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January 2014 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.

Pause, Look, Listen

Jan 31, 2014

Brugler 

Market Watch with Alan Brugler

January 31, 2014

 

Pause, Look, Listen…

 

For the most part, the ag markets went through a week of consolidation and re-evaluation, with outside factors changing the dynamic enough for the trending markets to wobble.  The Fed increased its tapering.  The US Dollar index was significantly higher, and the Dow took a couple of dives; ending the week at the lowest closing level since November 7th, 2013.  The S&P had a choppy week and ended down 7 handles, and gold was off more than 2%. The cattle market backed off a bit as boxed beef prices found their high for the time being, then the annual cattle inventory report confirmed that the national herd is in fact toward the smaller end of industry expectations; confirming fundamental support for the sharpest rally in a decade.  The wheat market tried to turn around, but still ended up red for the week.  Corn futures traded inside of an unusually narrow range of only 7.5 cents this week.  Feeders slipped toward mid-January levels, then recovered all but 95 cents of the $4.275 decline from last Wednesday’s highs.  Front month lean hogs had a choppy week, but the later months moved substantially higher.  Soybeans also posted a choppy week, but took back more than 19 cents from last Friday’s lows to end the week just 2 cents lower.  Each of these markets seemed to be in limbo, looking for the signal for which direction to move, and usually following the fundamental news.

 

Corn futures picked up another 3 cents per bushel this week, a 1.3% advance. The cash market continues to earn its carry. Low prices continue to work to cure low prices. Ethanol imports have been zero for the past 17 weeks, as US prices have been cheaper than those in Brazil. In fact, US ethanol is now being imported into Brazil, with most Brazilian plants having completed processing of last year’s sugar cane crop. Ethanol plant margins are still very attractive, and average daily ethanol production was 900,000 bpd last week. Ethanol stocks dropped back below 17 million barrels.  Weekly corn export sales were huge at 1.937 MMT (76.5 million bushels). Low prices cure low prices! Japan was the largest buyer at 797,800 MT.  One additional sale to China delivered back in November was rejected and resold to Spain. According to the CFTC on Friday night, managed money accounts decreased their net short position in corn by 7,208 contracts, bringing their position as of last Tuesday’s close to the least bearish reported net position since mid-July.  

 

Soybean futures were down .16% for the week in the nearby March contract, losing just 2 cents. Weekly US export sales were 865,800 MT including 371,000 MT of new crop. There were 610,000 MT of the rumored 1 MMT of cancellations reported, all in the unknown destinations category.  The cancelations were mathematically replaced with new purchases from China and unknown destinations for both this marketing year and the next. Total US export Commitments as a % of total exports are now at 104% of the newly revised USDA forecast for the year. The first Brazilian new crop soybean export cargos left port this week, foreshadowing an eventual slow down in US export shipments that typically begins in February and March. On the other hand, economic instability in Argentina has producers reluctant to exchange their soybean assets for unstable pesos. This afternoon’s CFTC Commitment of Traders report showed the large speculative traders lessened their net long position in soybeans by 5,530 contracts in the reporting week ending January 28. Their net long position was  121,631 contracts as of Tuesday.

 

Wheat futures were lower this week, with CHI off 1.68% and KC down 1.87%, while MPLS was 1.47% lower. Total US export commitments are still a larger % of the USDA forecast than usual for this date, currently at 85% vs. the five year average of 83%.  Weekly wheat export sales through USDA increased to 796,900 MT including 2,000 MT of new crop. The US also sold some SRW to Egypt, confirming prices are competitive. The EU approved 609,000 MT of new wheat export licenses, bringing the total to 17.3 MMT. Last year it was just 10.8 MMT at this time. The IGC this week hiked projected old crop world production to 707 MMT, about as expected.  New crop for 2014/15 is expected to be 697 MMT at this very early date.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

01/10/14

01/17/14

01/24/14

01/31/14

Change

% Change

Mar

Corn

$4.33

$4.24

$4.30

$4.34

$0.04

1.05%

Mar

CBOT Wheat

$5.69

$5.64

$5.65

$5.56

($0.09)

-1.68%

Mar

KCBT Wheat

$6.26

$6.22

$6.27

$6.16

($0.12)

-1.87%

Mar

MGEX Wheat

$6.21

$6.18

$6.13

$6.04

($0.09)

