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March 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.

Out Like A Lion

Mar 30, 2012

Brugler

Market Watch with Alan Brugler

March 30, 2012

Out Like a Lion

 

The traditional saying says that the month of March comes "in like a lion and out like a lamb". In other words, blustery early and warm and gentle late. The weather has been pretty weird this year, though!  The market weather definitely ended the month in lion mode, with huge daily gains on Friday following the USDA Prospective Plantings and Grain Stocks reports. While the reports had some explosive elements, the technical setup was also ripe for a big end of month jump out of oversold conditions, and that is what we experienced. Roar!

 

Corn futures dropped 2 cents per bushel for the week. Things were really ugly until the limit up move on Friday. Increased producer selling was a factor, but end of quarter profit taking was also apparent at times. A chart breakdown drew in fresh bears right before the slaughter. US export sales commitments are 77% of the USDA forecast for the year. The 5 year average commitment is 79%, so we appear to be on track to hit the USDA number. New crop corn continues to lose ground to soybeans in the revenue department, based on the soy/corn ratio. It was at 2.51:1 on Friday night. Historically, ratios over 2.3:1 start to attract swing acres to beans. Corn planting intentions at 95.9 million acres are the largest since 1937, if the rally in soybeans fails to change some minds. Old crop ending stocks are getting tight, however. The March 1 stocks of 6.01 billion bushels indicated that total second quarter disappearance was record large. If that pace continues, USDA will have to reduce projected ending stocks and move the stocks/use ratio closer to the all time record low set in 1995/96.

 

The wheat complex saw all three exchanges higher, although it was close for HRW in Kansas City. Much smaller than expected spring wheat acreage intentions tightened up the outlook for 2012/13 production and ending stocks. Spring wheat planting intentions were 11.976 million acres, when traders had been guessing 13.4 million. MPLS futures rose 2% for the week, all of it on Friday. The new spring wheat number brought expected US all wheat acreage down to 55.908 million for 2012.  Crop condition ratings for winter wheat are much better than last year in the Plains HRW states. Crop maturity is very much ahead of normal due to the warm temps.

 

Soybeans jumped 37 cents for the week. USDA reported 73.9 million acres intended for 2012, well below the 75.5 million acre average guess. That fired up the bulls and nearby futures were up 47 ½ cents on Friday alone. Soy oil rose 0.4% for the week after the big rally on Friday. Production estimates for Brazil continue to leak lower as the combines roll and the full extent of the drought damage is uncovered. The combined Brazilian and Argentine production estimates USDA put out a week ago are 349 million bushels smaller than the year before, and if the private estimates are correct that gap gets as much as 400 million bushels larger. The USDA global use projection is still 15 million bushels larger than last year, so the missing bushels have to come out of ending stocks or out of the US via increased export sales.

 

Cotton futures were up 3.89% for the week. Weekly export sales were acceptable, adding to total commitments which are now 110% of the USDA projection for the year. Outstanding sales currently on the books are 20% smaller than last year, but expectations are also diminished. US planting intentions as of March 1 were measured at 13.155 million acres, close to the trade average guess if you throw out a low ball estimate from Goldman Sachs.

 

 

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

03/09/12

03/16/12

03/23/12

03/30/12

Change

% Change

May

Corn

$6.43

$6.73

$6.47

$6.44

($0.02)

-0.39%

May

CBOT Wheat

$6.41

$6.72

$6.54

$6.61

$0.06

0.99%

May

KCBT Wheat

$6.84

$7.06

$6.95

$6.96

$0.02

0.25%

May

MGEX Wheat

$8.05

$8.23

$8.17

$8.34

$0.16

1.99%

May

Soybeans

$13.38

$13.74

$13.66

$14.03

$0.37

2.73%

May

Soybean Meal

$362.70

$374.40

$373.00

$388.70

$15.70

4.21%

May

Soybean Oil

$54.27

$55.50

$54.88

$55.10

$0.22

0.40%

Apr

Live Cattle

$126.03

$125.30

$124.50

$120.45

($4.05)

