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July 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.

Fool's Gold

Jul 29, 2011

Brugler

Market Watch with Alan Brugler

July 29, 2011

Fool’s Gold

 

Gold futures set a new all time high of $1634.90 this past week. Fool’s gold is of course a rock that has gold coloration but no real gold in it. In this case, the gold is real, but investors are worried about the value of the currencies being used to buy it. The Washington debt ceiling situation continued into the weekend, with the House trying to pass a bill that the Senate promised to veto, while the Senate had no equivalent bill to solve the problem scheduled for a vote. European investors were also uneasy, pulling money out of euros and into gold as well. In a head scratcher, money being pulled out of equities was being parked in Treasuries, which presumably would lose value if the Washington debt situation isn’t resolved before the country runs out of cash.

 

Corn futures were down 24 ½ cents for the week, another 3.5% drop. There is still much debate about the impact of the high temps on pollinating or early ear fill corn, but that is running up against the old trade axiom that rain makes grain. USDA again reported sluggish export sales for the week ending July 21, showing that there is some resistance to higher prices in the world market. That likely has something to do with the availability of the cheap Russian and Ukrainian feed wheat. The Brugler500 crop condition index was the lowest for this week since 2008, and is also below the 5 year average. If it is still below the 5 year average by Labor Day, a below trend national average yield would be expected.

 

Soybeans were down 1.9% for the week, or 26 cents per bushel. Meal futures fell $11.40/ton and lost 3.1%, dragging down product value. Soy oil was down 1.5%. Export sales business to China is picking up, but overall bookings are still soft because supplies are still available out of South America. China bought 224,000 of the 2011/12 sales bringing accumulated new crop soybean sales to China to 7.052 MMT.


Wheat prices were lower at all three exchanges, reversing gains from the previous week. Chicago was the weakest, down 2.85%. Russian wheat continues to dominate export deals in the Middle East, as it is priced 50 to 80 cents per bushel below US offerings. Lower US futures and cash prices can solve that, but one wonders why the Russians persist in giving the wheat away rather than matching the prevailing world prices. They are sacrificing revenues they could be earning. But again, buyers were burned by the export defaults last year, and the discounts may be necessary to get the business back. US export sales last week are near the upper end of the trade guesses, and shipments year to date continue to run ahead of last year.


Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:


 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/08/11

07/15/11

07/22/11

07/29/11

Change

% Change

Sep

Corn

6.4225

7.0125

$6.90

$6.66

0.2450

3.55%

Sep

CBOT Wheat

6.5125

6.9475

$6.92

$6.73

0.1975

2.85%

Sep

KCBT Wheat

7.2725

7.645

$7.80

$7.67

0.1300

1.67%

Sep

MGEX Wheat

8.17

8.2375

$8.39

$8.31

0.0775

0.92%

Sep

Soybeans

13.45

13.8575

$13.80

$13.54

0.2600

1.88%

Sep

Soybean Meal

348.3

360.3

$363.00

$351.60

11.4000

3.14%

Sep

Soybean Oil

56.55

57.35

$56.51

$55.65

0.8600

1.52%

Aug

Live Cattle

114.65

110.6

$110.55

$112.63

2.0750

1.88%

Aug

Feeder Cattle

143.6

135.7

$136.40

$137.05

0.6500

0.48%

Aug

Lean Hogs

96.175

98.95

$100.83

$102.78

1.9500

1.93%

Oct

Cotton

116.58

101.46

$99.14

$102.08

2.9400

2.97%

Sep

Oats

3.495

3.55

$3.53

$3.46

0.0750

2.12%

Sep

Rice

16.13

16.995

$16.74

$16.12

0.6250

3.73%


Cotton Futures were actually up almost 3% for the week in the October contract. It wasn’t due to weekly export sales, which saw another 64,100 RB in net cancellations. The 2010/11 marketing year ends on July 31, so all remaining outstanding business will be rolled to 2011/12. That may not happen until the August 11 Export Sales report, however. Heavy rain was expected this weekend on nearly ripe Rio Grande Valley cotton. While most of Texas could benefit from 3-5" of rain, growers there could lose both yield and quality if rains from T.S. Don score a direct hit on the valley. New crop December futures were up 2.47 cents for the week. Net export sales reported by USDA were 40,600 running bales. Old crop commitments again dropped, with cancellations of 64,100 RB. The Census Cotton Consumption report showed domestic use running at an annualized rate of 3.539 million bales. The pace will have to pick up to meet USDA’s projection of 3.8 million bales for the year.

