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Market Watch

RSS By: Alan Brugler, AgWeb.com

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

Back in the Gutter

Jun 25, 2010
 
Market Watch with Alan Brugler
June 25, 2010
 
Back in the Gutter
 
Corn couldn’t stand prosperity. After a two week gain of 21 cents per bushel, futures were down all 5 days, and the net loss for the week was 20 cents. In other words, it only took one week to erase two weeks of rally. Crop condition ratings dropped for the week, with wet weather resulting in drowned out low areas and yellow corn in others. Hillsides and sandy ground seemed to benefit. Weekly export sales were strong, at over 1.4 MMT, but this was ignored by a market that is confident it has enough supply to get it to September. With 10% of the U.S. crop thought likely to be pollinating by July 4th (some writers have estimates over 20%!) early availability of new crop supplies is taken for granted. The Chinese did allow the Yuan to float higher vs. the dollar, but didn’t appear to use the new found purchasing power to extend corn purchases over and above the 900+ thousand tonnes they have already bought.
 
            Cash wheat prices failed to fully follow the futures rally higher, reflecting the reality of a harvest in progress and large stocks of old wheat already in the bin. Technical selling kicked in as prices hit overhead resistance areas, and by the end of the week futures were down almost 5% in Minneapolis. KC and Chicago had smaller losses. Weekly export sales were solid, but most of the big tenders like Egypt and Saudi Arabia still seem to be going to EU and FSU suppliers. The U.S. just isn’t competitive after allowing for freight across the Atlantic.
 
Soybeans posted a 4 cent loss for the week. Crude oil was up sharply on Friday, with traders getting excited about storms in the Caribbean that had some potential for brewing up into an early season hurricane. Soy oil was unable to follow suit with a 1 point loss on Friday and a 2% decline for the week. That put pressure on crush margins. Export shipments are still on track to meet USDA’s projection for the year, although they have slowed significantly because of South American competition. Chinese imports from all sources for the month of June are expected to be all time record large at over 5 MMT. That’s good for world demand in general, and much needed given the projected growth in world ending stocks.
 
July Cotton posted the largest percentage gain for the week of the commodities followed in our table. Cert stocks dropped sharply, presumably going straight from the warehouse to the export market. That diminished the risk of deliveries against July futures, but didn’t totally prevent them. One of the major merchants was right there on first notice day to put out some bales. Weekly export sales were slower than expected, and growing weather in the Southeast improved. All of that didn’t seem to matter for the week. USDA will release an updated Planted Acres number on Wednesday morning
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
06/04/10
06/11/10
06/18/10
06/25/10
Change
% Change
July
Corn
$3.40
$3.50
$3.61
$3.41
0.20
5.61%
July
CBOT Wheat
$4.36
$4.41
$4.62
$4.56
0.05
1.19%
July
KCBT Wheat
$4.65
$4.67
$4.97
$4.84
0.14
2.71%
July
MGEX Wheat
$4.93
$5.02
$5.38
$5.12
0.26
4.83%
July
Soybeans
$9.35
$9.46
$9.61
$9.57
0.04
0.42%
July
Soybean Meal
$277.20
$289.70
$289.40
$289.75
0.35
0.12%
July
Soybean Oil
$36.78
$36.90
$37.92
$37.16
0.76
2.00%
June
Live Cattle
$90.95
$89.50
$89.30
$90.95
1.65
1.85%
Aug
Feeder Cattle
$108.87
$110.07
$110.17
$113.32
3.15
2.86%
July
Lean Hogs
$79.73
$78.55
$80.87
$80.72
0.15
0.19%
July
Cotton
$77.06
$81.54
$81.78
$84.72
2.94
3.59%
July
Oats
$1.94
$2.27
$2.63
$2.64
0.01
0.38%
July
Rice
$10.84
$11.01
$11.01
$10.06
0.95
8.59%
 
Hogs pulled back 15 cents for the week on some light position squaring prior to Friday afternoon’s USDA Hogs & Pigs report. The report showed a smaller hog herd than expected, at 96.4% of year ago. Market hog numbers were also on the lower end of trade estimates at 96.3%. The breeding herd was down 3% from a year earlier, but this was not as large of a reduction as some had anticipated. Efficiency continues to improve, with 9.81 pigs per litter saved in the Mar-May farrowings. Estimated red meat production for the week was down 1.1% from the same week a year ago. Pork production YTD is down 4.2%.
 
Cattle futures were up $1.65 or 1.85% for the week. Wholesale beef prices crept higher, giving packers a little wiggle room on margins. Cash trade was mostly steady with the prior week, with Wednesday and Thursday transactions mostly at $91. Futures had been at a discount to that level, and rallied as the threat of deliveries against June diminished. Beef production YTD is down 1.2%, and estimated production for the week ending June 26 was 505.2 million pounds. That would be down 2.4% from the same week in 2009.
 
Market Watch: Crop watchers will focus very intently on Wednesday morning’s USDA Planted Acreage and Grain Stocks reports. Generally the trade is looking for USDA to show larger corn and soybean plantings than in the March Intentions report. There are some questions about the unplanted acreage in June, i.e. whether final numbers will match this early June survey. The Monday evening Crop Progress report will be monitored for changes in Crop Condition ratings. Wednesday will also be FND for July futures deliveries and expiration day for June Live Cattle. July serial cattle options are due to expire on Friday, July 2. Trade is expected to be thin on Friday, due to the July 4th weekend and the market holiday on July 5.
 
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, or of any particular risk management technique. 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 more extensive paid subscription and consulting services.
 
                                                                                                                                      Copyright 2010 Brugler Marketing & Management, LLC
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