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February 2012 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.

Oily Situation

Feb 24, 2012

Brugler

Market Watch with Alan Brugler

February 24, 2012

Oily Situation

 

Oil and oilseeds dominated the market action this week, although corn also got a lot of attention via the USDA Outlook Forum and the first "armchair estimates" from USDA for 2012/13 production and consumption. Crude oil (WTI) rose to $109.70, up $1.87/barrel on Friday. That was the highest weekly close since April 29, 2011. Iran talk dominated the discussion, but gasoline and diesel prices were also rising and allowing refiners to pay up for product as needed. Biodiesel may not be getting the blend credit that it was, but soy oil followed the energy products higher anyway. The drought is breaking down in South America, but estimates of production losses continue to get larger, and so are projections for US 2012/13 soybean exports. That has the bean market trying to buy acreage this spring in the United States, or at least minimize the loss of acreage to corn. USDA thinks beans are holding all of last year’s acreage, at 75 million planted, but time and spring weather will tell the tale.

 

Corn futures lost a penny per bushel for the week. The USDA 10 year Outlook Forum production forecast was bearish as expected, with 94 million acres expected to have a near record yield of 164 bushels per acre. USDA did see expanded use, however, and projected ending stocks were at a fairly neutral 1.6 billion bushels. Weekly export sales were disappointing, less than a million metric tonnes. On the bull side, China bought more corn as announced under the daily reporting system, and additional sales were attributed to "unknown destinations".

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

02/03/12

02/10/12

02/17/12

02/24/12

Change

% Change

Mar

Corn

$6.45

$6.32

$6.42

$6.41

($0.01)

-0.16%

Mar

CBOT Wheat

$6.61

$6.30

$6.44

$6.41

($0.03)

-0.47%

Mar

KCBT Wheat

$7.13

$6.73

$6.90

$6.81

($0.09)

-1.23%

Mar

MGEX Wheat

$8.39

$8.14

$8.22

$7.87

($0.36)

-4.35%

Mar

Soybeans

$12.33

$12.29

$12.68

$12.79

$0.11

0.91%

Mar

Soybean Meal

$328.60

$320.00

$332.50

$333.60

$1.10

0.33%

Mar

Soybean Oil

$51.65

$52.53

$53.40

$54.29

$0.89

1.67%

Feb

Live Cattle

$123.63

$123.95

$128.60

$127.55

($1.05)

-0.82%

Mar

Feeder Cattle

$154.30

$154.15

$158.42

$157.68

($0.74)

-0.47%

Apr

Lean Hogs

$88.75

$88.58

$90.38

$89.73

($0.65)

-0.72%

Mar

Cotton

$96.34

$90.61

$91.45

$89.85

($1.60)

-1.75%

Mar

Oats

$3.14

$3.18

$3.24

$3.20

($0.04)

-1.31%

Mar

Rice

$13.88

$13.72

$14.14

$14.21

$0.07

0.50%

 

 

 The wheat complex saw all three exchanges lower. Minneapolis lagged the gains in the other two markets a week ago, and was even weaker this past week. USDA predicted 58 million acreage of wheat will be planted this spring. That implied about a million acres more spring and durum wheat than what the trade has been anticipating. Minneapolis is the delivery location for most of the US spring wheat. A wire service poll of Canadian producers also surfaced expansion plans in Canada for 2012. USDA projected US ending stocks will total 957 million bushels by May 31, 2013, which is an unwelcome expansion given current world stocks levels.

 

Cotton futures slid 160 points to close 1.75% lower for the week. USDA reported weekly export sales through February 16 at 183,900 RB for both marketing years for Upland cotton. Net Pima sales were 17,300 RB for 2011/12 delivery. Upland cotton acreage is expected to decline to 13.2 million acres because of lower prices. At the Outlook Forum, USDA projected 2012/13 exports would reach 12 million bales. China is expected to cut cotton imports by 1 million bales to 16 million in 2012/13 according to USDA. The USDA projected the on farm price will average 80 cents a pound in the 2012-13 marketing year.

 

Cattle futures set new all time highs, but dropped by more than $2 on Thursday and ended the week $1.05 lower than they went home the previous Friday. Wholesale prices were stout all week, with Select boxed beef setting an all time high on Friday at $193.40, and strong weekly export sales announced Friday morning confirmed the strength of the demand. Cash cattle trade confirmations were still hard to come by in the southern Plains on Friday afternoon, but a few northern sales were $1-2 lower than the record high of the previous week. Estimated beef production for the week was down 3.7% from the previous week and down 7.7% from last year. YTD production is down 5.3%. Friday’s Cattle on Feed report showed larger than expected marketings at 102.4% of year ago, with placements at 97.8% and February 1 On Feed numbers at 102.0%.

