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December 2011 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.

Goodbye 2011

Dec 30, 2011

Brugler

Market Watch w/Alan Brugler

December 30, 2011

Goodbye 2011

By almost any definition, 2011 was a crazy year. You had new all time highs for cattle and corn and cotton, but not in wheat or soybeans. You saw a rash of new governments formed, or at least the old governments thrown out, in North Africa. Others are hanging on in Syria and Yemen. The European Union appears intact, but there are major stresses in the Eurozone and questions about whether the common currency can survive the heavy government social program debts there. Meanwhile the US continued to run up record government debt because of similar social programs and is in political gridlock about how to fix the debt problem before the bond vigilantes turn their guns in this direction.

Corn futures were up another 27 cents per bushel this past week, a gain of 4.36% for the week and 64 cents in two weeks. Potential production losses in South America helped encourage the bulls, as did strong demand for ethanol use. Weekly ethanol production for the US set a record at 962,000 barrels per day, with almost none of that going into storage. Weekly export sales were disappointing, at a combined 345,200 MT.

The wheat complex kept up with corn, with Chicago up 4.9% for the week, and KC up 5.4%. Minneapolis lagged due to spread trading and year end adjustments, gaining 0.6% for the week. USDA weekly export sales, reported on Friday morning, were stronger than the trade had expected at 431,200 MT. Trade estimates had been below 350,000 MT. The Drought Monitor is starting to show very dry conditions in spring wheat country, and only spotty improvements in HRW territory. Spring wheat planting won’t begin until April, but the spec community is monitoring the situation. One reason for wheat to rally is simply the large speculative short position. Traders have to pay income taxes based on marked to market prices on December 31. Shorts had money made, and some didn’t want to pay taxes on it and then see those gains go away with a rally in early 2012.

Soybeans rallied 35 cents per bushel for the week, a 3.05% gain. Prices are up 92 cents per bushel since December 9. Soybean meal was firmer, up 4.18% but still getting cheaper vs. corn and feed wheat because it was going up slower. Soy oil gained 2.2%. Weekly soybean export sales were stronger than the trade expected, at 662,700 MT for 2011/12. Shipments were over a million metric tonnes, with nearly 80% going to China. High temps (up to 109 degrees F) and below normal rainfall continue to stress corn and soybean crops in southern Brazil and Argentina. Even a relatively minor 3-4 MMT production drop there would spur US export sales and tighten projected 2011/12 ending stocks.

Cotton was up a sharp 4.75% for the week despite lackluster export business. USDA reported combined upland and pima sales for the week ending Dec 22 at 129,500 running bales. Open interest did decline modestly in the March contract, confirming a little short covering. Consumer confidence is up, and US economic indicators were generally running in the plus direction and creating ideas of more demand in 2012.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/09/11

12/16/11

12/23/11

12/30/11

Change

% Change

Mar

Corn

5.9425

5.83

6.195

$6.47

0.2700

4.36%

Mar

CBOT Wheat

5.96

5.8375

6.22

$6.53

0.3075

4.94%

Mar

KCBT Wheat

6.615

6.395

6.75

$7.12

0.3675

5.44%

Mar

MGEX Wheat

8.2725

8.1125

8.445

$8.50

0.0500

0.59%

Jan

Soybeans

11.07

11.3

11.63

$11.99

0.3550

3.05%

Jan

Soybean Meal

276.9

290.3

297

$309.40

12.4000

4.18%

Jan

Soybean Oil

49.6

49.55

50.96

$52.09

1.1300

2.22%

Feb

Live Cattle

118.45

118.5

124.325

$121.45

2.8750

2.31%

Jan

Feeder Cattle

142.1

143.05

147.625

$146.35

1.2750

0.86%

Feb

Lean Hogs

86.425

83.15

85.85

$84.30

1.5500

1.81%

Mar

Cotton

90.43

86.07

87.24

$91.38

4.1400

4.75%

Mar

Oats

3.02

3.0125

3.1125

$3.10

0.0175

0.56%

Jan

Rice

14.01

13.685

13.905

$14.61

0.7000

5.03%

 

Cattle futures dropped 2.3% for the week, a $2.87 correction that was somewhat expected after the dramatic $5.821 gain the week before. On Friday, USDA showed a sharp jump in weekly beef export sales, with combined 2011 and 2012 sales of 13,700 MT. USDA estimated beef production for the week was down 6.5% from the same week in 2010. Beef output for the year was down 0.4%, while exports were up sharply. That resulted in lower per capita US consumption and higher average prices. 2011 was the first year in history that front month cattle futures were above $100 for the entire year.