 

Cattle futures were up $2.07 for the week, despite concerns about a weak cash cattle market. Estimated weekly beef production was up 2.2% from last week and up 1.7% from the same week in 2010. Carcass weights are still running 4-5 pounds above last year, but beef production YTD has still been down 0.1% in total. The wholesale market was mixed, with choice cuts losing ground for the week but the Select boxes up 29 cents or 0.2% on a Friday/Friday basis.


Lean Hog futures were up $1.95, a 1.93% gain spurred by a surge to record high carcass cutout values. With the pork up, the cash hogs were on the rise and futures were anticipating further gains. The pork carcass value jumped 5.77% for the week, led by a 12.7% hike in pork belly prices. Weekly pork production was down an estimated 1% from the previous week, but up 3.2% from the same week in 2010. That leaves pork production YTD up 1.1%. It has to be demand that is supporting the pork price! Estimated carcass weights are 2-3 pounds above last year, so we are getting more tonnage out of 2.2% more slaughter.


Market Watch: This week we’ll be watching the crop condition ratings intently. Generally, expectations are for little change, with some areas stressed by high temps (100 degrees as far north as South Dakota) and others aided by widespread if inconsistent T-storm activity. That report is on Monday evening. Monday is also the first day of the new month, potentially freeing up some new investment flows. That brings us to the other issue, which is the debt ceiling debate. That money is likely to stay on the sidelines until the outcome is determined, be it destruction of the dollar, a "responsible" deal or a punt/extension. The usual USDA Export Sales report will be out on Thursday morning. Friday will mark the expiration of the August cattle options.


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. 


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

A Leaky Dome

Jul 22, 2011

Brugler

Market Watch with Alan Brugler

July 22, 2011

A Leaky Dome

 

This is definitely a weather market, but which weather forecast do you want to trade? The high pressure dome goes away for a couple days and then comes back. The NWS 8-14 day forecast still shows Much Above normal temps in early August, but it also shows some above normal rainfall to help ease the stress on the crops. All I know is that a lot of corn was curling pretty hard, and then it rained and night time temps started showing more high 60’s and 70’s in the Corn Belt, rather than night time 80’s. Will it warm up again? As the saying goes "It ain’t over until it’s over!"  

Corn futures were down 11 ¼ cents for the week, a 1.6% drop. The long range weather maps still show above normal temps in the bulk of the Corn Belt, but the high pressure ridge is oscillating from the east to the west and when it gets back to the Southwest that brings a flow of cool air out of Canada. With high humidity that triggers numerous showers. There is still much debate about the impact of the high temps on pollinating or early ear fill corn. USDA reported sluggish export sales for the week ending July 14, showing that there is some resistance to higher prices in the world market. That likely has something to do with the availability of the cheap Russian and Ukrainian feed wheat. USDA reported a combined 900,000 MT for old and new crop. 

Soybeans were down 0.4% for the week. The meal futures advance slowed to only 0.75%, as cheaper corn and DDG prices provided stiff competition. Estimates for the USDA weekly export sales report ran from 400 to 550 thousand MT.  USDA put the actual number at 445,900 MT, in the lower third of the range of estimates. Chinese futures were higher for the week in all three legs of the complex. Palm oil in Malaysia had firmed at mid-week due to stronger exports ahead of a holiday period beginning August 1.

Attend the Brugler Marketing Summer Seminar in Omaha on July 31-August 2 for the complete picture of the grain and livestock markets, also with some fantastic farmer oriented options training. Call 402-697-3623 and ask for a registration packet or send an email request to seanp@bruglermktg.com.

Wheat prices were higher once again in KC and MPLS. High temps may have stressed the spring wheat in a few areas. Chicago was down 2 ½ cents despite a late rally on Friday that "dressed up the close". New crop September MGE wheat was up 1.8% for the week. Higher protein wheat was more firmly bid than SRW, which sees the most direct competition from the re-emergence of a Black Sea export program. . USDA said the US actually booked 403,500 MTs for export  in the week ending June 14. That was in the middle of the range of trade estimates.

Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/01/11

07/08/11

07/15/11

07/22/11

Change

% Change

Sep

Corn

6.0675

6.4225

7.0125

$6.90

0.1125

1.60%

Sep

CBOT Wheat

6.1225

6.5125

6.9475

$6.92

0.0250

0.36%

Sep

KCBT Wheat

7.2075

7.2725

7.645

$7.80

0.1550

2.03%

Sep

MGEX Wheat

8.045

8.17

8.2375

$8.39

0.1475

1.79%

Sep

Soybeans

13.095

13.45

13.8575

$13.80

0.0550

0.40%

Sep

Soybean Meal

342.5

348.3

360.3

$363.00

2.7000

0.75%

Sep

Soybean Oil

55.55

56.55

57.35

$56.51

0.8400

1.46%

Aug

Live Cattle

112.85

114.65

110.6

$110.55

0.0500

0.05%

Aug

Feeder Cattle

140.475

143.6

135.7

$136.40

0.7000

0.52%

Aug

Lean Hogs

93.15

96.175

98.95

$100.83

1.8750

1.89%

Oct

Cotton

121.81

116.58

101.46

$99.14

2.3200

2.29%

Sep

Oats

3.47

3.495

3.55

$3.53

0.0200

0.56%

Sep

Rice

14.91

16.13

16.995

$16.74

0.2550

1.50%

 

Cotton Futures were down 2.20% for the week. Production concerns continue in the United States, with virtually no cotton rated good or excellent in the entire state of Texas. The Southeast did see some welcome rain. The main story, though, continues to be the inability of overseas customers to move higher priced yarn. The global economy just isn’t strong enough to handle the price increases necessary to make yarn from $1.50 cotton and break even. Thus, we’ve had nearly 3 months of net cotton export sales being a negative number. With one or two exceptions, weekly cancellations of old crop purchases have been larger than new sales. 

Cattle futures were down only a nickel in the nearby futures, having dropped by more than the cash market in the previous week.  Wholesale beef prices were under pressure, with the choice cutout down $5.68 per hundred pounds for the week. That is a 3.1% drop. Cash cattle also traded sharply lower for the week. On Friday night, USDA released a monthly Cattle on Feed Report.  It showed much larger than expected placements on feed during June, coupled with somewhat larger than expected marketings. These both appear to be a function of the high temperatures in the US, and the ongoing drought in the southern Plains. Here are the main USDA numbers, compared to trade average guesses. All are expressed in % of year ago terms.

 

 

USDA Actual

Trade Avg Guess

Range of Ests

On Feed July 1

103.8

102.7

101.5-104.1

June Placements

104.1

93.4

88.1-101.4

June Marketings

105.3

102.8

101.5-104.6


Lean Hog futures were up $1.87, a bullish performance given the weakness in cattle. One reason was the strength of the cutout values. The pork cutout was up a little over 1% for the week (Thur/Thur comparison), posting two days with prices over $100. Cash hogs were also firmer at midweek, reflecting the higher value of the hog and the difficulty in moving them with heat index readings in the triple digits. Slaughter was down from the previous week, with estimated pork production off 0.5%. Pork production YTD is still up 1.1%.


Market Watch: Next week we will be watching for the Crop Progress report Monday to show us how the crops are holding up in this crucial time period.  Also Monday is the Export Inspections report to show us how exports are holding up. Thursday has the Census Soybean Crush report along with Cotton Consumption, as well as USDA weekly export sales. Friday is Q2 GDP, showing us the performance of the economy for April-June compared to earlier estimates. Traders will be watching weather closely due to the significant impact the extremes can have on yields during this time period.


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

Old Fashioned Weather Market

Jul 15, 2011

Brugler

Market Watch with Alan Brugler

July 15, 2011

Old Fashioned Weather Market

 

While we can’t ignore the role of the investment crowd, price action this week in the grains was as close to an old fashioned weather market as we have come for a while. Above normal temps have been building over the eastern 2/3 of the US for a while, and now the Texas drought has joined with typical summer highs to form a ridge of hot and mostly dry air over the nation’s midsection. The forecasts as of Friday had that pattern holding into at least July 29, with hints of a shift to the ECB (eastern corn belt) toward the end of the period. We’ve had hot weather, and the stuff is designed to grow outside, but the tight old crop ending stocks for corn and soybeans magnify the importance of a big US crop.  

