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Market Watch

RSS By: Alan Brugler,

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

Euro Troubles Part II

May 21, 2010
Market Watch with Alan Brugler
May 21, 2010
Euro Troubles Part II
Trading was choppy this week in the commodity markets. Germany announced on the 18th that it was banning naked short selling of certain European bonds and shares of top German banks. The markets did not like this initially and this sent the dollar screaming higher which sent shock waves through the stock market and commodities market. Later in the week the Euro recovered against the dollar, and Corn rebounded but Soybeans were left behind. In the middle of the week commodities started to move on their own, independent of the outside markets. The DJIA finished at 10,193.39 for the week and up 125.38 for the day. Crude oil settled at $70.13, down $.67. The dollar index finished at 85.372. Gold finished the week at $1,177.50.
Corn had a net change of 1.65%, up 6 cents for the week. Net weekly export sales were up 1% from the prior four week average and shipments were down 5 % at 978,900 MT. China corn purchases were made official on this weeks export sales report with 239,000 MT for 2009/10 delivery and 130,000 MT for 2010/11 delivery. China was in the market again this week for more U.S. corn, purchasing another 118,000 MT for 2009/10 delivery. China plans to auction another 1 MMT of corn from their reserves in the north, about 20% more than auctions of the past three weeks. The weekly crop progress report showed corn planting at 87% as of last Sunday, that’s 26 points ahead of the five year average with emergence 16 points ahead of the five year average at 55%. Planting progress was slowed to a 6 point gain this week due to wet weather in much of the country. Trade estimates for next week’s crop progress report are looking for planting progress at 92 to 94%.
Wheat futures were steady to higher for the week. CBOT wheat finished the week at steady money with the KC wheat up 4 cents and the MGEX 2 cents higher than last Friday’s close. On May 19th the CBOT began tracking the components that will set the VSR (variable storage rate) for SRW wheat. The CBOT will track the data for five weeks before making their determination of whether to raise storage rates which is intended to improve convergence between cash and futures wheat prices. The weekly export sales were 37% higher than the four week average with Japan and Mexico the main buyers for 2009/10 delivery. Sales for 2010/11 delivery were 205,200 MT down 24% for new crop four week average. Spring wheat planting is basically on par with the five year average but 30 points ahead of last year.  
Soybeans just can’t seem to get their groove back and ended 13 cents lower for the week closing below the weekly trend line. The retreating dollar this week was supportive to the feed grains but failed to impact the beans in a positive way. China’s continued buying of U.S. soybeans has limited the decline. Accumulated sales to China for 2009/10 delivery are at 21.479 MMT. Plus 2010/11 China sales are at 2.794 MMT. China may come to the U.S. sooner versus later for more 2009/10 because Argentine farmers are holding tight to the remaining 30 MMT of their unsold crop as a hedge against Argentine currency concerns. Roughly 25 MMT of the 55 MMT crop has been sold. The trade is also awaiting the passing of U.S. biodiesel legislation that would extend the $1.00 blend credit through December 2010.
July Cotton ended up for the week. Planting progress in the US was ahead of the 5 year average and well ahead of last year. Aside from the currency moves, China and India were in the spotlight this week. Being the two largest world producers and consumers this is not unusual. China issued import quotas of 800,000 MMT which were fully subscribed. China also had weather issues which damaged their cotton crop. India lifted the ban on exports of cotton due to the unrest it has caused with the ginners but it is restricting the exports that it allows.
Hog futures closed $2.10 or -2.51% lower for the week. The monthly Cold Storage report showed 482.524 million pounds of pork in the cooler as of April 30 that compares to 612.290 million pounds for April 30, 2009, or 22% less than a year ago. The national barrow/gilt price was $1.48 lower, eastern Corn Belt $1.44 lower, western Corn Belt $1.59 lower and Iowa/Minnesota $2.12 lower. Hog slaughter was up 3.5% from last week but year to date totals are down 4.2% from a year ago.
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
Market Watch
% Change
CBOT Wheat
KCBT Wheat
MGEX Wheat
Soybean Meal
Soybean Oil
Live Cattle
Feeder Cattle
Lean Hogs
Cattle futures closed 2.02% lower for the week, down $1.88. Beef exports for the week were good at 15,700 MT. Boxed beef prices did slip some more to $167.20 on the Choice, down $2.06 and select finished at $161.06, down $3.26. Cash cattle prices were 153-157 in the north and 96 in the south this week. Beef production was up 1.4% from last week and down 2.8% from a year ago. Year to date cattle slaughter is ahead of last year by 1.2% but weights are running about 17 pounds per head below a year ago. Cattle on Feed for May 1, 2010 showed 96.59% of last year, April placements were 101.81% of last year and April marketings were 99.09% of last year.
Market Watch: The euro drama could continue next week but will likely not be quite as volatile as the past two weeks. Be looking out for the Crop Progress Report out Monday, along with the Census Crush and Cotton Consumption and Export sales reports all out Thursday morning. The significant economic reports coming up next week are the Home Sales Reports and GDP, Personal Income and Chicago PPI, weekly Energy Stocks, Jobless Claims and the Consumer Confidence Report.
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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