-1.47%

Mar

Soybeans

$12.78

$13.17

$12.85

$12.83

($0.02)

-0.16%

Mar

Soybean Meal

$413.60

$434.50

$425.70

$426.10

$0.40

0.09%

Mar

Soybean Oil

$38.23

$37.74

$37.54

$37.64

$0.10

0.27%

Feb

Live Cattle

$136.70

$140.35

$143.40

$141.68

($1.72)

-1.20%

Mar

Feeder Cattle

$167.95

$167.92

$168.87

$169.43

$0.56

0.33%

Feb

Lean Hogs

$85.83

$86.18

$86.38

$86.23

($0.15)

-0.17%

Mar

Cotton

$82.90

$86.90

$87.21

$85.83

($1.38)

-1.58%

Mar

Oats

$3.87

$4.00

$3.96

$4.06

$0.10

2.40%

Mar

Rice

$15.57

$15.60

$15.43

$15.40

($0.03)

-0.16%

Cattle futures were unable to expand on the all time highs set the previous week. The sharp increase in wholesale and retail beef prices provoked some push back, and wholesale prices were lower. Choice boxed beef was down 5.8% dropping $7.26 between Thursday and Friday.  Select boxed beef lost 4.8% on a Friday/Friday basis. Cash cattle traded at $145-$146, a significant pull back from the record high of $150 paid the previous week. Weekly estimated slaughter was down 8.56% from the same week in 2013.  The CFTC commitment of traders report showed managed money accounts getting longer, adding 442 contracts to their net long position.  The current managed money net position is now 124,097 contracts; the longest reported managed money position since October 2010. The Friday night USDA Cattle Inventory report was expected to show a drop in herd size and in calf numbers. USDA showed All Cattle and Calves at 87.73 million head and down 1.76% from last year. The calf crop was down 1.02%.  Herd expansion was expected. Beef cow numbers were 99.31% and beef heifers kept for breeding were 101.68% of year ago.

 

Hog futures were off 0.17% for the week in the front month, getting a very modest assist from skyrocketing beef prices. June hogs gained 2.56% since last Friday.  Estimated weekly slaughter totaled 2.132 million head, down 1.7% from last year. Estimated carcass weights have ballooned as packers are looking for tonnage to make up for the inventory lost to PEDv.  The pork carcass cutout value was up $1.19 or 1.36% this week. USDA weekly export sales for pork slowed to 8,700 MT for the reporting week ending January 23.

 

Cotton futures rallied another 4.8% this week. Global ending stocks are still projected to be record large at more than 97 million bales or a 10 month surplus. Weekly upland cotton export sales for the week ending January 23 were strong for a second consecutive week at 531,600 RB.  Another 7800 RB of 2014 Pima export sales were reported. US Export commitments improved to ....% of the USDA forecast for the year. This compares to 86% for this point last year, and the 5 year average of 82%.    The CFTC weekly commitment of traders report showed managed money accounts reduced their net long position by 5,372 contracts, taking it to 43,947 contracts.

 

 Market Watch

 

We turn the calendar to February, with Chinese markets closed for Golden Week. Cattle traders will be reacting to the Cattle Inventory report issued on Friday afternoon. While not traditionally a big market mover, that report has taken on more significance since USDA discontinued the July updates of the same data. It is now an annual report. We will see the regular USDA Export Inspections report on Monday morning, and weekly Export Sales on Thursday. Ethanol production and stocks will be out on Wednesday.  February live cattle options expire on Friday.

 

 http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

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.                  

 

Copyright 2014 Brugler Marketing & Management, LLC

Red Hot Beef

Jan 24, 2014

 Brugler

Market Watch with Alan Brugler

January 24, 2014

Red Hot Beef

Cattle futures traded at new all time highs this week, reinforced by record high prices for wholesale beef which in turn allowed packers to pay record prices of $150 per cwt for cash cattle. The speculative community has been aiding and abetting the rally, with the managed money spec funds now holding a record larger net long position. All of this is setting off warning bells, at least in my head. US consumers historically haven’t been willing to pay much more than $2.00/pound for the whole carcass average, and $5 for the retail average. Even with extra jingle in their pocket courtesy of lower fuel prices (thank you fracking and ethanol!) they have a pronounced tendency to switch to more pork and chicken when the price ratios get out of line. The question is merely one of timing. How soon does that reduced disappearance get back to the wholesale replacement orders and match the reduced supply?