 

Corn futures shot up 59 cents per bushel this week in the September contract, a 9% advance for the week. The two week gain is 94 cents per bushel. USDA supported the rally by showing more ambitious usage than the trade expected, leaving projected old crop ending stocks at 880 million bushels. New crop ending stocks were projected to be 870 million bushels. However, there are questions about the harvested acreage estimate given Missouri River flooding, and the average yield estimate of 158.7 bushels is being challenged by 95-105 degree temps during pollination. Adding weather premium was the name of the game all week.

 

Soybeans were 3% higher for the week, over 40 cents per bushel.  USDA’s ending stocks figure of 200 million bushels was widely anticipated, but the 175 million bushel new crop number is snug. As with corn, the trade is trying to figure out if and how much the crop is being hurt by the much above normal temps throughout the US growing area. Those were shifting a little further east in the July 23-29 period, but an estimated 30-40% of the crop will be under the ridge for a week or more and getting stressed with limited moisture and high temps. Soybean meal futures were up 3.45% for the week, boosted by corn. Soy oil advanced 1.41%, with the NOPA report hinting at larger biodiesel use in June.

 

Attend the Brugler Marketing Summer Seminar nearest you for the complete picture of the grain and livestock markets, also with some fantastic farmer oriented options training. Call 402-697-3623 and ask for a registration packet or send an email request to seanp@bruglermktg.com.Seminars will be held July 25-26 in West Chester, OH (north of Cincinnati) and August 1-2 in Omaha, NE.

Wheat prices were higher once again, although for MPLS wheat it was a struggle. New crop September MGE wheat was up only 0.83% for the week, while Chicago gained 6.68% over the same 5 trading days. The inter-market spread relaxed a little bit as spring wheat crop condition ratings improved and USDA boosted projected HRW production in the Tuesday crop reports. Weekly export sales business is holding in there, but Russia successfully sold another 180,000 MT of wheat to Egypt on Friday, at prices well below US values.

October cotton plunged nearly 13% for the week. World demand for cotton over $1 per pound has dwindled to something approaching zero. USDA again reported negative weekly export sales, with more cancellations than new purchases. The spinners and mills have been pushing prices higher, but the weakness of the US and European economies is limiting the price hikes that can be passed on at retail. That’s backing up cotton in the system, while at the same time more synthetic fiber is being used in an attempt to keep prices down. USDA raised projected ending stocks by 500,000 bales, but only by cutting projected production by 1 million bales to keep up with reduced export sales estimates in both old crop and new crop.

 

Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

06/24/11

07/01/11

07/08/11

07/15/11

Change

% Change

Sep

Corn

6.57

6.0675

6.4225

7.0125

0.5900

9.19%

Sep

CBOT Wheat

6.61

6.1225

6.5125

6.9475

0.4350

6.68%

Sep

KCBT Wheat

7.6725

7.2075

7.2725

7.645

0.3725

5.12%

Sep

MGEX Wheat

8.185

8.045

8.17

8.2375

0.0675

0.83%

Sep

Soybeans

13.1075

13.095

13.45

13.8575

0.4075

3.03%

Sep

Soybean Meal

339.5

342.5

348.3

360.3

12.0000

3.45%

Sep

Soybean Oil

55.61

55.55

56.55

57.35

0.8000

1.41%

Aug

Live Cattle

113.5

112.85

114.65

110.6

4.0500

3.53%

Aug

Feeder Cattle

138.6

140.475

143.6

135.7

7.9000

5.50%

July

Lean Hogs

96

95.5

95.875

95.15

0.7250

0.76%

Oct

Cotton

126.92

121.81

116.58

101.46

15.1200

12.97%

Sep

Oats

3.4

3.47

3.495

3.55

0.0550

1.57%

Sep

Rice

14.505

14.91

16.13

16.995

0.8650

5.36%

 

Cattle futures sank more than $4 for the week, losing 3.53%. USDA reported solid weekly export sales of more than 17,000 MT for the previous week, but cash cattle traded at only $111 vs. mostly $114 the week before. Wholesale prices were higher for the week, so packer margins got a little better. Beef production for the week was 0.2% larger than the same week in 2010. The YTD tonnage is up 0.5%, while slaughter numbers have actually been 0.1% smaller. Estimated carcass weights are now the same as last year, but they were heavier earlier in the year.