 

Lean Hog futures were down 0.7% for the week. Pork production for the week was estimated at 441.2 million pounds, down 1.4% from last week but up 0.5% from the same week in 2011. YTD production is up 0.6%. The pork carcass cutout value was down $1.10 for the week on a Friday/Friday basis. Pork ribs were in the most demand for the week. The Cold Storage report earlier in the week showed pork in the cooler to be 8.5% more abundant than a year ago. On the other hand, chicken breast meat supplies were down sharply as production cutbacks have finally started to tighten up supplies.

 

Market Watch: Grain traders will start the week adjusting for any futures positions inherited due to options "pins" as the March options expired on Friday. March corn was the piñata, if you will pardon the expression, settling at $6.40 ¾ and forcing a number of long March 640 calls to be exercised into long futures. Long 640 puts of course expired worthless. The March 1280 strike price was the battleground for soybeans, settling at $12.79. March Chicago wheat settled at $6.41, again a penny in the money on the calls. February cattle futures expire on Tuesday, which is also the end of the month and a time that can result in fund flow price changes in a lot of markets. The regular USDA reports are the Export Inspections on Monday and weekly Export Sales 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 2012 Brugler Marketing & Management, LLC

Uniform Opinion

Feb 17, 2012

Brugler

Market Watch with Alan Brugler

February 17, 2012

Uniform Opinion

 

It is pretty rare to see all of the commodities we track higher in the same week. Particularly rare when inflation is supposed to be pretty tame. However, that is the case this week. The dollar wasn’t even weaker, advancing 1% on the week. Admittedly the USD was down on Thursday and Friday ahead of a three day weekend. Demand is seen as picking up a little globally, and there are just enough weather concerns in South America and the Northern Hemisphere to keep buyers on their toes. 

Corn futures regained 10 of the 13 cents per bushel lost the previous week. The USDA 10 year forecast was bearish as expected, with 94 million acres planted and a 164 bushel per acre yield. However, those numbers are expected to be modified by the Chief Economist at this week’s Outlook Forum in Washington. Weekly export sales topped a million metric tonnes, exceeding trade expectations. Shipments were also strong.  South American production estimates continue to run below the most recent USDA numbers, leading to ideas that USDA may be more aggressive in projecting 2012/13 export sales out of the US.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

01/27/12

02/03/12

02/10/12

02/17/12

Change

% Change

Mar

Corn

$6.42

$6.45

$6.32

$6.42

$0.10

1.58%

Mar

CBOT Wheat

$6.47

$6.61

$6.30

$6.44

$0.14

2.22%

Mar

KCBT Wheat

$7.00

$7.13

$6.73

$6.90

$0.16

2.45%

Mar

MGEX Wheat

$8.26

$8.39

$8.14

$8.22

$0.08

0.98%

Mar

Soybeans

$12.19

$12.33

$12.29

$12.68

$0.39

3.13%

Mar

Soybean Meal

$322.20

$328.60

$320.00

$332.50

$12.50

3.91%

Mar

Soybean Oil

$51.59

$51.65

$52.53

$53.40

$0.87

1.66%

Feb

Live Cattle

$124.70

$123.63

$123.95

$128.60

$4.65

3.75%

Mar

Feeder Cattle

$154.60

$154.30

$154.15

$158.42

$4.27

2.77%

Apr

Lean Hogs

$87.33

$88.75

$88.58

$90.38

$1.80

2.03%

Mar

Cotton

$96.00

$96.34

$90.61

$91.45

$0.84

0.93%

Mar

Oats

$2.99

$3.14

$3.18

$3.24

$0.06

1.81%

Mar

Rice

$14.64

$13.88

$13.72

$14.14

$0.42

3.06%

 

 The wheat complex saw all three exchanges higher, with Minneapolis lagging the gains in the other two. KC led with a 2.45% gain for the week. There were several bullish themes for the week, mostly export related. The US captured Egyptian business in two separate tenders for the first time this year. South Korea also bought milling wheat. There were again noises out of Ukraine about slowing old crop exports due to concerns about a shortfall in 2012 production. Weather and rail car logistics also appeared to be putting a kink in Russian export shipments, leaving room for other origins to sell. Saudi Arabia is tendering for 330,000MT of hard wheat for May-June shipment.