Cattle futures surged to new all time highs, gaining 2.17% on top of 2.67% last week. Feeders were up 70 cents or 0.41%. Cash cattle traded at $150, up $18 per hundred from where they were in December.  Weekly slaughter was down 4.3% from the same week in 2013, with beef production down 4.4%. Year to date beef production is down 10%, partially due to a smaller number of slaughter days.  Estimated carcass weights are now even with year ago, as packers have been aggressively pulling cattle ahead to fill the hole in numbers. Wholesale beef prices were up another 2.4% in the Choice boxes and 3.0% in the Select. The CFTC commitment of traders report showed managed money accounts getting longer, adding 4,799 contracts to their net long position.  The current managed money net position is now 123,655 contracts. The Friday night USDA Cattle on Feed report showed larger placements and smaller December slaughter than expected by the trade overall, resulting in January 1 numbers that were 94.7% of year ago.

Corn futures picked up 5 cents per bushel this week, a 1.3% advance. Low prices continue to work to cure low prices. Imports have been zero for the past 16 weeks, as US prices have been cheaper than those in Brazil. Ethanol plant margins are still very attractive, and average daily ethanol production rebounded to 905,000 bpd last week. Ethanol stocks did rise back above 17 million barrels.  Total commitments as a % of total exports are now at 82 compared to 74% at this time last year and the 5 year average of 60%.  Weekly export sales were above the upper end of pre-report estimates, at 693,000 MT. According to the CFTC on Friday night, managed money accounts decreased their net short position in corn by 4,606 contracts, bring their position as of last Tuesday’s close to the least bearish reported position since August.   

Soybean futures lost 2.4% for the week in the nearby March contract. Weekly US export sales were a larger than expected at 1.673 MMTG (61.5 million bushels) including 703,400 MT of old crop. There were cancellations of 302,100 MT from the "unknown destinations" slot, but China bought 295,700 MT of additional old crop US beans. Total US export Commitments as a % of total exports are now at 104% of the newly revised USDA forecast for the year. They would typically be at 82% by now, although last year was 91%. South American planting activity is just about wrapped up, with 3-4% of the Argentine crop remaining as well as whatever double crop Brazil will do after first crop beans come off. SAFRAS raised its estimate of Brazilian soybean production to 91.8 MMT (USDA @ 89 MMT), while the BA Grain exchange put Argentina at 53 MMT vs. USDA at 54.5 MMT.

Two of the three wheat futures contracts in the US eked out gains this week.  Chicago was up 0.3%, and KC gained 0.8% on winter kill concerns. Spring wheat has no such concerns, but does have a lot of Canadian competition. It was down another 0.7% for the week. Total US export commitments are still a larger % of the USDA forecast than usual for this date, currently at 83% vs. the five year average of 81%.  Weekly wheat export sales through January 16 were 413,400 MT. The EU has approved more than 16.7 MMT of export licenses this year, vs. just a little over 11 MMT a year ago.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

01/03/14

01/10/14

01/17/14

01/24/14

Change

% Change

Mar

Corn

$4.24

$4.33

$4.24

$4.30

$0.05

1.30%

Mar

CBOT Wheat

$6.06

$5.69

$5.64

$5.65

$0.02

0.31%

Mar

KCBT Wheat

$6.44

$6.26

$6.22

$6.27

$0.05

0.80%

Mar

MGEX Wheat

$6.32

$6.21

$6.18

$6.13

($0.04)

-0.73%

Mar

Soybeans

$12.71

$12.78

$13.17

$12.85

($0.32)

-2.41%

Mar

Soybean Meal

$407.10

$413.60

$434.50

$425.70

($8.80)

-2.03%

Mar

Soybean Oil

$38.60

$38.23

$37.74

$37.54

($0.20)

-0.53%

Feb

Live Cattle

$136.20

$136.70

$140.35

$143.40

$3.05

2.17%

Jan

Feeder Cattle

$167.63

$168.65

$170.00

$170.70

$0.70

0.41%

Feb

Lean Hogs

$86.68

$85.83

$86.18

$86.38

$0.20

0.23%

Mar

Cotton

$83.31

$82.90

$86.90

$87.21

$0.31

0.36%

Mar

Oats

$3.44

$3.87

$4.00

$3.96

($0.03)

-0.81%

Mar

Rice

$15.64

$15.57

$15.60

$15.43

($0.17)

-1.12%

 

Hog futures were up 0.23% for the week, getting a very modest assist from skyrocketing beef prices. Pork production this week was 7.1% larger than the same week in 2013, although 1.5% smaller than the previous week. Estimated slaughter totaled 2.222 million head, up 4.2% from last year. Estimated carcass weights have ballooned to 214 pounds as packers are looking for tonnage. The pork carcass cutout value was up $0.60 or 0.69% this week, with pork butts the strongest component. USDA weekly export sales for pork improved to 14,700 MT for the reporting week ending January 16.