-3.25%

Mar

Feeder Cattle

$153.93

$153.40

$153.30

$148.83

($4.47)

-2.92%

Apr

Lean Hogs

$87.83

$85.88

$85.03

$83.43

($1.60)

-1.88%

May

Cotton

$88.80

$87.48

$89.63

$93.12

$3.49

3.89%

May

Oats

$2.88

$3.34

$3.33

$3.41

$0.08

2.48%

May

Rice

$14.15

$14.54

$14.60

$14.77

$0.17

1.13%

 

Cattle futures flirted with bullish thoughts on Friday morning, but ended up more than $2 lower. For the week, they were down $4.05 or 3.25%. Cattle have both a supply problem and a demand problem at the moment. The number of cattle available for slaughter is rising seasonally; aggravated by the surge in light weight placements forced into feedlots last summer because of the southern Plains drought. Those cattle are now finishing, and comparatively early because of benign spring weather. Estimated carcass weights are now 25 pounds above last March’s actual. Demand was hurt by the surge in wholesale prices into the $190’s. US consumers have always balked in that price range, and export customers also apparently took a pass.

 

Lean Hog futures were higher on Friday, but down 1.88% for the week. The pork carcass cutout value lost 0.2% on a Thursday/Thursday basis. Ribs were higher, but the other cuts lagged. Pork production year to date is up 0.6% from last year. Production this past week was 0.8% smaller than last week, but 0.3% larger than the same week in 2011. Production YTD is up 0.7%. Carcass weights are estimated at 209 pounds, which would be up 1# from the 2011 actual weight.  T

 

Market Watch: The hangover from the March 30 party will likely extend into Monday. Hog traders will also be reacting to the Hogs & Pigs report, which was released after the close on Friday evening. The main USDA reports this coming week will be Export Inspections on Monday and Export Sales on Thursday. The first weekly Crop Progress report of the season is expected to be released on Monday afternoon. Thursday will make the last trading day for April cattle options. US futures markets will be closed on Good Friday for the Easter holiday weekend.

 

 

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

A Storm is Brewing

Mar 23, 2012

Brugler

Market Watch with Alan Brugler

March 23, 2012

A Storm Is Brewing

 

With much above normal temperatures throughout much of the country east of the Rockies, talk about unusual weather has been widespread. It is just too warm, too early. Typically, we hear "we’re gonna pay for this, somehow". Some figure tornados, others figure a late freeze due to all the vulnerable plants, some expect a hot and dry summer. Expectations are building but with uncertainty about direction. The same stormy weather is expected in the grain markets, specifically on Friday. That’s when USDA will release the quarterly Grain Stocks and Planting Intentions reports. To say that producers and speculators have been having a hard time anticipating what USDA finds is an understatement. There have been large (and often limit) daily moves following quarterly stocks reports, beginning with the bullish June 2010 Grain Stocks report. Contrary to popular opinion, they have not all been bearish.  You can see the markets hunkering down ahead of the tornado, with chart formations tightening into triangles or coils, and lots of futures options being bought to control price risk. The surprise will be if we don’t go anywhere.

Corn futures dropped 27 cents per bushel for the week. Increased producer selling from the week before was a factor, but end of quarter profit taking was also apparent at times. US export sales commitments are down 9% from year ago, but at 76% of the USDA forecast for the year. The 5 year average commitment is 77%, so we appear to be on track to hit the USDA number. New crop corn continues to lose ground to soybeans in the revenue department, with the soy/corn ratio on Friday at 2.37:1. Historically, ratios over 2.3:1 start to attract swing acres to beans.