Lean Hog futures lost 1.8%, as the pre-Christmas surge from the Hogs & Pigs report didn’t hold up after traders came back to work. Cash hog prices slipped, mostly because pork cutout values were still declining. The cutout was down .08% for the week. Estimated pork production for 2011 was 1.5% larger than in 2010. Production for the last week of 2011 was 2.6% larger than the same week in 2010.

Market Watch: There will be no US futures trading on Monday, as the market observes the New Years holiday. There will also be no Globex trade on Monday evening. Global markets will trade. With the start of the New Year, we get asset allocation adjustments for the major index funds, and fresh dollars allocated to hedge funds and CTA’s. Those flows tend to be market neutral, but can occasionally cause a big price move that comes out of nowhere when there isn’t enough liquidity.  USDA reports will run a day behind, with Export Inspections on Tuesday and Export Sales delayed until Friday. Friday will be the last trading day for the January serial options in Live Cattle and the currencies. We should also start to see private estimates start popping up for the key January 12 USDA reports.

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

Prices Thaw Out

Dec 23, 2011

Brugler

Market Watch w/Alan Brugler

December 23, 2011

Prices Thaw Out

We might have had the first official day of winter this week, but for the grains and livestock it acted more like spring. The bull markets of 2011 had been in the deep freeze since August (earlier for wheat), but showed some signs of thawing this week.

 Corn futures were up 36 ½ cents for the week after losing 11 cents the prior week. Weekly export sales continue to improve, as do shipments of previously sold corn. China has been a regular feature on the sales with outstanding sales at 1.2595 MMT as of December 15th and accumulated exports at 1.5777 MMT for the current marketing year.  Potential for production losses in Argentina and Brazil continues, due to declining soil moisture and high temps during pollination. The CFTC report today showed the large spec funds mildly liquidating net longs as of Tuesday. Total open interest has declined as a ripple effect of the MF Global melt down.

The wheat complex rallied in tandem with the corn market, posting gains of 4.1 to 6.55% at the three exchanges. Weekly export sales continue to be less than stellar with sales totaling 362,255 MT for the week ending December 15th.  Argentine new crop is now available in the world market, along with Australian production that is expected to be record or near record large. On the other hand, KC protein basis firmed all week because of demand for milling quality hard wheat and limited farmer selling interest.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/02/11

12/09/11

12/16/11

12/23/11

Change

% Change

Mar

Corn

5.9525

5.9425

5.83

6.195

0.3650

6.26%

Mar

CBOT Wheat

6.255

5.96

5.8375

6.22

0.3825

6.55%

Mar

KCBT Wheat

6.815

6.615

6.395

6.75

0.3550

5.55%

Mar

MGEX Wheat

8.445

8.2725

8.1125

8.445

0.3325

4.10%

Jan

Soybeans

11.3575

11.07

11.3

11.63

0.3300

2.92%

Jan

Soybean Meal

288.3

276.9

290.3

297

6.7000

2.31%

Jan

Soybean Oil

50.25

49.6

49.55

50.96

1.4100

2.85%

Dec

Live Cattle

121.9

118.3

118.15

124.3

6.1500

5.21%

Jan

Feeder Cattle

147.075

142.1

143.05

147.625

4.5750

3.20%

Feb

Lean Hogs

89.225

86.425

83.15

85.85

2.7000

3.25%

Mar

Cotton

91.84

90.43

86.07

87.24

1.1700

1.36%

Mar

Oats

3.15

3.02

3.0125

3.1125

0.1000

3.32%

Jan

Rice

14.455

14.01

13.685

13.905

0.2200

1.61%

 

Soybeans rallied 2.9% for the week, adding to the 2.08% gain from last week. Soybean meal was up 2.3% despite weakening a little on Thursday and Friday. Soy oil jumped 2.85%, with palm oil hitting a multi-week high. It looks like the blend credit for biodiesel will expire, but plants have been aggressively producing as much as they can ahead of time. That has made a serious dent in the US soy oil stockpile, which had been up around 3.3 billion pounds. Weekly export sales were still anemic at 728,404 with accumulated shipments at 12.99 MMT.  South American weather is on everyone’s radar, with dry spots continuing to develop. The large managed money traders in the CFTC report were adding net longs as of Tuesday, making their position net positive again.