Cotton futures rallied another 4.8% this week. Global ending stocks are still projected to be record large at more than 97 million bales or a 10 month surplus. Weekly export sales for the week ending January 16 jumped to 551,700 RB with nearly 90% of the total slated for 2014.  Another 8,300 RB of 2014 Pima export sales were reported. Export commitments as a % of total exports (for upland cotton) are now at 76%, which compares to 77% for this point last year, and lagging the 5 year average of 79%.    The CFTC weekly commitment of traders report showed managed money accounts added 7,788 contracts to their net long position, taking it to 49,319 contracts.

 Market Watch

We come into the last full week of January, expecting the usual end of month position squaring moves. Usually that means funds selling (or buying back) some of their big winners and taking new positions in January’s losers. Cattle would be vulnerable to that type of profit taking type selling, with the caveat that Feb futures can’t go down much without an expectation that wholesales prices and cash cattle prices also retreat. Monday action in livestock will be driven by reactions to the COF report released on Friday.  January feeder cattle futures will expire on Wednesday. Grain producers will get the usual Export Inspections report on Monday and weekly Export Sales on Thursday morning. Commodity markets in general will also be anxious to see the outcome of the FOMC meeting on Wednesday and whether the Fed sticks to its guns about the economy getting better (and tapering continuing).

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

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.                  

Copyright 2014 Brugler Marketing & Management, LLC

Relentless

Jan 17, 2014

Brugler

Market Watch with Alan Brugler

January 17, 2014

Relentless

 

Our theme of the week is relentless markets. Those ag markets that are trending are being pushed, pulled and dragged in the direction of the trend, with corrections typically only 2-3 days. Cattle and oats and cotton present the bull cases, while wheat is the poster child for the relentless bear. A significant amount of investment money has been pulled out of the commodity markets over the past year (some estimates are as high as $42 billion), and those still in seem inclined to ride their winners hard and avoid markets that are chopping around like corn and hogs.

 

Corn futures gave back a chunk of the Jan 10 crop report gain this week, losing 9 cents per bushel or 2.02%. Demand is a bright spot as low prices continue to work to cure low prices. Ethanol stocks are hovering just a little above a three year low. Imports have been zero for the past 15 weeks, as US prices have been cheaper than those in Brazil. Ethanol plant margins are still very attractive. Private exporters reported export sales this morning of 204,000 metric tons of corn to Egypt for shipment yet this year.  Total commitments as a % of total exports are now at 80% compared to 73% at this time last year and the 5 year average of 58%.  According to the CFTC, managed money accounts decreased their net short position in corn by 27,520 contracts, bring their position as of last Tuesday’s close to the least-short reported position since August 27th.   

  

Soybean futures jumped 3% this week, adding 39 cents to the value of March beans. Weekly US export sales were a larger than expected at 1.22 MMT of combined old and new crop business. China continues to aggressively buy US beans for both old crop and new crop delivery. Total US export Commitments as a % of total exports are now at 102% of the newly revised USDA forecast for the year. Soybean meal export sales continue to be very strong (and front loaded) with 66% of the projected sales for the year already booked. The average pace would be 59%. South American planting activity is just about wrapped up, with 3-4% of the Argentine crop remaining as well as whatever double crop Brazil will do after first crop beans come off.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/27/13

01/03/14

01/10/14

01/17/14

Change

% Change

Mar

Corn

$4.28

$4.24

$4.33

$4.24

($0.09)

-2.02%

Mar

CBOT Wheat

$6.09

$6.06

$5.69

$5.64

($0.06)

-0.97%

Mar

KCBT Wheat

$6.44

$6.44

$6.26

$6.22

($0.04)

-0.60%

Mar

MGEX Wheat

$6.35

$6.32

$6.21

$6.18

($0.03)