 

Lean Hog futures marked time while waiting for the CME Lean Hog Index to decline into expiration of the July futures contract. July expired on Friday. Net change for the week was only 72 cents, in the southerly direction. Estimated pork production for the week was up 16% over the holiday shortened July 4th week, and up 1.6% vs. the same week in 2010. The pork carcass cutout value was up 3% for the week on a Friday/Friday basis. That gave the packers more spending money, but they were reluctant to share it with hog producers. Cash prices were irregular throughout the week.

 

Market Watch: The main USDA reports this week are bookends, with Crop Progress and condition ratings on Monday and the Cattle Inventory, Cattle on Feed and Cold Storage reports on Friday afternoon. There will also be a weekly Export Sales report on Thursday morning. The August grain options expire on Friday the 22nd as well.

 


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

Heating Up

Jul 08, 2011

brulogomed 

Market Watch with Alan Brugler

July 8, 2011

Heating Up

 

It’s the middle of July, you have a late planted corn and soybean crop, and the weather models are calling for a high pressure ridge to set up over the Southeast for the next two weeks or more. Temps east of the Rockies are projected to be above normal or much above normal for the period. That is not a setup for going home short for the weekend, and grains popped higher on Friday as bears headed for the sidelines.

Corn futures were up 4.92% this past week. There were zero deliveries against July futures, as corn basis is sufficiently strong to make it more attractive to own the cash corn than to deliver it against futures. Commercial longs are standing strong because taking delivery against September could drag out into new crop harvest, where prices are currently much lower. It is better to have the corn now. On the other hand, the 24 cent inverse is making elevators reluctant to hold cash corn and roll to the September. Many are back to backing any corn they are buying, or strictly buying it against September. USDA reported the largest weekly export sales total in 3 months on Friday, as low prices in the last half of June did their work of curing low prices. Large sales are also expected to be reported next week, including 540,000 MT of old crop corn sold to China.  Bulls also noted that spot ethanol margins have improved dramatically, and ethanol stocks are the tightest they have been all year.

Soybeans were also about 30 cents higher for the week, aided by higher values for both soybean meal and soybean oil. The smaller soybean acreage shown by USDA in the June 30 report is also supportive because high average yield is required and the weather forecasts have plenty of heat in them. Crop condition ratings improved slightly last week. USDA weekly export sales through June 30 were 434,700 MT, on the lower end of estimates. However, China was the buyer of 372,000 MT of old crop beans and that was news. Chinese soy oil prices have also risen back toward the upper end of their 6 month range, with some trade talk that price controls on veg oil will be eased in August.

Wheat prices advanced at all three exchanges, with old crop July sharply (11.29%) higher in Chicago. Deliveries vs. July futures there were limited because of the excellent returns to be had by storing the wheat and hedging it for later delivery. KC saw heavy deliveries against its July contract on Thursday, followed by a jump in basis bids for higher protein wheat. Low priced Russian wheat is making an impact on the market. Egypt bought 180,000 MT of Russian wheat after being made an offer so attractive that they couldn’t refuse. Tunisia had already purchased Russian wheat, and the Ukrainians have also been selling some. The US wheat crop is a mixed bag, with SRW yields reported to be pretty good, but spring wheat acreage and yield a mystery. The spring wheat crop is only 13% headed, compared to 52% on average.

July cotton futures expired with a dramatic drop of 1920 points on Friday, once again reminding us why you don’t want to still be in contracts that are close to expiration. The damage didn’t extend to the more liquid December futures, however. Net change for the week was -4.29% on the now front month October. Export business still isn’t good, with USDA once again showing net cancellations for old crop. New crop business did pick up in the week ending June 30, however, with USDA recording 425.6K running bales of new sales commitments. Not coincidentally, December futures had dropped 27 cents per pound between June 3 and this week’s low. That was the lowest new crop futures price seen since February.

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. 

