

$5.92

$6.05

$5.73

-0.32

-5.37%

August Soybeans

$10.10

$10.21

$11.34

$11.85

0.51

4.95%

August Soy Meal

$317.50

$323.20

$361.00

$374.50

13.50

4.18%

August Soy Oil

$34.82

$33.89

$35.06

$36.78

1.72

5.08%

August Live Cattle

$86.38

$84.52

$84.70

$83.85

-0.85

-1.01%

August Feeder Cattle

$104.60

$102.55

$102.35

$101.35

-1.00

-0.98%

August Lean Hogs

$64.67

$59.05

$56.02

$48.80

-7.22

-12.23%

October Cotton

$62.10

$57.39

$57.93

$60.53

2.60

4.53%

September Oats

$2.15

$1.95

$1.98

$1.99

0.01

0.64%

September Rice

$12.97

$13.40

$13.77

$13.87

0.10

0.75%

 

Cattle futures ground lower as wholesale beef prices gave back some of their July gains due to pressure from substantially cheaper pork.  That weakness translated into lower cash cattle bids, with Nebraska trading at $130/$82 on Thursday. With August futures above $84 the prior week, and now into the delivery period, prices had to drift down toward the cash market price level.

 

Hogs unfortunately took the prize for not only the worst weekly loss, but for the worst weekly loss we’ve seen in quite some time. The nearby August contract fell $7.22/cwt., or 12.23% for the week. It was pretty much an elevator ride down, with pork cutouts dropping sharply each day despite plants taking downtime in an attempt to firm up the market. Export demand appears to be much poorer than last year (Census data lags by 45-60 days), and carcass weights are running higher than last year. This has all the earmarks of a market that will overrun to the downside due to the momentum players before rebounding. The break below the 2007 bottom caused fresh liquidation selling. The next major chart support is at $45.75.

 

Market Watch:  Cattle traders will begin the week reacting to any surprise positions inherited when August options expired and were exercised on Friday. Monday is also first notice day (FND) for August cattle futures deliveries. There will be some interest in the USDA weekly crop progress and condition report on Monday night. Whether condition ratings are dropping in seasonal fashion will be the biggest question, along with how rapidly the heat is advancing corn maturity. Soybean traders will be looking for evidence that China is shipping all of the old crop beans that are still on the books. The big report day of the week will be Wednesday, however, when USDA will release its first field based Crop Production estimates for corn and soybeans, along with the monthly WASDE supply/demand estimates. There is keen interest in any acreage changes USDA will make as a result of the 7 state re-survey efforts.  Finally, Friday will include the monthly NOPA soybean crush report. It will also be the last trading day for August lean hogs.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.


***Participate in our 5th annual Virtual Corn Tour. We cover the country without leaving home and share results with all who submit data. Download the instructions from our Web site and fax or e-mail the results back to us before August 17.  The PDF may be obtained from the Brugler homepage at www.bruglermktg.com. Results may be faxed to 402-289-2353 or emailed to alanb@bruglermktg.com.

 

© 2009 Brugler Marketing & Management, LLC

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