The wheat complex saw all three exchanges lower, after all were higher the week before. Chicago dropped the most after being the biggest gainer the week before, down 2.7%. USDA reported weekly export sales were actually larger than the trade had expected, but export commitments are down 23% from last year at this time, and total only 93% of the USDA forecast for the year. They would typically be 97% by now. Crop condition ratings are much better than last year in the Plains HRW states. Crop maturity is very much ahead of normal due to the warm temps. That has growers nervous about a late freeze like the Easter freeze a few years ago. No freeze is currently in the forecast, but the risk exists out through the end of April.

Soybeans held up better than the feed grains, down 8 cents per bushel or 0.6%. Soy oil dropped 1.1% for the week despite a big rally on Friday and strong Chinese veg oil futures prices. Production estimates for Brazil continue to leak lower as the combines roll and the full extent of the drought damage is uncovered. The combined Brazilian and Argentine production estimates USDA put out a week ago are 349 million bushels smaller than the year before, and if the private estimates are correct that gap gets as much as 400 million bushels larger. The USDA global use projection is still 15 million bushels larger than last year, so the missing bushels have to come out of ending stocks or out of the US via increased export sales. The truckers strike in Argentina has been resolved. It emptied some of the port storage but appears to have not interfered with vessel loading because it didn’t last long enough.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

03/02/12

03/09/12

03/16/12

03/23/12

Change

% Change

May

Corn

$6.54

$6.43

$6.73

$6.47

($0.27)

-3.97%

May

CBOT Wheat

$6.72

$6.41

$6.72

$6.54

($0.18)

-2.68%

May

KCBT Wheat

$7.19

$6.84

$7.06

$6.95

($0.11)

-1.56%

May

MGEX Wheat

$8.32

$8.05

$8.23

$8.17

($0.05)

-0.67%

May

Soybeans

$13.33

$13.38

$13.74

$13.66

($0.08)

-0.60%

May

Soybean Meal

$359.10

$362.70

$374.40

$373.00

($1.40)

-0.37%

May

Soybean Oil

$54.08

$54.27

$55.50

$54.88

($0.62)

-1.12%

Apr

Live Cattle

$129.95

$126.03

$125.30

$124.50

($0.80)

-0.64%

Mar

Feeder Cattle

$158.10

$153.93

$153.40

$153.30

($0.10)

-0.07%

Apr

Lean Hogs

$90.43

$87.83

$85.88

$85.03

($0.85)

-0.99%

May

Cotton

$88.23

$88.80

$87.48

$89.63

$2.15

2.46%

May

Oats

$3.06

$2.88

$3.34

$3.33

($0.01)

-0.37%

May

Rice

$14.51

$14.15

$14.54

$14.60

$0.06

0.45%

 

Cotton futures were up 2.5% for the week. Weekly export sales picked up nicely, and are total commitments are now 109% of year ago. There are questions about cancelation risk on some of the older sales, but there is also optimism that the bookings are in place to meet or exceed USDA forecasts for the year. The restrictions on Indian cotton exports are also stirring interest in US product.

Cattle futures were down 0.6% for the second week in a row. It was a puzzling week for cattle bulls. Wholesale prices were down on Friday, with Choice off a nickel, but cash cattle trade was steady vs. the previous week, and USDA reported weekly export sales were the largest since 2001 at 52,000 MT. The Cold Storage report showed end of February beef supplies were up 1% from last year but down 4% from last month. The futures selling was tied to the USDA report to be released on Friday night. The report showed smaller than expected February marketings at 98% of year ago. Placements were 103% of last February, and the combination left the March 1 On Feed at 102.6% of last year.  Estimated beef production this week was down 2.2% from the week before and also ran below year ago. Total output since January 1 is down 3.5% despite larger numbers on feed (most not yet ready to market) and 23# heavier average carcass weights.

Lean Hog futures sank 1% this past week and are now down the last 4 weeks in a row. The pork carcass cutout value lost 3% for the week, with ribs, hams and pork bellies the weakest components. Pork production year to date is up 0.7% from last year. Production this past week was 1.9% smaller than last week, but 1.1% larger than the same week in 2011. Production YTD is up 0.7%. Carcass weights are estimated at 209 pounds, which would be up 1# from the 2011 actual weight.  