 

Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

06/17/11

06/24/11

07/01/11

07/08/11

Change

% Change

July

Corn

7.0025

6.7

6.4075

6.7225

0.3150

4.92%

July

CBOT Wheat

6.7225

6.3575

5.845

6.505

0.6600

11.29%

July

KCBT Wheat

8.045

7.485

7.03

7.0775

0.0475

0.68%

July

MGEX Wheat

8.9725

8.26

8.31

8.5

0.1900

2.29%

July

Soybeans

13.33

13.2025

13.2225

13.52

0.2975

2.25%

July

Soybean Meal

349

339.9

340.9

346.3

5.4000

1.58%

July

Soybean Oil

55.92

55.22

55.16

56.2

1.0400

1.89%

Aug

Live Cattle

110.2

113.5

112.85

114.65

1.8000

1.60%

Aug

Feeder Cattle

132.65

138.6

140.475

143.6

3.1250

2.22%

July

Lean Hogs

95.65

96

95.5

95.875

0.3750

0.39%

Oct

Cotton

129.61

126.92

121.81

116.58

5.2300

4.29%

July

Oats

3.515

3.355

3.395

3.455

0.0600

1.77%

July

Rice

13.965

13.45

13.99

15.32

1.3300

9.51%

 

Cattle futures continued regained their footing after pulling back the week before. The net change was +1.6% for the week. Rising wholesale beef values allowed packers to pay up for cattle, with the choice boxed beef up .71% for the week on the Thursday/Thursday basis. Weekly USDA export sales for beef on Friday morning were a bit disappointing at only 13,800 MT, but cumulative sales for the year to date are 382,251.

 

Lean Hog futures have been trading in a fairly tight range over the past month. July futures have been at a stubborn discount to the CME Lean Hog Index, expecting cash hogs to be under pressure. To a degree that has been true, but wholesale pork prices have been seeing some solid buying interest as we head into BLT season. The carcass cutout value was up .49% on a Thursday/Thursday basis.

 

Market Watch: The main news driver for the week will be the USDA monthly crop production and supply/demand reports, which will be released on Tuesday morning.  USDA has telegraphed some of the content via the June 30 reports, but there is great debate in the industry about which categories USDA chooses to adjust to meet the known quarterly stocks figures. The corn use adjustment was also very severe, raising questions about whether the 4th quarter will be assumed to have a similar cutback.

We’ll have the regular USDA reports on export inspections and crop condition ratings on Monday.  NOPA monthly soybean crush numbers are expected on Thursday morning, along with USDA weekly export sales data. The July grain futures contracts also expire on Thursday.

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

Where Is That Bottle Rocket?

Jul 01, 2011

Brugler

Market Watch with Alan Brugler

July 1, 2011

Where Did I Put That Bottle Rocket?

 

As we head into the July 4th  weekend, the corn and wheat markets look like they are in need of a booster rocket. They have clearly lost their bullish momentum since the Russians announced that they were getting back into the export market. Actually, today was supposed to be the first day Russian wheat was to be available. Maybe we can strap a few leftover bottle rockets or Roman candles to the charts and get these things turned around. Of course, if you are cattle or hog feeder, you like this reprieve on the feed costs and might want to have a bucket of water close by.

 

Corn futures dropped 29 cents per bushel for the week, after a 30 cent loss and an 87 cent loss in the previous two weeks. That is some serious selling! Much of this was just plain old liquidation of long positions ahead of July deliveries. There were more than 500 thousand contracts open in July at the beginning of June, and that’s 2.5 billion bushels of corn. Registered receipts were less than 500 contracts, i.e. corn available to deliver against July futures. The short squeeze potential was there, but exchange rules require non-commercials to downsize to 600 contracts apiece by FND. Thus, the big sell off. Now that the only ones still in the pool are commercials and bullish funds, we’ll see if the shorts can come up with corn to deliver. There were zero deliveries on Friday.

 

The corn sell off did get a fundamental kicker on Thursday, as USDA showed 3.67 billion bushels of corn were still sitting around on June 1. That was below the 4.3 billion from last year, but definitely more than the trade expected. USDA will have to cut the Feed & Residual use or the Ethanol use categories in the July WASDE report to show who didn’t use the corn that they found! The June 1 planted acreage number was also bearish, larger than the March Intentions for the 8th time in 9 years. There are still questions about the USDA numbers, particularly the harvested acres figure. It didn’t appear to take into account the widespread flooding in ND/SD/NE/IA and MO. That ground would be in the planted acres number, but will be a lake until August or September.