Cotton was up 1.36% this week. Weekly export sales through Dec 15 were net positive at 84,875 RB for both marketing years. The problem is with global demand and the potential for further slowing as austerity measures are implemented in Europe and potentially nudge the Eurozone back into recession territory.

Lean Hog futures were up 3.25% for the week as they headed into the Hogs and Pigs report on Friday. The Hogs and Pigs report was initially seen as bullish due to a smaller breeding herd than expected, but does show expansion in hog numbers with farrowing intentions for Dec-Feb at 100.8% of year ago and the overall market hog snout count up 1.7% from last year. Pork carcass cutout values were down 3.82%.Weekly pork production was unchanged but down 3.4% YTD. Managed Money was offloading net longs in the CFTC report as of Tuesday.

 

Cattle futures surged 5.2% for the week. Cash cattle trade had another of those big up weeks, trading at $123-127 on Thursday. Weekly export sales were poor, but the total for the year has pushed the record at an unofficial accumulated total of 780,492 MT.  Wholesale prices were up 1.4% on a Friday/Friday basis. YTD beef production is now down 0.3%.

Market Watch: The markets will be closed on Monday the 26th. There is no scheduled Globex session for grains or livestock on Monday night, so the market will re-open on Tuesday. Next week should be very light volume with market participants on holiday vacation. That doesn’t mean we couldn’t see some fireworks! If markets are open and volume is light, watch out!

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

Golden Opportunity For Commodities?

Dec 16, 2011

Brugler

Market Watch w/Alan Brugler

December 16, 2011

Golden Opportunity For Commodities?

It was not a good week to be a gold bug. The bad news was still flying in Europe, and the euro dropped below $1.30 for a while. In some recent weeks, euro weakness had been accompanied by gold buying. Gold, however, was down 7% for the week, trumped by a strong US dollar index, and we suspect some yearend profit taking following a huge rally. It started the year at $1422 and had traded as high as $1920.70 in September. So why is this a golden opportunity for commodities? Most of them are technically in oversold conditions. If traders begin unwinding shorts in things like cotton, wheat or soybeans ahead of year end, the proverbial Santa Claus rally could still develop. Corn might be a harder sell, since prices are still nearly $2 above where they were last year at this time, but if wheat rallied corn would likely bounce as well. 

Corn lost 11 cents per bushel for the week, with export sales still poor and open interest declining in "get me out" trade across a wide swath of commodities. Weekly export sales were 504,700 MT for 2011/12 delivery and 1,200 for 2012/13 delivery. Total export commitments are 57% of the USDA forecast for the year, actually above the 52% average. Unshipped sales are 4% smaller than the book last year at this time. The CFTC report on Friday showed the large spec funds adding to their net long position in the reporting week ending December 13. Some RGDS producers (Brazil) are talking about having to rip up poor corn stands and trying to get in some late soybeans.

The wheat complex had losses at all three exchanges again this week, with KC down the most at 3.3%. US weekly export sales were 318,400 for 2011/12 and shipments were 539,300, up 25% from the previous week and up 55% from the four week average. Cumulative sales are still down however, confirmed when USDA cut projected exports another 50 million bushels on the 9th. Global prices appear to be evening out, with Egypt buying French wheat in its most recent tender. US SRW would be competitive if it weren’t for larger freight costs.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