Market Watch: The Big One for the week will be on Friday morning, when USDA rolls out the March 1 Grain Stocks report and the Planting Intentions report. Trade estimates are remarkably consistent for the Planting Intentions, which leaves open the potential for a surprise. USDA will also have the usual Export Inspections report on Monday and Export Sales on Thursday morning.  Not be be overlooked is the quarterly Hogs and Pigs report on Friday afternoon. April grain options expired on Friday, which may have left some folks with surprise futures positions to be adjusted early this week. Pin attempts failed, with settlements well away from the round number strike prices. Thursday will mark the expiration of the March feeder cattle futures contract.

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

The Long March

Mar 16, 2012

Brugler

Market Watch with Alan Brugler

March 16, 2012

The Long March

The historical Long March was a 370 day retreat by the Chinese Communist armies in 1934-35 during their civil war with the Chinese Nationalists. Some sources estimate the total ground covered at 8000 miles. Our Long March, however, is in terms of days and soybeans. The soybean market bottomed on December 14, and has been marching steadily higher for 63 market days and more than 90 calendar days. Such steady and directional price moves are often known as "realizing bull markets" where it is too late to change the supply side of the market and prices must rise enough to make consumption fit the now "known to be smaller" supply. As was the case with the Chinese, the actual end date and destination were not known for a long time. Please understand that we’re not suggesting the bean rally has to go 370 days! The Chinese are also key players in the soybean Long March, with USDA showing that an estimated 60.5% of global soybean exports in 2011/12 will end up in China.

Corn futures were up 8 cents per bushel for the week. While the USDA weekly export sales for the week ending March 8 were so-so, there were several sales announced under the daily reporting system that fired up the bulls. The most notable was the 240,000 MT sale to "unknown".  A number of Chinese purchases this year have been initially recorded as unknown destinations, and then identified the week they were actually being loaded to ship. Chinese futures prices for September traded over $10 per bushel on Friday, adding to ideas that they must need to import more corn to cool down the market. US futures also remain inverted, trying to pull stored and hedged grain forward into end user hands. There were no deliveries vs. March futures until after the contract expired, and those stoppers were both exporters. Ethanol production dropped, but stocks also fell back a little bit and offered hope to the bulls of a recovery in margins for the ethanol plants.

The wheat complex saw all three exchanges higher. Chicago got the biggest boost, up 4.5% for the week. KC was up less than 2%, due to improving crop condition ratings, forecasts for excellent rain in the Plains, and no sign of a killing frost that could hurt the advanced maturity and thus vulnerable crop in OK and KS. Weekly export sales were unexceptional, on the low end of trade estimates, but US exports in the week ending March 8 were the largest since June 2011. That got the attention of the cash market, and boosted the old crop May futures. It didn’t hurt that Egypt bought more US wheat, and Japan made up for a light week with a bigger purchase this week.

Soybeans were up 2.7% for the week, supported by a 3.2% gain in meal and a 2.3% gain in soy oil. Private production estimates for Brazil continue to leak lower as the combines roll and the full extent of the drought damage is uncovered. The combined Brazilian and Argentine production estimates USDA put out a week ago are 349 million bushels smaller than the year before, and if the private estimates are correct that gap gets a little larger. The port strike at Rosario has been suspended, but threw a kink into global logistics. Brazil is seeing the typical two to three week loading waits. The US export inspections are still miserable, down 280 million bushels from last year, but weekly export sales were stronger than the trade expected due to some fill in business and fears of even higher prices to come. Memphis cash soybeans hit $14 per bushel on Friday.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