Soybeans popped 3.13% for the week, aided by a nearly 4% increase in soybean meal. Soy oil was up 1.66%. Weekly USDA export sales were still slow at 614,700 MT with shipments at 1.0 MMT.  Trade estimated sales were from 600 to 750 thousand MT. However, China signed some long term commitments for more than 8 MMT, with an additional announcement expected heading into the weekend. South American weather also continues to be an issue, with more firms lowering projected Brazilian production into the 69 MMT range because of poor yields in Parana and ongoing dryness in the less developed Rio Grande do Sul crop.

Cotton futures reversed the prior week slide, closing 0.93% higher on Friday night. Weekly export sales were up significantly from the four week average at 101,400 RB for 2011/12 with sales of 65,200 RB for 2012/13 delivery for upland cotton. Net Pima sales were 6,600 RB. Total commitments are now 101% of the USDA projection for the year. They’ll likely have to get to 106-107% to allow for unshipped sales that will be carried over on August 31.

Cattle futures jumped 3.75% for the week. Cash cattle trade confirmations were still hard to come by in the southern Plains on Friday afternoon, but a few popped up at $128. If widespread, that will justify the futures move this week and probably lift asking prices to $130 for this coming week. The wholesale market was much stronger, with choice boxed beef up 2.1% for the week on a Thursday/Thursday basis. The select product was up 1.8%. Thus, we conclude that packers had more spending money available. Weekly beef production was down an estimated 4.1% from 2011, and year to date (YTD) production is down 5%. That also does quite a bit to keep prices firm. Estimated carcass weights are believed to be creeping up, possibly 13 pounds higher than a year ago.

Lean Hog futures were up 2%, drafting the speeding cattle futures market around the February calendar. Pork production for the week was estimated at 447.3 million pounds, up 2.7% from the same week in 2011. YTD production is up 0.8%. Hog carcass weights are believed to match last year at 278 pounds live and 208 pounds dressed weight. The pork carcass cutout value was up $1.50 on a Thursday/Thursday basis.

Market Watch: Trading won’t begin until Tuesday in the US, with President’s Day being observed on Monday. Globex trade will resume on Monday evening. USDA Export Inspections will be delayed until Tuesday because of the holiday, and the weekly Export Sales report will be delayed until Friday. USDA will issue the monthly and annual Cold Storage reports on Wednesday. The monthly Cattle on Feed report will be out Friday after the close of the markets. Thursday marks FND (First Notice Day) for March cotton futures deliveries. The March grain and energy options will expire on Friday.

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 more information on our individualized subscription and consulting services for leading agricultural producers and businesses.

 

 Copyright 2012 Brugler Marketing & Management, LLC

Waiting for Spring

Feb 10, 2012

Brugler

Market Watch with Alan Brugler

February 10, 2012

Waiting For Spring

USDA made a few changes in the February reports, but not much that was a surprise to the trade. Now we’re mostly hanging around waiting to see what USDA rolls out for 10-year projections and 2012 production and S&D balances at the Outlook Forum. The former were done late in 2011 as part of the budget process, and the latter are "armchair" estimates, but it gives the market something to chew on. Producers are also keeping an eye on the guarantee prices for corn, soybeans and spring wheat, which are determined based on February average futures prices. We know that the fall prices for wheat were high enough to attract more winter wheat acreage than is really needed in 2012. The question is whether the same thing can happen in the other crops, and where the constraints are in the acreage pool.

Corn futures lost 13 cents per bushel this past week, nearly all of it after the USDA reports came out on Thursday morning. USDA dropped projected ending stocks to 801 million bushels, and cut the stocks/use ratio to the tightest since 1995/96. They also trimmed projected Argentine production because of the drought back in December and January, and reduced projected world corn ending stocks. It all sounds bullish, but it was also all widely anticipated ahead of the report. There was no fresh bullish input, while the weekly export sales report was bearish and Greeks were again rioting in the streets. Some in the trade have also convinced themselves that USDA will issue a very bearish 10 year outlook ahead of the annual Ag Outlook Forum in D.C on February 23-24.

The wheat complex saw all three exchanges lower, with Chicago dropping 4.6% for the week and KC down 5.6%. Minneapolis saw a smaller decline of 2.9%. The bearish factor for the week was yet another monthly increase in projected world wheat ending stocks, this time to 213.10 MMT from 201.02 MMT last month. USDA continues to find more production for both 2010 and 2011, and in this case even trimmed back projected total use. The US numbers were tweaked in a bullish direction, with ending stocks cut to 845 million bushels and the average annual cash price a dime higher.  That wasn’t enough to offset the bearish implications of the world numbers.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