11/25/11

12/02/11

12/09/11

12/16/11

Change

% Change

Mar

Corn

5.9

5.9525

5.9425

5.83

0.1125

1.89%

Mar

CBOT Wheat

5.89

6.255

5.96

5.8375

0.1225

2.06%

Mar

KCBT Wheat

6.54

6.815

6.615

6.395

0.2200

3.33%

Mar

MGEX Wheat

8.075

8.445

8.2725

8.1125

0.1600

1.93%

Jan

Soybeans

11.065

11.3575

11.07

11.3

0.2300

2.08%

Jan

Soybean Meal

283

288.3

276.9

290.3

13.4000

4.84%

Jan

Soybean Oil

48.44

50.25

49.6

49.55

0.0500

0.10%

Dec

Live Cattle

121.1

121.9

118.3

118.15

0.1500

0.13%

Jan

Feeder Cattle

144.625

147.075

142.1

143.05

0.9500

0.67%

Feb

Lean Hogs

91.8

89.225

86.425

83.15

3.2750

3.79%

Mar

Cotton

93.27

91.84

90.43

86.07

4.3600

4.82%

Mar

Oats

2.87

3.15

3.02

3.0125

0.0075

0.25%

Jan

Rice

14.235

14.455

14.01

13.685

0.3250

2.32%

 

Soybeans rallied 2.08% for the week, with soybean meal jumping 4.8% on the continued slow crush pace and indications that prices below $280 had attracted more use in feed rations. Soy oil was a drag on product value, down 0.1%. Weekly export sales were still anemic at 468 thousand tonnes, but export shipments were over 1 MMT.  South American weather is now on everyone’s radar, with dry spots developing and high temperatures stressing both corn and beans. The large managed money traders are rarely net short soybeans for long, and they unwound 7,035 of those shorts (futures & options) in the CFTC reporting week ending December 13.

Cotton was down 4.8% this past week, taking our prize for Biggest Loser. Weekly export sales through Dec 1 were net positive, unlike last week. US Weekly Export Sales through December 8 were a combined 45,700 RB for both marketing years with a reduction for 2012/13 of 10,100 RB from Thailand. Net American Pima sales were 5,600 RB. The problem is with global demand and the potential for further slowing as austerity measures are implemented in Europe and potentially nudge the eurozone back into recession territory. The lower prices are causing reductions in planned 2012 acreage, with two surveys both showing 2012 Chinese plantings could be down 9%.

Lean Hog futures dropped a huge 3.79%, with most of that loss coming on Friday.  The pork cutout was actually up 0.9% on a Thursday/Thursday basis. Weekly pork production, however, was up an estimate 0.5%, and cumulative production YTD is now 1.2% larger than last year. It is a good thing pork exports have been so strong, to absorb the excess. Estimated carcass weights were up 2# from last year’s actual average of 207 pounds.

Cattle futures slipped 15 cents per hundredweight for the week, a modest adjustment after the $3.60 slide a week ago. Cash cattle trade was late to develop, with a few trading in NE a dollar below last week. Weekly export sales were phenomenal for both 2011 and 2012 delivery. Wholesale prices were up 0.5% on a Thursday/Thursday basis, aided by a drop of about 4 million pounds in beef production for the week. YTD production is now down 0.5%. On Friday night, USDA put the number of Cattle on Feed December 1 at 12.081 million head, up 4% from last December and the largest monthly total since January 2008. Placements were larger than expected at 104.1%, offset by marketings at 99.8% of last year and a 65% jump year over year in "other disappearance". The report is slightly bearish because the numbers are on the high side of expectations, but much of the downward bias should have been absorbed by the price drop coming into the report and the continued strong export sales. Those sales do tend to slow over the holidays.

Call in consulting service with Alan is available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details at 402-289-2330. 

Market Watch: We start to get into holiday mode this week, although there is still a full trading calendar. The main USDA reports are the Cold Storage report on Thursday and the Hogs & Pigs report scheduled for Friday afternoon. There will also be continued interest in the export sales data, both the Inspections report on Monday and the weekly Sales report on Thursday morning. Friday will mark the expiration of the January grain options, and be followed by the Christmas weekend. The markets will be closed on Monday the 26th.

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

Trying to Kill the Futures Market?

Dec 09, 2011

Brugler

Market Watch w/Alan Brugler

December 9, 2011

Trying to Kill The Futures Market?

 

At times this fall, it seems like events are conspiring to kill off the futures markets or at least make them a lot more unpopular and less liquid to use. It started with the CFTC discussions about expanding position limits to a lot more commodities. Then the MF Global debacle came along with $1.2 billion missing from the segregated customer accounts. That’s money which is always supposed to be there. More than 50,000 traders, many of them elevators and farmer hedgers are still without large chunks of their cash. Others have had to borrow money to margin existing hedge positions when the cash didn’t transfer to their new broker. Speculators with cash in an account in most cases haven’t been able to get at it. That surely cuts interest in trading or hedging! The House Ag Committee hearing on Thursday was badly needed to shine light on this still festering situation, but wasn’t exactly an advertisement to use futures to pass off market risk.

