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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.

Cattle Still BulledUp

Mar 12, 2010
 

Market Watch with Alan Brugler
March 12, 2010
 
Cattle Still Bulled Up!
 
Cattle futures posted the largest percentage gain this week for any of the agricultural commodities that we track. Prices were up 2.31%. Feeder cattle were also pulled higher by the combination of higher cattle futures and lower corn prices. Cash cattle traded at $94-95 in the Plains on Friday, yet another testimony to tightening supplies and improved feedlot leverage. Wholesale prices were less enthusiastic, with choice boxes up a whole nickel for the week.
 
Hogs were down all week, but bounced on Friday. The pork cutout fell $1.88 for the week. Hams took the biggest hit, losing 7.5% over the 7 days. However, the CME Lean Hog Index used to settle futures deliveries was rising. Weekly slaughter was well below both year ago and last week, due to downtime at an Indiana plant caused by a fire.
 
Corn prices were under pressure, with net weekly export sales for the week ending March 4 only 338,900 MT. Prices are lower than they were in January, but the world market isn’t terribly eager to stock up. USDA showed us one reason this week, boosting projected Argentine production by 3.8 MMT and boosting projected exports for that country to 12 MMT (472 million bushels). Ethanol plant margins continue to be in the black, but have been diminished by weakness in the ethanol. That has weighed on cash corn bids.
 
Wheat futures were lower, but more reluctantly so. The bear story in wheat is very well advertised. USDA’s cut in projected US food use was a small bearish surprise, and nudged projected ending stocks above the psychologically important billion bushel mark. Essentially the U.S. will have a 6 month supply of wheat already in the bin when harvest is just starting in May.
 
Soybeans were down 1.8% for the week. Bulls thought they had something on Friday, with USDA reporting fresh old crop export sales of 220,000 MT to China. However, the announcement was corrected to show those sales as 2010/11 delivery, a drop in the bucket of world new crop supplies instead of a sizeable buy in a rapidly shrinking old crop supply pool. Weekly US export sales for the week ending March 4 had already been net negative, as China had canceled 192,400 MT of previous purchases.
 
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
02/19/10
02/26/10
03/05/10
03/12/10
Change
% Change
May
Corn
$3.72
$3.89
$3.75
$3.64
-0.11
-2.97%
May
CBOT Wheat
$5.04
$5.19
$4.93
$4.85
-0.08
-1.66%
May
KCBT Wheat
$5.09
$5.21
$5.00
$4.95
-0.06
-1.16%
May
MGEX Wheat
$5.19
$5.29
$5.12
$5.13
0.01
0.23%
May
Soybeans
$9.54
$9.61
$9.43
$9.25
-0.17
-1.82%
May
Soybean Meal
$270.00
$270.00
$257.70
$251.30
-6.40
-2.48%
May
Soybean Oil
$39.00
$39.70
$40.05
$39.55
-0.50
-1.25%
April
Live Cattle
$93.30
$91.92
$92.95
$95.10
2.15
2.31%
March
Feeder Cattle
$102.60
$101.05
$102.20
$103.00
0.80
0.78%
April
Lean Hogs
$69.65
$72.80
$73.10
$72.65
-0.45
-0.62%
May
Cotton
$78.98
$82.46
$82.43
$80.47
-1.96
-2.38%
May
Oats
$2.39
$2.31
$2.27
$2.19
-0.08
-3.53%
May
Rice
$13.97
$13.76
$13.09
$12.43
-0.66
-5.04%
 
Cotton prices pulled back after a strong run in February and early March. They were down 2.4% for the week in the May contract. Net upland cotton export sales were 131,900 running bales for the week. That was only half of the 4-week moving average pace. A higher than expected inflation rate in China raised concerns about further Chinese government attempts to tighten up credit and the money supply. Some saw that as a threat to cotton import purchases.
 
Market Watch: Monday marks the full moon and the first trading day after the switch to Daylight Savings Time. It will also be the Ides of March made immortal by Shakespeare’s Julius Caesar as in “Beware the Ides of March”. The soothsayer didn’t tell us whether he was warning the bulls or the bears, but it certainly wasn’t a good day for Caesar! For the agricultural markets, the main items for the day are expected to be the monthly NOPA soybean crush report and the USDA weekly Export Inspections numbers. It is also the last trading day for the March US dollar index futures. The Fed is scheduled to begin the FOMC meeting on Tuesday. Wednesday is St. Patrick’s Day, a time when the river in Chicago has traditionally turned green and some traders have taken extra long lunch hours. Thursday features USDA’s weekly Export Sales report, as well as monthly Milk Production. On Friday, we’ll see the monthly Cattle on Feed report in the afternoon.  Not to be forgotten, and eagerly hoped for my many, Saturday will be the first day of Spring.
 
There is a risk of loss in futures and options trading.  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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