02/24/12

03/02/12

03/09/12

03/16/12

Change

% Change

May

Corn

$6.44

$6.62

$6.65

$6.73

$0.08

1.16%

May

CBOT Wheat

$6.41

$6.75

$6.43

$6.72

$0.29

4.51%

May

KCBT Wheat

$6.97

$7.28

$6.93

$7.06

$0.14

1.95%

May

MGEX Wheat

$7.89

$8.26

$8.01

$8.23

$0.22

2.72%

May

Soybeans

$12.87

$13.33

$13.38

$13.74

$0.36

2.71%

May

Soybean Meal

$336.20

$359.10

$362.70

$374.40

$11.70

3.23%

May

Soybean Oil

$54.65

$55.25

$54.27

$55.50

$1.23

2.27%

Apr

Live Cattle

$129.50

$129.95

$126.03

$125.30

($0.73)

-0.58%

Mar

Feeder Cattle

$157.68

$158.10

$153.93

$153.40

($0.53)

-0.34%

Apr

Lean Hogs

$89.73

$90.43

$87.83

$85.88

($1.95)

-2.22%

May

Cotton

$90.15

$88.23

$88.80

$87.48

($1.32)

-1.49%

May

Oats

$3.11

$3.06

$2.88

$3.34

$0.47

16.26%

May

Rice

$14.47

$14.51

$14.16

$14.54

$0.38

2.68%

 

Cotton futures dropped 1.5% for the week. The USDA global estimates were bearish last week, with likely ending stocks raised to 62.32 million bales. Bulls got a little excited because of India’s export halt, but the reality is that US ending stocks are very comfortable and could tolerate another million bales of exports before the alarm bells start to go off. Weekly export sales are picking up a little, but are still modest. Weekly U.S. cotton export sales through March 8 were 239,900 RB for 2011/12 and 118,800 for 2012/13 marketing year for Upland cotton. Total commitments ARE 107% of the USDA forecast for the year, but there are always sales that get carried over to the following marketing year, so we can’t yet assume that USDA is too low in their forecast.

Cattle futures were down 0.6% this week. It was a tough week for cattle bulls, with wholesale prices under pressure, cash cattle down, and export sales down. This is evidence that price rationing has worked to slow demand. It wasn’t supply, as slaughter was down 1.9% for the week. Beef demand and packer offerings were both described as light on Friday, with the result that choice boxes were down 2% for the week. Feeders were being paid only $1.74 more for the Choice product over Select graded carcasses, vs. a $19.25 premium in November. Estimated beef production for the week was down 1.8% from the previous week, and total tonnage is still down 3.7% from last year at this time.

Lean Hog futures sank 2.2% this past week. The pork carcass cutout value lost 1% for the week, with pork bellies the weakest component. Pork production year to date is up 0.7% from last year. Production this past week was 2% larger than last week, putting pressure on packers to discount the product and get it to move. Carcass weights continue to be consistent with last year.

Market Watch: It has been spring for weeks now if you look at the trees and winter wheat in the Midwest. On Tuesday, the calendar makes it officially Spring. The main USDA reports for the week are the monthly Cold Storage report on Thursday and the Cattle on Feed report on Friday. Friday also marks the expiration of April grain options, which settle against May futures prices. We also get a USDA Milk Production report on Monday, along with the weekly Export Inspections report. Weekly Export Sales will be out 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

Ready or Not, Spring is Here

Mar 09, 2012

Brugler

Market Watch with Alan Brugler

March 9, 2012

Ready or Not, Spring is Here

 

The calendar may say that Spring doesn’t begin until March 20, but it sure feels like we’re already there. Daylight savings time begins this weekend (March 11). The weather clearly thinks it is spring, with temperatures for much of the US as much as 20 degrees above normal in the 6-10 day forecast. The wheat thinks it is spring, breaking dormancy far north of where it normally would be by now. That could be a problem if we get a late March or early April cold snap. The other evidence it is spring comes from the markets, which had some wild intra-day action on Friday following the USDA reports. People are clearly positioning for the vagaries of the growing season.