 

On top of all this, the CME Group and ICE seem to feel that raising the cost of trading won’t discourage use of the market. The CME group announced this week that it is raising real time quote fees for livestock by 13.4% effective January 1. They will now cost $76 per month. New York Merc, NYMEX and CBOT fees for grains are also increasing by the same amount. ICE, not to be left out is increasing real time end user fees to $80/month from $70, a 14.2% increase. These increases are roughly 7 times the rate of inflation. Since these markets are too volatile for many folks to trade without real time quotes, that is another knock on potential volume and liquidity.

 

If you are a cash only marketer, don’t feel too smug. Your prices are dependent on your buyers being able to hedge, somewhere in the system. Basis will get a lot worse if they can’t. You should also be concerned that at least some of the price you have been seeing for grains and livestock and cotton has been put there by buy-and-hold index funds or buying by hedge funds and CTA’s. If they pare back futures activity, your prices will likely suffer (everything else being equal).

 

Corn was up 1 cent per bushel lower for the week, after a 4 cent gain last week. Weekly export sales were improved for the second week in a row, and weekly shipments were over a million metric tonnes. China also bought another cargo, but the big concern remains sluggish sales to large customers like Japan. On Friday, USDA cut FSI use of corn by 5 million bushels, preferring to wait for the Grain Stocks report before making further adjustments to feed & residual use or ethanol use. They did lower the mid-point of the average cash price forecast for the year to $6.40 from $6.70, however.

 

The wheat complex had losses at all three exchanges this week. Chicago rose 6.57% last week, and was down the most this week at -6.33%. MPLS was the firmest, down only 1.5%. The wheat market was hit by a flood of bearish news this past week, including record wheat production in Australia, an increase in final crop size for Canada, and increased forecasts for Argentina. USDA capped it all on Friday with increases in both old crop and new crop global ending stocks estimates. They also trimmed projected US exports by another 50 million bushels to reflect poor sales in recent weeks and the substantial competition in the world market. The US isn’t the only country having trouble selling wheat. The EU has issued export licenses for only 6.6 MMT thus far, compared to 10.3 MMT in 2010/11.

 

Soybeans were down 2.53% this week after being up 2.6% last week. All but about 3 cents of the decline came on Friday after the USDA reports. There actually wasn’t much bearish in the WASDE estimates. There was no change in Brazilian or Argentine production nor in Chinese imports. USDA cut estimated Chinese domestic soybean production as well, in theory implying a larger need for imports. So why the sell off? USDA cut projected US crush by 10 million and trimmed exports by another 25, with other countries capturing more of the business than previously expected. That boosted ending stocks to 230 million bushels. That’s a comfortable level, with the stocks/use ratio now the "loosest" since 2006/07. Beans need a pre-Christmas sale to stir up buying interest. USDA was also more bearish on soy oil, raising ending stocks 200 million pounds due to larger production (higher oil yield) and smaller exports.

 

Cotton was down 1.54% for the week. On paper the US has excellent export sales commitments, but they keep disappearing. Weekly export sales through Dec 1 were net negative for upland cotton, with more cancellations than new bookings. USDA left projected exports for the year UNCH at 11.3 million bales, but cut likely domestic use by 200,000 bales. Cotton production was reduced on Friday, to 15.83 million bales from the previous 16.3 million. This was due to a yield cut, and allowed the cotton ending stocks forecast to tighten to 3.5 million bales. Price is expected to average 90 cents per pound.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