-0.48%

Mar

Soybeans

$13.13

$12.71

$12.78

$13.17

$0.39

3.01%

Mar

Soybean Meal

$427.20

$407.10

$413.60

$434.50

$20.90

5.05%

Mar

Soybean Oil

$39.35

$38.60

$38.23

$37.74

($0.49)

-1.28%

Feb

Live Cattle

$134.95

$136.20

$136.70

$140.35

$3.65

2.67%

Jan

Feeder Cattle

$167.00

$167.63

$168.65

$170.00

$1.35

0.80%

Feb

Lean Hogs

$85.65

$86.68

$85.83

$86.18

$0.35

0.41%

Mar

Cotton

$84.12

$83.31

$82.90

$86.90

$4.00

4.83%

Mar

Oats

$3.56

$3.44

$3.87

$4.00

$0.13

3.36%

Mar

Rice

$15.48

$15.64

$15.57

$15.60

$0.03

0.19%

 

Wheat futures were lower at all three exchanges. The good news is that the declines were less than 1% for the week. Total US export commitments are still a larger % of the USDA forecast than usual for this date, currently at 81% vs. the five year average of 78%.  Weekly wheat export sales through January 9 were 319,900 MT. The EU has approved more than 15 MMT of export licenses this year, vs. just a little over 10 MMT a year ago. When combined with increased Canadian and Australian supplies, the US market has had to do some discounting to move bushels.   

 

Cotton futures rallied another 4.8% this week. Global ending stocks are still projected to be record large at more than 97 million bales or a 10 month surplus. Weekly export sales for the week ending January 9 totaled 249,000 RB of all classes and years. That was down a little from the 271,800 RB the preceding week. Export commitments as a % of total exports (for upland cotton) are now at 76%, which compares to 77% for this point last year, and lagging the 5 year average of 79%.    The CFTC weekly commitment of traders report showed managed money accounts reduced their net short position by 16,086 contracts, bringing their total net short position to 56,842 contracts.

 

Cattle futures surged to new all time highs, gaining 2.67% this week. Feeders were down $1, or 0.6%. Cash cattle traded consistently at $144, up $12 per hundred from where they were in December.  Weekly slaughter was down 1.5% from the same week in 2012. Year to date beef production is down 12%, partially due to a fewer number of slaughter days.  Estimated carcass weights are running 5 to 6 lbs. above year ago but are coming down as packers pull ahead greener cattle to offset lower ready numbers. Wholesale beef prices were up a whopping $16.74/cwt this week, a 7.4% advance for Choice that was aided a little by a change in the USDA calculation method, but mostly due to tight supplies and retail price increases. Select was up an even more impressive 8.4%. The CFTC commitment of traders report showed managed money accounts getting longer, adding 13,822 contracts to their net long position.  The current managed money net position is now 118,856 contracts (largest reported since Oct 26, 2010 when it was 122,077 contracts)

 

Hog futures were up 0.41% for the week, finally getting a little assist from skyrocketing  beef prices. Pork production this week was 5.0% larger than the same week in 2013. Estimated slaughter totaled 2.263 million head, up 2.6% from last year. Estimated carcass weights have ballooned to 213 pounds as packers are looking for tonnage. Most of the really big hogs have been packer owned and destined for boning operations. The pork carcass cutout value was up $3.46 or 4.1%% this week, with pork bellies the strongest component. USDA reported weekly pork export sales were a slow.......this week.

 

 Market Watch

 

This will be a short trading week, as the markets are closed on Monday for the ML King holiday. We’ll get the regular Export Inspections on Tuesday and weekly Export Sales on Friday morning because of the holiday delay. USDA will issue the monthly Cold Storage report on Wednesday afternoon, and the monthly Cattle on Feed is scheduled for Friday. There will be keen interest in the latter, due to the record high beef prices. February grain and oilseed options will expire on Friday as well.

 

 http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.


 

Blockbuster Reports

Jan 10, 2014

 Brugler

Market Watch with Alan Brugler

January 10, 2014

Blockbuster Reports

 

The January USDA reports have a reputation for creating market volatility. This is well deserved, with 5 of the past 7 January reports (not counting 2014) resulting in a limit move in nearby corn futures. The focus was on US corn and soybean final production estimates, and first quarter use. The trade knew going in that US corn, wheat and soybean exports were much stronger this year than last year, but feed & residual use is computed from the Grain Stocks report which was issued today. Traders were also interested in how USDA would handle Chinese demand given the MIR-162 issues. On that front, projected Chinese imports were trimmed 2 MMT from 7 MMT to 5 MMT.  They likely don’t need the imports, with USDA hiking estimated Chinese production to 217 MMT from 211 MMT in the December report.