 

Corn futures lost 5 cents per bushel this past week, all of it before the USDA reports came out on Friday morning. USDA left projected ending stocks UNCH at 801 million bushels, leaving the stocks/use ratio at the tightest reading since 1995/96. The cash average price for the year is still estimated at $6.20. World corn stocks are still tightening, with USDA showing 124.53 MMT by next August. That wasn’t as tight as the general public expected, because USDA raised rather than lowered Brazilian production (to 62 MMT) and did not change China or Argentina. South Africa production was cut by 500,000 MT.

 

The wheat complex saw all three exchanges lower, with Chicago dropping 4.8% for the week and KC down 4.3%. Minneapolis saw a smaller decline of 3.19%. Unlike previous reports, USDA cut projected world ending stocks to 209.6 MMT after raising them to 213.1 MMT in February. Smaller carryover from the prior year and increased domestic feed use more than offset a rise in production. With the tighter world number, USDA was comfortable raising the projected US exports and reducing projected ending stocks to 825 million bushels. As was the case with corn, prices were higher after the report, but not enough to get them into plus territory for the week. USDA does not issue next year balance sheets in March or April, kicking them off officially in May after the unofficial release at the Outlook Forum in February. A Memphis firm did release its private acreage guesses for 2012 on Friday, putting All Wheat at 57.745 million acres. The Other Spring crop was estimated at 13.793 million acres.

 

The soybean complex posted fractional gains. After a $2 rally, it gets a little more difficult to argue that prices aren’t high enough. Soybeans were up 4 cents, after gaining 14 cents the week before. Soybean meal was down 2.6% in sympathy with the feed grains, aided by another $1.30/ton gain in soybean meal. Soy oil squeezed out a 0.35% gain. Meal rallied despite the weaker corn market, but we need to remember that on a per pound basis soybean meal was the cheapest this winter vs. corn that it had been in years. It has to rally harder just to restore the normal price relationships. USDA cut projected South American production further than expected, with Argentina at 46.5 MMT and Brazil at 68.5 MMT. The Brazilian estimate is now 239 million bushels smaller than it was at the beginning of the growing season. The U.S. is in position to make up for much of that shortfall over the next 9-12 months.  The global ending stocks estimate was trimmed to 57.3 MMT.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

02/17/12

02/24/12

03/02/12

03/09/12

Change

% Change

Mar

Corn

$6.42

$6.41

$6.59

$6.54

($0.05)

-0.76%

Mar

CBOT Wheat

$6.44

$6.41

$6.71

$6.39

($0.32)

-4.77%

Mar

KCBT Wheat

$6.90

$6.81

$7.11

$6.80

($0.31)

-4.36%

Mar

MGEX Wheat

$8.22

$7.87

$8.28

$8.02

($0.26)

-3.14%

Mar

Soybeans

$12.68

$12.79

$13.28

$13.32

$0.04

0.26%

Mar

Soybean Meal

$332.50

$333.60

$357.30

$358.60

$1.30

0.36%

Mar

Soybean Oil

$53.40

$54.29

$53.76

$53.95

$0.19

0.35%

Apr

Live Cattle

$130.90

$129.50

$129.95

$126.03

($3.92)

-3.02%

Mar

Feeder Cattle

$158.42

$157.68

$158.10

$153.93

($4.17)

-2.64%

Apr

Lean Hogs

$90.38

$89.73

$90.43

$87.83

($2.60)

-2.88%

May

Cotton

$92.65

$90.15

$88.25

$88.80

$0.55

0.62%

Mar

Oats

$3.24

$3.20

$3.28

$3.11

($0.17)

-5.18%

Mar

Rice

$14.14

$14.21

$14.27

$13.93

($0.34)

-2.35%

 

Cotton futures were up 0.62% for the week despite additional losses on Friday. USDA cut projected domestic mill use, resulting in a carryover estimate of 3.9 million bales when the trade had expected a reduction from 3.8 million to 3.6 million. There are still those in the trade who insist that ginning results show a smaller cotton crop than the 15.67 million bales USDA is using. USDA analysts don’t agree, at least not strongly enough to change the US production and yield numbers. They did raise the cash average price estimate to 90.5 cents (midpoint). The USDA global estimates were bearish as well, with likely ending stocks raised to 62.32 million bales. The few trade estimates in circulation were looking for something closer to 61.5 million. The estimate for Chinese imports was raised 1.5 million bales to 18.5 million That compares to 11.98 million last year and 10.9 million in 2009/10.