11/18/11

11/25/11

12/02/11

12/09/11

Change

% Change

Dec

Corn

6.1025

5.825

5.865

5.855

0.0100

0.17%

Dec

CBOT Wheat

5.9825

5.745

6.1225

5.735

0.3875

6.33%

Dec

KCBT Wheat

6.6725

6.435

6.76

6.5375

0.2225

3.29%

Dec

MGEX Wheat

9.145

8.2725

8.5575

8.43

0.1275

1.49%

Jan

Soybeans

11.6825

11.065

11.3575

11.07

0.2875

2.53%

Dec

Soybean Meal

298.4

282.7

286.4

275.5

10.9000

3.81%

Dec

Soybean Oil

50.88

48.23

50.05

49.34

0.7100

1.42%

Dec

Live Cattle

119.7

121.1

121.9

118.3

3.6000

2.95%

Jan

Feeder Cattle

147.425

144.625

147.075

142.1

4.9750

3.38%

Dec

Lean Hogs

87.475

88.3

86.25

85.4

0.8500

0.99%

Mar

Cotton

93.27

93.27

91.84

90.43

1.4100

1.54%

Dec

Oats

3.04

2.92

3.18

3

0.1800

5.66%

Jan

Rice

14.68

14.235

14.455

14.01

0.4450

3.08%

 

Lean Hog futures dropped 85 cents or 1%.  The Dec futures are discounting a further decline in cash hog prices, but with the contract expiring on Wednesday they had to rally on Friday to narrow the gap. The firmer wholesale price made it slightly less likely that cash hogs would be down below $85, although there is no rule that the average basis has to be in place every year. The pork cutout value continues to run more than $15 higher than last year, and does have a seasonal tendency to firm in early December. The question was whether it could do so while already this high. For this week the answer was yes, with a 1.8% gain. Estimated pork production was down 1.2% from the previous week, but still running 4% above December 2010 for the same week. It is a nice trick to have higher prices and higher production at the same time.

 

Cattle futures sank a huge 2.95% for the week, or $3.60 per cwt. Wholesale prices succumbed to the effects of $195 choice beef on the average consumer (i.e. buy less!), and dropped 3.1% in the choice and 1.8% in the select this week.  Weekly export sales for the week ending December 1 were actually stronger than expected at 15,800 MT, but that was also past history. Cash cattle trade reflected the loss in value to the packer, with Texas trading at $119-120.

 

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. 

 

Market Watch: The main USDA reports for grain producers this week are the Export Inspections on Monday and weekly Export sales on Thursday. THE theme between now and the January crop reports will be whether the US is capturing enough export business with these lower futures prices to hit USDA’s diminished expectations for the year. NOPA will give us an update on soybean crush activity on Wednesday morning. Wednesday will also mark the expiration of the December grains and the Dec hog contract. Cattle producers will receive USDA’s monthly count of Cattle on Feed on Friday afternoon.

 

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

Mostly Black Ink

Dec 02, 2011

Brugler

Market Watch w/Alan Brugler

December 2, 2011

Mostly Black Ink

 

It turns out that much of the Thanksgiving weakness may have been due to traders parking money for ....Thanksgiving. A flood of buying came back into the commodities and equities markets this week. The S&P had the biggest up week since March 2009, with a coordinated global central bank intervention coinciding nicely with a bounce from the 61.8% Fibonacci retracement support on the S&P chart. The European debt crisis story continues, but Italian interest rates dropped sharply after the intervention and bought some time to work out other issues. Most of the ag commodities were in the black for the week due to the perceived monetary easing and the weaker US dollar. The dollar was firmer on Friday, but dropped for the week.

It wasn’t much, but it was a plus. Corn was up 4 cents per bushel for the week, a 0.7% gain. Ethanol production reached the highest level of 2011 @ 930,000 bpd. Despite the strong production, ethanol stocks dropped to 17 million, reflecting good demand both domestically and for export. On the bear side, corn gluten feed (wet mill byproduct) exports to Europe have declined amidst the economic issues there. Corn export sales bookings also have been slow for the past month, although total commitments year to date are down only 28 million from last year at 872 million bushels. Feed wheat competition continues in the world market, with some Asian destinations taking delivery of their first Ukrainian feed wheat purchases ever.

The wheat complex showed solid advances at all three exchanges. MPLS was up 3.45%, KC was up 5.05% and Chicago rose 6.57%. There was a confluence of bullish factors. Chicago was helped by the CFTC report on Monday which showed a record large net short spec fund position. Some shorts wanted a quick exit from what had become a ‘crowded’ trade. Weekly export sales were solid again, and featured the higher quality/more expensive wheat grades. The Ukraine also reduced projected exports to only 6 MMT on Friday, when previous estimates had been 2-3 MMT higher. That left a little more wiggle room for US exports. Gains were limited by the ongoing Russian exports and expanded new crop sales out of Argentina.