 

Corn futures were up 2.2% this week, thanks to a 20 cent rally on Friday following the USDA reports. USDA reported that only 10.426 billion bushels of corn were in on farm and off farm storage on December 1, about 350 million bushels less than trade analysts had expected. USDA increased estimated feed & residual use by 100 million bushels for the year as a result of the stocks report. That dropped projected ending stocks again, to 1.631 billion bushels and tightened the stocks/use ratio to 12.4%. Estimated cash average price remains at $4.40 for the year.

 

Soybean futures were up 1.1% this week. Old crop bean futures were higher, but new crop prices dropped sharply. USDA left projected US ending stocks UNCH at 150 million bushels. They are still in price rationing mode. A small yield increase to 43.3 bpa bumped up production to 3.289 billion bushels, but all of the additional supply was immediately allocated to increased crush and export use. Prior to the report, US export commitments had reached 102% of the previous full year forecast, so it was a no brainer for USDA to raise the forecast if the bushels existed. The Brazilian production estimate was raised 1 MMT to 89 MMT due to improved weather.

 

Wheat futures lost another 6.1% in Chicago this week. KC was down a more modest 2.7% because of strong export sales to Brazil and some freeze damage concerns (which also should have extended to SRW). The spec trade is heavily short wheat and heavily long cattle. Neither position changed this week. USDA did raise projected US ending stocks to 608 million bushels. The Dec 1 wheat stocks number was larger than expected at 1.463 billion bushels, forcing USDA to cut estimated feed use. World ending stocks were also increased. After the close, Egypt came back in the market for mid-February needs, trying to take advantage of the price decline. USDA did show a smaller winter wheat plantings total than previously expected, and showed a shift toward lower yielding acreage in the Dakotas vs. the southern Plains. SRW acreage was also reduced, suggesting a lower national average wheat yield for 2014.

 

Cotton futures were down 0.49% this week.  USDA left US projected ending stocks UNCH at 3 million bales, with offsetting revisions to US production and exports. The midpoint of the cash average price range for the year is now 74.50 vs. 74 cents a month ago and 72.5 last year. World ending stocks continue to balloon, with the estimate for July 2014 now at 97.61 million bales. That is 89% of the current projection for annual consumption.  Put another way, the world could go 325 days past harvest without running out of cotton (although it would be darn hard to find those last few bales). USDA did raise estimated Chinese production 1 million bales and raised projected Chinese ending stocks to 58.31 million bales. That would be 60% of the world surplus. If something happened to the global crop, the Chinese would have a corner on the supplies.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/20/13

12/27/13

01/03/14

01/10/14

Change

% Change

Mar

Corn

$4.33

$4.28

$4.24

$4.33

$0.09

2.18%

Mar

CBOT Wheat

$6.14

$6.09

$6.06

$5.69

($0.37)

-6.07%

Mar

KCBT Wheat

$6.57

$6.44

$6.44

$6.26

($0.18)

-2.72%

Mar

MGEX Wheat

$6.51

$6.35

$6.32

$6.21

($0.11)

-1.78%

Jan

Soybeans

$13.39

$13.32

$12.89

$13.04

$0.15

1.12%

Jan

Soybean Meal

$446.60

$445.70

$424.50

$435.20

$10.70

2.52%

Jan

Soybean Oil

$39.44

$39.02

$38.34

$37.95

($0.39)

-1.02%

Feb

Live Cattle

$133.90

$134.95

$136.20

$136.70

$0.50

0.37%

Jan

Feeder Cattle

$166.98

$167.00

$167.63

$168.65

$1.03

0.61%

Feb

Lean Hogs

$86.25

$85.65

$86.68

$85.83

($0.85)

-0.98%

Mar

Cotton

$83.15

$84.12

$83.31

$82.90

($0.41)

-0.49%

Mar

Oats

$3.49

$3.56

$3.44

$3.87

$0.42

12.27%

Jan

Rice

$15.50

$15.45

$15.76

$15.57

($0.19)

