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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.

Easy Come Easy Go

Apr 23, 2010

 


 

Market Watch with Alan Brugler

April 23, 2010

Easy Come, Easy Go

 

Nearby May corn futures rallied 19 cents per bushel two weeks ago, and promptly gave back 11 cents this week. All of that selling happened on Monday and Friday. Bears were focused on rapid planting progress with some insisting it would be over 50% in Monday’s USDA report. That’s for the 18 main production states including states like North Dakota, Pennsylvania and Wisconsin that typically are less than 15% done by now. The U.S. average progress since 2001 for this week (with no adjustment for day of week) would be 31%, with 53% not being reached until the following week. Bulls focused on a big jump in export sales interest, rising blend rates for ethanol in conventional gasoline, and year/year increases in egg sets and chick placements.

 

Wheat futures were up on the week until Friday came along. Despite the weaker US dollar and higher energy futures, longs took money off the table rather than risk another Meltdown Monday. Weekly export sales and shipments were about as expected, and failed to provide much bullish fuel. Crop condition ratings also rose, suggesting some yield improvement. Wet weather heading into the end of the week bolstered yield ideas, but also threatened a more rapid spread of the stripe rust that has already been plaguing the crop. The EU wheat futures market set a 3 month high on Friday, with traders there noting dry conditions in some of the French growing areas, and also problems with the Chinese crop. MPLS futures saw their big gain on Thursday, as USDA announced a $6.00 loan rate for durum. That was so far above the spring wheat that traders expected a late acreage switch to durum and away from HRS/DNS. The rally in soybeans also makes them appear more attractive than spring wheat.

 

Soybeans extended their gains of the past three weeks, with May futures closing right on the $10 handle on Friday night. That was likely no coincidence, with May options also expiring on Friday.  Bullish inputs for the week were led by soybean meal, which rose 4.06%. Census reported on Thursday that meal stocks as of March 31 had declined from a burdensome 700 thousand tons in February to more bull friendly 361 thousand tons.  Technically, meal shows a Head & Shoulders bottom, which made the fundamental news easy to buy. Soy oil lagged, losing 45 points on unwinding of oil/meal spreads and a lack of direction in energy futures. Biodiesel plants continue to go out of business as Congress still hasn’t acted to restore the blend credit the plants need to use veg oils and compete with crude oil based product. China was also an aggressive buyer of new crop US beans amid an ongoing trade dispute with Argentina.

 

Some cash cattle traded at $100 again this week, but more appear to have traded in the $99 zone. With cash cattle at that level, April futures have seen zero delivery notices, and have gradually rallied to meet the cash price. Cattle were up 47 cents for the week.  USDA reported weekly Export sales of more than 20 thousand tonnes, nearly doubling the moving average. Friday’s Cattle on Feed report confirmed that we are very current on slaughter, with March marketings at 104.3% of year ago and combined marketings/other disappearance larger than the ready cattle numbers. Placements were also lighter than the average trade guess. The eight weights were notably lighter than a year ago, which we attribute to cattle being held longer on wheat pasture.

 

Hog futures were up almost a dollar for the week. Pork carcass prices rose to the highest level since 2008 ($90.68 on Thursday and holding at $90.30 on Friday), and futures were also heading toward a test of the 2008 highs. The Thursday evening Cold Storage report confirmed that there was still less pork in the cooler than a year ago.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:

 

Market Watch

 

 

 

 

Weekly

Weekly

Month

04/01/10

04/09/10

04/16/10

04/23/10

Change

% Change

May

Corn

$3.45

$3.46

$3.64

$3.53

0.11

3.02%

May

CBOT Wheat

$4.55

$4.66

$4.91

$4.93

0.03

0.56%

May

KCBT Wheat

$4.70

$4.91

$5.07

$5.06

0.01

0.15%

May

MGEX Wheat

$4.89

$5.01

$5.20

$5.27

0.07

1.30%

May

Soybeans

$9.42

$9.52

$9.85

$10.00

0.15

1.50%

May

Soybean Meal

$265.90

$265.30

$280.90

$292.30

11.40

4.06%

May

Soybean Oil

$38.98

$40.04

$39.80

$39.35

0.45

1.13%

April

Live Cattle

$96.65

$99.65

$98.75

$99.22

0.47

0.48%

April

Feeder Cattle

$110.37

$114.52

$111.95

$112.20

0.25

0.22%

May

Lean Hogs

$81.73

$83.88

$86.42

$87.40

0.98

1.13%

May

Cotton

$81.50

$75.80

$80.01

$84.26

4.25

5.31%

May

Oats

$2.11

$2.15

$2.15

$2.05

0.10

4.76%

May

Rice

$12.38

$13.79

$12.81

$12.41

0.40

3.12%

 

Cotton futures staged a huge 5.37% rally this week, adding to a very similar gain the previous week. Consumer demand is picking up, as measured by retail sales and new home sales. US ending stocks are shrinking, and wet conditions are slowing cotton planting in the southern U.S. The big story for the week was that India was going to slow or halt exports, forcing China and other large users to buy cotton from the U.S., Brazil or Pakistan that it would not otherwise have been forced to purchase. Monday will mark first notice day for May cotton deliveries. Given huge cert stocks, large deliveries are possible. They are only likely if the owner doesn’t have an export market.

 

Market Watch: The May grain options expired on Friday.  Market participants will begin the week adjusting positions for those who were surprised by exercises. The main battle grounds were the May 1000 strike in soybeans and the May 490 strike in CBT wheat.  The market moved away from the May 360 in corn but pinned the 1000 strike in May beans exactly. Traders will be very interested in the planting progress and crop condition ratings from USDA on Monday evening.  The Fed meets on Tuesday and Wednesday, with no rate hike currently expected. Thursday will be the final trading day for April feeder cattle. April live cattle expire on Friday. Friday will also mark first notice day for May futures deliveries.

 

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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