Soybeans were up 2.6% for the week, or almost 30 cents per bushel. Soy oil contributed, up 3.77% for the week. Changes to Indonesia palm oil export taxes disrupted the soy oil market. US biodiesel production is also rapidly drawing down US soy oil stocks. US export shipments last week were a solid 1.2171 MMT, mainly to China (893,500 MT). The Commitment of Traders report showed the large spec funds (managed money) cutting back on their net short positions after dipping into minus territory a week earlier. That group is rarely net short in the soybean market, with the exception of a couple months in 2006 when US projected ending stocks were over 500 million bushels.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

11/11/11

11/18/11

11/25/11

12/02/11

Change

% Change

Dec

Corn

6.385

6.1025

5.825

5.865

0.0400

0.69%

Dec

CBOT Wheat

6.1675

5.9825

5.745

6.1225

0.3775

6.57%

Dec

KCBT Wheat

7.04

6.6725

6.435

6.76

0.3250

5.05%

Dec

MGEX Wheat

9.3425

9.145

8.2725

8.5575

0.2850

3.45%

Jan

Soybeans

11.755

11.6825

11.065

11.3575

0.2925

2.64%

Dec

Soybean Meal

299.5

298.4

282.7

286.4

3.7000

1.31%

Dec

Soybean Oil

50.98

50.88

48.23

50.05

1.8200

3.77%

Dec

Live Cattle

120.55

119.7

121.1

121.9

0.8000

0.66%

Jan

Feeder Cattle

145.675

147.425

144.625

147.075

2.4500

1.69%

Dec

Lean Hogs

86.45

87.475

88.3

86.25

2.0500

2.32%

Dec

Cotton

99.24

94.9

90.82

91.35

0.5300

0.58%

Dec

Oats

3.215

3.04

2.92

3.18

0.2600

8.90%

Jan

Rice

15.22

14.68

14.235

14.455

0.2200

1.55%

 

Cotton eked out a 53 point net gain for the week after falling 842 points in the two previous weeks. The coordinated central bank move to lower interest rates on Thursday helped boost commodity prices in general and improve the demand outlook. China’s plan to reduce bank reserve requirements on December 5 was also seen as potentially stimulating buying interest there. US retail sales over the Thanksgiving weekend proved to be a mixed bag. Large HD TV’s were a big seller, but clothing heavy retailers like Kohl’s and JC Penney didn’t do as well. US weekly export sales also fell off sharply from the week before. The good news is that 92% of the projected exports for the year have already been sold/contracted. They just need to be shipped.

Lean Hog futures plunged $2.05 (2.3%) for the week. The value of a hog carcass continued to decline, defying those analysts who had been predicting a seasonal uptick after Thanksgiving. The pork carcass cutout value was down $1.16 or 1.3% for the week. The big "IF" in the picture continues to be the substantial premium that cutout value has over where it was last year or the year before. Estimated weekly pork production was up 14.5% from the short holiday week, but also 1.3% larger than the same week in 2010. Pork production YTD is up 1.1%.

 

Cattle futures closed 80 cents higher than they did on the previous Friday. US weekly beef export sales dropped to the lowest level since June 2, @ 9,100 MT. The reported cutout value of a choice graded steer dropped $4.11 in a week, a 2.1% drop Friday/Friday. Select beef was down 3%. Beef production for the week was estimated by USDA at 513.2 million pounds. That is 3.1% smaller than the same week in 2010, and YTD beef production is now 0.3% smaller than last year despite having larger numbers of cattle on feed. Actual slaughter is down 0.4% through this week.

Call in consulting service with Alan is 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. 

Market Watch: Cattle traders will start the week dealing with any surprise positions inherited in the December options expiration on Friday. December cotton expires on Wednesday.  USDA’s main reports will be on Friday morning, with Crop Production and the WASDE supply/demand estimates. Traders will also look at weekly Export Inspections on Monday and Weekly Export Sales on Thursday, since one of the key questions for grains is whether the US is moving enough exports to hit USDA’s reduced expectations for the marketing year or if it needs to further reduce those estimates.

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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