-1.21%

 

Cattle futures rallied another 50 cents this week.  Cash cattle trade was very slow to develop, but some reports of $139/$222 tops filtered in on Friday afternoon. That would be $2 above last week in most areas. Wholesale beef prices were up 6.2% on a Fri/Fri basis in the Choice, and up 7.2% in the Select, assisted by a revision in the way USDA computes cut yields. This price increase is exactly what is needed to support the cash cattle prices being paid. Weekly beef production was up 9.1% from the previous week, but down 8.3% from the same week in 2013. Estimated carcass weights are running 7 pounds above last year’s actual of 796 pounds. USDA increased projected 2014 US beef production to 24.32 billion pounds from 24.205 billion in December. The average cash price for the year is expected to be between $129 and $138, vs. $125.89 in 2013.

 

Hog futures were down 1% for the week. Higher carcass weights (+5# per head vs. last year) are offsetting the smaller slaughter runs. Pork production for the week was up 5.5% from last week, but down 5.2% from the same week in 2012. USDA reported weekly pork export sales were much improved at 21,600 MT. The afternoon pork carcass cutout value was up $1.26 this week, or 1.52%. Ham prices were the strongest of the primals. On Friday, USDA projected that 2014 pork production would be 1.6% larger than in 2013, at 23.58 billion pounds. The average live hog price for 2014 is expected to be between $60 and $64, compared to $64.05 in 2013. 

 

 Market Watch

 

We’ll start the week still trading the aftermath of Friday’s USDA reports. USDA will update Export Inspections on Monday. January futures contracts for rice and the soybean complex expire on Tuesday.  NOPA is due to release their monthly soybean crush estimate for December on Wednesday the 15th.   USDA Weekly export sales will be released on Thursday morning. Weekly EIA ethanol production will be out on Wednesday. The markets will be closed the following Monday for the ML King holiday.

 

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

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.                  

Copyright 2014 Brugler Marketing & Management, LLC

Grains In The Deep Freeze, Cattle Red Hot

Jan 03, 2014

 Brugler

Market Watch with Alan Brugler

January 3, 2014

Grains In The Deep Freeze, Cattle Red Hot

 

The grain markets started out 2014 the same way they ended 2013, with nary a bullish spark. The bears were growling about rapidly growing world production capability, and grain bulls could only rely on slowly growing consumption at these bargain prices (feed grains). Babe the Blue Ox from Paul Bunyan came to mind. The cattle futures weren’t blue, they were a deep shade of black on the balance sheets. Cash trade hit $139 as short bought packers hit reduced ready numbers and some movement restrictions because of extremely cold temps. The spec funds hold large net long positions in cattle and were happy to feed the flame. 

March corn futures were down 4 cents this week. US corn export commitments are 77% of the upwardly revised December USDA forecast for the year. The 5 year average commitment for this time would be 56%. Redirection of previous Chinese sales that were rejected upon arrival has slowed new bookings. Total Chinese purchases YTD (shipped and unshipped) are 14% of the projected US corn export program. With confirmed redirections of more than 616,000 MT, that exposure is shrinking. Some of the earlier shipments are already consumed. Outstanding Chinese unshipped sales of 2.154 MMT are 5.8% of projected US shipments for the year and along with in transit shipments represent the remaining risk. Ethanol stocks dropped 100,000 barrels last week, and production dropped by about 13,000 barrels per day due to holiday down time. Next week’s report will also be on the small side due to the New Year’s holiday. Feed use is strong, with average hog weights 5# above year ago and thus taking a lot more corn per hog. Chicken production is also still expanding. On the bear side, southern Brazilian corn areas are now getting decent rains heading into pollination, and deterioration in Argentina has been slowed.  

Soybean futures were down 3.17% this week. Better weather in South America and reports that soybean harvest had begun in remote interior areas of Brazil both weighed on the market. Weekly US export sales were much improved at 1.18 MMT. Total US export Commitments are now at 101% of the USDA forecast for the entire year, with 8 months remaining. Last year 85% of the sales for the year were booked at this time and that was a front loaded year like this one. Soybean meal export sales picked back up to 123,900 MT. USDA shows 65% of the projected sales for the year are already booked. The average pace would be 56%.