 

Cattle futures sank 3.02% for the week. It was a tough week for cattle bulls, with wholesale prices under pressure, cash cattle down, export sales down and the dollar up.  The bottom line is that the futures premium to cash was taken out of the market, essentially saying to the cash market "prove to me that you can go up." Beef demand and packer offerings were both described as light on Friday, with the result that choice boxes were down 2.1% for the week. Select was down only 44 cents, and the choice/select spread is doing its typical March collapse. Feeders were being paid only 48 cents more for the Choice product, vs. $19.25 in November. Estimated beef production for the week was up 1.7% from the previous week, but total tonnage is still down 4.3% from last year at this time.

 

Lean Hog futures were down 67 cents this past week, almost erasing the 85 cents for the week before. Ham prices dropped $5.78 from Friday/Friday. Somebody appeared to have too much inventory after processors had finished their Easter ham buying. The pork carcass cutout value moved up a whole 4 cents for the week. Pork production year to date is up 0.5% from last year. Production this past week was 0.8% below the prior week so things are slowing on a relative basis. The pork cutout value declined 1.8% for the week, or $1.60. That certainly didn’t help packer margins, although cash hogs were also lower in most areas. USDA began taking public comments on a plan to begin reporting weekly pork export sales, as is already done for beef. Comments are due no later than May 7. With more than 20% of US pork production exported, it is much more important than it used to be to know how much is being sold. At the present time you have to wait about 60 days after the fact for Census to release official data.

Market Watch: We will start off the week adjusting to the change in the clock, with Daylight Savings time beginning on Sunday. Move your clock ahead an hour. The March grain futures contracts expire on the 14th. In a few cases there have still been no deliveries, raising the question of a short squeeze.  The Federal Reserve OMC meets on Tuesday. USDA will issue the usual Export Inspections and Export Sales reports on Monday and Thursday respectively. NOPA will also release the February crush estimate for soybeans on Wednesday morning. This private report has taken on more significance since Census quit reporting monthly crush data.

 

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

Rolling On

Mar 02, 2012

Brugler

Market Watch with Alan Brugler

March 2, 2012

Rolling On

 

Soybean futures have continued to march higher, ignoring rain in a few still growing areas of Argentina and southern Brazil, a sometimes firmer US dollar, and overbought technical conditions. Money flow is a factor, with the Managed Money (spec funds) continuing to add long positions in the bean complex. Nearby March beans were up another 49 cents this week, a 3.85% advance. The soybean meal market was up over 7% for the week, supporting the rise in the beans. Soybean oil was actually down 1% as diesel/heating oil prices backed off. Weekly export sales were stronger than expected but still run behind last year for both current year commitments and advance commitments for new crop shipment.  The Managed Money net long position in soybeans was up 20,707 contracts from the previous week in Friday’s CFTC Commitment of Traders report.

 

Corn futures rallied 2.8% for the week, or 18 cents per bushel after being down a penny the week before. Weekly export sales were disappointing, less than a million metric tonnes. On the bull side, China was shown as buying two more vessels of old crop corn in the weekly USDA Export Sales report, and export shipments continue to run very close to year ago levels despite expectations for a drop off of more than 100 million bushels from year ago. A Memphis based forecasting firm estimates Argentina will raise 22.5 MMT of corn this year. That’s .5 MMT higher than USDA projections. That same group puts the Brazilian corn crop at 61.5 MMT. That’s also .5 MMT over the USDA February projections.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