01/20/12

01/27/12

02/03/12

02/10/12

Change

% Change

Mar

Corn

$6.12

$6.42

$6.45

$6.32

-0.13

1.98%

Mar

CBOT Wheat

$6.11

$6.47

$6.61

$6.30

-0.31

4.65%

Mar

KCBT Wheat

$6.67

$7.00

$7.13

$6.73

-0.40

5.58%

Mar

MGEX Wheat

$7.99

$8.26

$8.39

$8.14

-0.24

2.89%

Mar

Soybeans

$11.87

$12.19

$12.33

$12.29

-0.04

0.28%

Mar

Soybean Meal

$311.90

$322.20

$328.60

$320.00

-8.60

2.62%

Mar

Soybean Oil

$50.43

$51.59

$51.65

$52.53

0.88

1.70%

Feb

Live Cattle

$124.55

$124.70

$123.63

$123.95

0.33

0.26%

Jan

Feeder Cattle

$151.63

$154.60

$154.45

$153.63

-0.83

0.53%

Feb

Lean Hogs

$85.33

$86.68

$87.53

$86.85

-0.67

0.77%

Mar

Cotton

$98.60

$96.00

$96.34

$90.61

-5.73

5.95%

Mar

Oats

$2.95

$2.99

$3.14

$3.18

0.04

1.19%

Mar

Rice

$14.54

$14.64

$13.88

$13.72

-0.16

1.15%

 

Soybeans held up well compared to the feed grains. Prices were down 4 cents, after gaining 14 cents the week before. Soybean meal was down 2.6% in sympathy with the feed grains, while soy oil rallied 1.7%.  Weekly soybean export sales were again below trade estimates. As we had anticipated in last week’s Market Watch, USDA cut projected Argentine and Brazilian production for 2012 by less than the average trade estimates. Brazilian production was trimmed to 72 MMT, and Argentina was cut to 48 MMT. USDA chose not to go as low as the Brazilian government (CONAB) due to current rains that could stabilize yields or even add some bushels between now and final.

Cotton futures lost nearly 6% for the week, with a dead cat bounce on Friday. USDA’s upward revision in projected cotton ending stocks just added another drip to the torture. In a series of monthly WASDE reports, ending stocks have gradually grown from 2.6 million bales last year to 3.8 million for next August. USDA noted slower domestic mill use and made no change to exports. Export sales were net positive for the week (not always the case), and total commitments are now at 100% of the USDA Upland export forecast for the year. They typically need to go to 104-105% to account for sales that get bumped to the following year, but the picture is one of meeting the USDA numbers if we just keep shipping what is already sold.

Cattle futures posted a tiny gain of 33 cents for the week, backing into it by losing $1.22 on Friday. Cash cattle trade confirmations were still hard to come by in the southern Plains. Cash cattle trade was down $1 in Nebraska on Friday. The wholesale market was higher for the week, with choice boxes up 1.9% and select up 2.1%. Weekly beef production was up an estimated 1.9% from the previous week, but still down 5.2% for the year to date.  

Lean Hog futures were down 67 cents this past week, almost erasing the 85 cents for the week before. Ham prices dropped $2.95 from Friday/Friday, erasing their gain from the previous week. The pork carcass cutout value moved up a whole 4 cents for the week. Pork production year to date is up 0.6% from last year. Production this past week was 0.6% below the prior week.


Market Watch: The cotton market starts the week learning to live without the buffering impact of the March options, which expired on the 10th.  Hog producers and traders will see the expiration of the February contract on Tuesday. NOPA is also expected to put out a Valentine for the soybean market with their monthly crush report. Analysts need the love from NOPA, since Census no longer publishes monthly government data on soybean crush. Other than that we have the usual USDA export inspections report on Monday and the weekly Export Sales data on Thursday morning.

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 2012 Brugler Marketing & Management, LLC

Warming Up

Feb 03, 2012

Brugler

Market Watch with Alan Brugler

February 3, 2012

Warming Up

Midwest temperatures have been unusually warm this winter. Grain markets have taken the hint and warmed up a little themselves. You can also think of it as warming up for the next main event, the March USDA Planting Intentions report. Coincidentally, we're also now in the pricing period used to set crop revenue insurance guarantee levels for 2012 crops.

Corn futures eked out a 3 cent per bushel gain for the week, extending a string of higher weekly closes.  A private analyst left projected Brazilian corn production UNCH at 61 MMT and dropped Argentina 1.5 MMT to 22.5 MMT. Other Argentine estimates have been another 40 million bushels lower but the cut made it more likely that USDA will follow suit in Thursday’s WASDE estimate. Weekly export sales hit 912,000 MT for 2011/12 and 63,000 MT for 2012/13 and were in line with trade expectations. Private exporters announced the sale of 107,340 MT of corn to Japan for 2011/12 delivery on Thursday. South African corn production was reduced to 11.5 MMT in a report issued by the USDA attaché for South Africa. Weekly ethanol production refused to back down, likely because of previous hedging, but stocks have built to nearly 21 million gallons and are putting pressure on ethanol prices.