Wheat futures lost another 0.7 to 2.4% this week, but did manage a higher daily close on Friday in Chicago.  Total US export commitments are still a larger % of the USDA forecast than usual for this date, currently at 82% vs. the five year average of 76%.  Weekly wheat export sales through December 26 were much slower than the prior week because of the Christmas holiday, totaling only 248,500 MT. Egypt bought a huge 535,000 MT of wheat in a tender on Thursday, all for shipment Jan 21-Feb 10. They were behind on their import program.

Cotton futures were down 0.96% this week after a 1.17% increase the previous week. China is still seen holding more than half of the world surplus. US Economic indicators have picked up in several areas, encouraging speculative fund buying. Weekly cotton export sales for the week ending December 26 slowed to 115,200 RB vs upland bookings at 242,300 running bales the prior week. US Export commitments as a % of total exports (for upland cotton) are now at 73%, still lagging the 5 year average of 76%.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/13/13

12/20/13

12/27/13

01/03/14

Change

% Change

Mar

Corn

$4.25

$4.33

$4.28

$4.24

($0.04)

-0.94%

Mar

CBOT Wheat

$6.28

$6.14

$6.09

$6.06

($0.03)

-0.53%

Mar

KCBT Wheat

$6.72

$6.57

$6.44

$6.44

($0.01)

-0.12%

Mar

MGEX Wheat

$6.60

$6.51

$6.35

$6.32

($0.03)

-0.47%

Jan

Soybeans

$13.28

$13.39

$13.32

$12.89

($0.42)

-3.17%

Jan

Soybean Meal

$432.60

$446.60

$445.70

$424.50

($21.20)

-4.76%

Jan

Soybean Oil

$39.83

$39.44

$39.02

$38.34

($0.68)

-1.74%

Feb

Live Cattle

$132.85

$133.90

$134.95

$136.20

$1.25

0.93%

Jan

Feeder Cattle

$167.08

$166.98

$167.00

$167.63

$0.63

0.37%

Feb

Lean Hogs

$87.17

$86.25

$85.65

$86.68

$1.02

1.20%

Mar

Cotton

$83.22

$83.15

$84.12

$83.31

($0.81)

-0.96%

Mar

Oats

$3.40

$3.49

$3.56

$3.44

($0.12)

-3.30%

Jan

Rice

$15.55

$15.50

$15.45

$15.76

$0.31

2.01%

 

Cattle futures rallied another $1.25 this week, and are up 2.5% in three weeks. Cash cattle traded $2-3 higher on Thursday than they had the previous week, with some cash sales reported as high as $139. Those are record prices. Packers needed cattle and had to pay up to get the few that were available. Wholesale beef prices were up 2.8% on a Fri/Fri basis in the Choice, and up 3.2% in the Select. This is exactly what is needed to support the cash cattle prices being paid. Packer margins would appear to be negative if they can’t move those values even higher next week. Estimated carcass weights are running 1-2 pounds above last year’s actual of 805 pounds. USDA reported weekly beef export sales of 13,200 MT, up from both of the two previous weeks.  

Hog futures were up 1.2% this week.  Higher carcass weights (+5# per head vs. last year) are offsetting the smaller than expected head counts shown in the quarterly Hogs & Pigs report. Comparisons on year over year slaughter and production are invalid due to partial week values. USDA reported weekly pork export sales were much improved at 16,900 MT for combined 2013 and 2014 sales. The afternoon pork carcass cutout value was down 6 cents for the week, or 0.07%. Ham prices were down, but loins and bellies were firmer. The CME Lean Hog Index is at a $6.92 discount to February futures, which are anticipating firmer cash hogs going forward.

 Market Watch

We will finally get back to a normal trading week this week, with 5 full days. USDA will update Export Inspections on Monday. Weekly export sales will be released on Thursday morning. Weekly EIA ethanol production will be out on Wednesday. Livestock futures will see Goldman Roll movement out of the February contracts. Index funds will also begin their asset allocation adjustments to their 2014 recommended weights this week. They are expected to be buying the big losers from 2013, and selling the biggest winners (see our December 31 year end Special Research Report). The main USDA reports for the month, and probably for the first two months, will be released on Friday, January 10th. These include the monthly WASDE Supply/Demand report, plus updated US Crop Production, wheat acreage, and the often market moving quarterly Grain Stocks report. The latter report gives USDA the hard data to adjust feed & residual use figures for both corn and wheat.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

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.                  

Copyright 2014 Brugler Marketing & Management, LLC

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