02/10/12

02/17/12

02/24/12

03/02/12

Change

% Change

Mar

Corn

$6.32

$6.42

$6.41

$6.59

$0.18

2.85%

Mar

CBOT Wheat

$6.30

$6.44

$6.41

$6.71

$0.30

4.64%

Mar

KCBT Wheat

$6.73

$6.90

$6.81

$7.11

$0.30

4.33%

Mar

MGEX Wheat

$8.14

$8.22

$7.87

$8.28

$0.41

5.24%

Mar

Soybeans

$12.29

$12.68

$12.79

$13.28

$0.49

3.85%

Mar

Soybean Meal

$320.00

$332.50

$333.60

$357.30

$23.70

7.10%

Mar

Soybean Oil

$52.53

$53.40

$54.29

$53.76

($0.53)

-0.98%

Apr

Live Cattle

$126.80

$130.90

$129.50

$129.95

$0.45

0.35%

Mar

Feeder Cattle

$154.15

$158.42

$157.68

$158.10

$0.42

0.27%

Apr

Lean Hogs

$88.58

$90.38

$89.73

$90.43

$0.70

0.78%

Mar

Cotton

$90.61

$91.45

$89.85

$87.46

($2.39)

-2.66%

Mar

Oats

$3.18

$3.24

$3.20

$3.28

$0.09

2.66%

Mar

Rice

$13.72

$14.14

$14.21

$14.27

$0.06

0.42%

 

 

 The wheat complex saw all three exchanges in the plus column, with KC and CHI up 4.3 and 4.6% respectively and MPLS up 5.24% after being the laggard the week before. The Managed Money (large specs) decreased their net short in Chicago wheat by 9,270 contracts from the previous week. U.S. wheat exports have been slowing down and the higher dollar could limit interest if the rally continues. Improving weather in the Black Sea Region will open up exports from that area (which had been bottled up for much of February) creating more competition with Europe. Indonesia is expected to tender for 300,000 MT of milling wheat.

 

Cotton futures dropped another 239 point after being down 160 points the week before. There were steady deliveries against March futures, which discouraged spec longs from remaining in the contract. Managed Money increased their net short cotton position by 7,137 contracts from the previous week. Total Upland cotton export commitments year to date are 10,389,407 RB compared to the same week last year of 14,587,959 RB. The market is assuming larger supplies will be available going forward, and is cutting back on forward commitments as a result. A Memphis firm increased their global cotton production estimates because of higher expected cotton plantings to 122.8 million bales. The USDA was at 123.34 million bales as of the February report so the private estimate is still smaller.


Cattle futures had a lot of excitement, but ended the week only 45 cents higher than they started it. Negotiated cash trade ended the week at $128 to $130 in TX/OK, $128.50 to $131 in KS in the live with 423 head selling for $207.50 in the dressed. That’s a new all time high. Nebraska cash cattle sold for $125 to $130 in the live and $205 to $206 in the dressed, a record high on a daily basis. Wholesale beef prices were lower on Friday, but did gain 66 cents for the week in the Choice and 40 cents in the select.


Lean Hog futures were up 70 cents for the week.  CFTC showed that Managed Money decreased their net long position in hogs by 2,878 contracts from the previous week. Cash hogs in IA/MN were down $1.42, WCB hogs were $1.13 lower and ECB hogs were $1.58 lower. The CME Lean Hog Index was at 87.55, down 0.08 for February 29th and a penny higher than a week ago. Pork trading was slow with light to moderate demand and offerings. The Carcass cutout was higher on Friday but remains stuck in a $4 trading range.

 

Market Watch: The main USDA reports for this coming week fall on Friday the 9th, with Crop Production, Dairy Products Prices and the monthly WASDE Supply/Demand estimates are  due out at 7:30 am CST. The routine reports are the Export Inspections on Monday morning and the weekly Export Sales on Thursday morning.  Thursday is the last trading day for March cotton futures. Not to be overlooked, Daylight Savings time resumes in the US on the 11th.

 

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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