The wheat complex saw all three exchanges higher for a change. There was still some spread trading between markets, but Chicago ended the week 2.1% higher. KC was up 1.8% and MPLS was up 1 5%. Weekly export sales were a net 518,900 MT for 2011/12 delivery and 35,200 MT for 2012/13 delivery, at the low end of trade guesses. The Rosario Grain Exchange predicts a crop of 12.5 MMT, down substantially from 2010 production of 16.1 MMT. The USDA attaché estimates Argentine wheat production at 14 MMT for 2011/12 with exports projected at 9.5 MMT. Goldman Sachs raised their near term wheat futures target to $6.80 from $6.20 but remains longer term bearish.

Soybeans were up 14 cents for the week, a 1.1% gain. Soybean meal was up 2%, while soy oil struggled to a 0.12% pickup for the week. Weekly soybean export sales were again below trade estimates, but the market shook that off on Friday, which accounted for nearly the entire advance for the week.  A private forecasting firm on Friday lowered their projection for soybean production in Brazil to 70 MMT, and put Argentina at 46.5 MMT. The combined cuts were larger than expected from that firm, and gave beans a good boost on Friday.  

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

01/13/12

01/20/12

01/27/12

02/03/12

Change

% Change

Mar

Corn

$6.00

$6.12

$6.42

$6.45

0.03

0.43%

Mar

CBOT Wheat

$6.02

$6.11

$6.47

$6.61

0.14

2.09%

Mar

KCBT Wheat

$6.70

$6.67

$7.00

$7.13

0.13

1.82%

Mar

MGEX Wheat

$8.01

$7.99

$8.26

$8.39

0.12

1.48%

Mar

Soybeans

$11.58

$11.87

$12.19

$12.33

0.14

1.11%

Mar

Soybean Meal

$301.50

$311.90

$322.20

$328.60

6.40

1.99%

Mar

Soybean Oil

$50.29

$50.43

$51.59

$51.65

0.06

0.12%

Feb

Live Cattle

$122.77

$124.55

$124.70

$123.63

-1.08

0.86%

Jan

Feeder Cattle

$150.58

$151.63

$154.60

$154.45

-0.15

0.10%

Feb

Lean Hogs

$85.60

$85.33

$86.68

$87.53

0.85

0.98%

Mar

Cotton

$95.47

$98.60

$96.00

$96.34

0.34

0.35%

Mar

Oats

$2.83

$2.95

$2.99

$3.14

0.16

5.19%

Mar

Rice

$14.44

$14.54

$14.64

$13.88

-0.76

5.19%

 

Cotton futures rose 0.35% for the week. All of the gain came on Friday. The U.S. economic news was positive on Friday, with unemployment dropping to 8.3%. Weekly export shipments were a marketing year high at 366,000 RB in the most recent USDDA report, with China the main destination. The USDA set the prevailing world market price (AWP) for upland cotton at 80.57 cents through February 9th. As you can see, US futures are well above that.

Cattle futures posted some new highs early in the week, but backed off on Friday to close $1.08 lower, or 0.86%. Cash cattle trade was down $1 in the south on Friday. Dressed business was reported $1-2 lower in the north, at $198.  The wholesale market was lower. Select boxes were down $.45, while Choice graded product was down $.07 with light to moderate demand and offerings. Weekly beef production was down an estimated 3.1% from the previous week, and down 5.8% from the same week in 2011. YTD beef production is down 5.2%.

Lean Hog futures were up 85 cents for the week, or about one percent. Ham prices rose $2.51 from Monday to Friday, helping to support the cutout value and the hogs. USDA projected weekly slaughter (including the Saturday estimate) was 2.137million head, down 30,000 from the previous week but up from year ago. The national average base hog price was $83.81, down $1.33 from the previous day and running a different direction than the product value as we headed into the weekend.

Market Watch: Most of the USDA report action will be on Thursday, with the monthly crop production and world supply/demand estimates due out at 7:30 am CST. No US production estimate revisions are expected, but cuts in South American crop size are widely expected. With US export shipments of corn running close to last year’s pace, and USDA well below that in the January report, traders will also be interested in the weekly Export Inspections report on Monday and the weekly Export Sales report. The latter is also a Thursday morning release. The cattle market will begin Monday by reacting to "surprise" positions acquired or lost from the Feb options expiration on Friday. Friday will mark the expiration of March cotton options.

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 2012 Brugler Marketing & Management, LLC

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