 

Soybeans were up 2 cents for the week.  China showed some interest in buying US beans again, despite rolling other purchases into the new crop time slots. USDA showed 619 million bushels of beans in the Grain Stocks report, which was 27 million more than the average trade estimate and suggests that August 31 ending stocks could be close to 200 million bushels. The soybean acreage number was bullish for beans at only 75.2 million. Producers went for extra corn ground in areas that could get it planted, leaving beans a little shy of the March intentions.  USDA does see an increase in double crop beans this year vs. year ago. The beans after wheat combo actually comes the closest to matching the revenue per acre from corn.

 

Wheat continued to show all the characteristics of a bear market, dropping hard on bearish news and pretty much ignoring bullish items. Chicago was down 8% for the week. KC was down 6%. Minneapolis spring wheat managed a 5 cent or 0.61% gain. All of it came on Friday. USDA on Monday showed 5% of the crop still wasn’t planted. On Thursday, USDA showed that at least 800,000 acres from the March intentions would NOT be planted, with durum acres on top of that. In fact, All Wheat planted acreage was reduced to 56.4 million acres.

Cotton futures were down 2.3% for the week. USDA found more cotton acres, including all of those the trade had expected to find in March and that didn’t show in the Intentions report. The new USDA estimate is 13.725million. So, we have a rise in potential US production at the same time we’re still seeing negative weekly export sales totals due to cancellations of prior contracts. Not so fast! USDA didn’t projected harvested acres for cotton, and there are indications that 20-40% of the Texas crop will be abandoned because it has not survived the drought. That translates to smaller harvested acreage in the largest US production state.

Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

06/10/11

06/17/11

06/24/11

07/01/11

Change

% Change

July

Corn

7.87

7.0025

6.7

6.4075

0.2925

4.37%

July

CBOT Wheat

7.5925

6.7225

6.3575

5.845

0.5125

8.06%

July

KCBT Wheat

8.68

8.045

7.485

7.03

0.4550

6.08%

July

MGEX Wheat

10

8.9725

8.26

8.31

0.0500

0.61%

July

Soybeans

13.8725

13.33

13.2025

13.2225

0.0200

0.15%

July

Soybean Meal

373.3

349

339.9

340.9

1.0000

0.29%

July

Soybean Oil

56.85

55.92

55.22

55.16

0.0600

0.11%

Aug

Live Cattle

103.475

110.2

113.5

112.85

0.6500

0.57%

Aug

Feeder Cattle

123.625

132.65

138.6

140.475

1.8750

1.35%

July

Lean Hogs

93.225

95.65

96

95.5

0.5000

0.52%

July

Cotton

150.03

145.18

165.22

161.41

3.8100

2.31%

July

Oats

3.955

3.515

3.355

3.395

0.0400

1.19%

July

Rice

14.895

13.965

13.45

13.99

0.5400

4.01%

 

Cattle futures were down 65 cents for the week. Cash cattle trade was slow to develop and fairly limited, with many packers dark on Monday and holding supplies of contract cattle that they can draw on at the beginning of the month. Texas trade appeared to be mostly $.50 to $1.00 higher, while Kansas was about steady with a week ago.  Wholesale prices were mixed for the week, with Choice boxed beef up 0.2% for the week while the lower graded Select beef was down 0.7%.

 

Lean Hogs retreated 50 cents per hundred in the nearby July contract, which will expire in a couple weeks. July is still at a considerable discount of $7.11 to the CME Lean Hog Index, betting that cash hog prices will decline over the next two weeks. Either that or the weakness in futures is merely because of spec fund liquidation and not yet focused on the real world values at expiration. Cash hog prices were very erratic, depending on packer holiday schedules, heat and other variables. The pork carcass cutout value reached an all time record high on Monday. However, carcass cutout values were down 2.55% for the week on a Friday/Friday comparison. Pork production for the year is running 1% ahead of 2010.

 

Market Watch: The trade (and the industry) gets a break on Monday for the Independence Day holiday in the United States. All markets are closed. The delays USDA Monday reports to Tuesday, including Crop Progress and Export Inspections. Thursday will be the last trading day for July cotton futures.  On Friday, we’ll get weekly USDA Export Sales, and a few macro reports like unemployment. By Friday, attention will be shifting to the monthly USDA Supply & Demand estimates to be released on the 12th.  

 

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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