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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.

Good News for the Economy, Bad News for Grains

Dec 04, 2009

 

Market Watch Summary with Alan Brugler & Kyung Ra

December 4, 2009

 

Good News for the Economy, Bad News for Grains

 

Corn futures were down sharply this week after trading in a fairly narrow range over the past three week. The largest daily rally in the US dollar index since June caused unwinding of some carry trades in the currency market, and the stronger dollar drove a little profit taking by the grain longs. The cash market has also been sending out some distress signals recently, with too much corn being dumped into the elevator and freight system at one time due to moisture and quality problems. That showed up in basis bids that were 12 to 16 cents weaker than a year ago at this time. Weekly export sales were also on the low side after a promising jump the week ahead of Thanksgiving. Some of the selling was also likely position squaring ahead of the December USDA reports and maybe even a little year end book squaring.

 

Wheat futures were down 1 to 2% at the three exchanges, with Chicago the weakest as it was the most exposed to the currency trade crowd. Export sales continue to run below the weekly pace needed to meet USDA projections for the year, and Egypt once again passed on US origin wheat at its buying tender. The trade broadly expects USDA to find that up to 1 million acres of SRW was not planted due to the fall weather, but the Winter Wheat Acreage report won’t be out until January. Stats Canada found more spring wheat in Canada than had been expected, which hurt MPLS a little.

 

Soybeans fared better than the feed grains, slipping less than 1% for the week. There were a number of cross currents at work, including China’s indication that they would phase out the crusher subsidies on beans if prices got too far above the reserve price. This was an effective cap on the market. Lower product prices in the US also limited crusher interest a little. Brazil is more than 80% planted, with Mato Grosso 100% done. Argentina has more to go, but better soil moisture due to some El Nino rains. Bulls are talking about conditions being too wet in parts of southern Brazil, but time will tell. The main support to the market is the need to originate LOTS of bushels from producers to load on the boats destined for China, and the need for US crushers to intercept some of those beans to use here.

 

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

 

Market Watch

 

 

 

 

Weekly

Weekly

 

11/13/09

11/20/09

11/27/09

12/04/09

Change

% Change

December Corn

$3.91

$3.91

$3.97

$3.74

-0.235

-5.92%

December CBOT Wheat

$5.39

$5.60

$5.49

$5.37

-0.120

-2.19%

December KCBT Wheat

$5.41

$5.57

$5.43

$5.36

-0.067

-1.24%

December MGEX Wheat

$5.56

$5.64

$5.54

$5.48

-0.057

-1.04%

January Soybeans

$9.87

$10.46

$10.53

$10.43

-0.100

-0.95%

December Soy Meal

$301.10

$317.10

$326.50

$320.90

-5.600

-1.72%

December Soy Oil

$38.61

$39.71

$40.10

$39.76

-0.340

-0.85%

December Live Cattle

$83.32

$83.95

$83.20

$81.00

-2.200

-2.64%

January Feeder Cattle

$91.83

$92.68

$92.50

$93.35

0.850

0.92%

December Lean Hogs

$55.00

$57.60

$59.02

$61.15

2.130

3.61%

December Cotton

$67.10

$70.41

$69.74

$70.21

0.470

0.67%

December Oats

$2.27

$2.58

$2.55

$2.43

-0.118

-4.61%

January Rice

$14.86

$15.17

$15.40

$15.72

0.315

2.05%

 

Cotton futures were actually up 0.67% for the week, showing no ill effects of the US dollar rally. The bulls were greatly aided by a strong weekly export sales report for the last week of November. Ongoing concerns over yield quality and crop supply in US, China and India due to weather lent support to futures for the week.  A bullish report by the ICAC on Tuesday was seen as supportive.  The International Cotton Advisory forecast 2009/10 world cotton production 5.13% down compared to the previous year due to weaker crop yields, while world consumption is forecasted at a 2.59% increase, reflecting a 6.52% increase in global imports. These figures would bring world cotton ending stocks at a 13.01% decrease from 2008/09.

 

Hogs were up 3.61% for the week, the biggest gainer on our list this week. Wholesale prices rose smartly on Thursday, with ham interest most notable.  For the week the average wholesale pork cutout price rose $3.27 a 5.29% increase.  Wholesale cutout value for hams in Friday afternoon trading gained $12.38, a 20.7% increase from Monday’s value.  Since Monday, cash hogs sold for the week $2.47 higher, a 4.38% increase by Friday in direct market trading. China’s announcement that it has lifted its ban on US pork exports on Monday and talk of increased hams exports this week added to the supportive tone to lean hog futures.

 

Live Cattle posted the biggest weekly loss in quite a while. Futures appeared to be in a death spiral of long liquidation ahead of the December options expiration on Friday. Options traders appeared to be aiming for a “pin” of the $80 strike price, but couldn’t get it done. Wholesale boxed beef prices were sharply lower for the week, where cutout values from Monday to Friday showed for Choice a 3.11% loss and Select had a 2.30% decline, as the market attention shifted back to ham and turkey for Christmas and there were few indications of a suddenly renewed interest in prime rib at restaurants.  The cash cattle market is wrestling with a rise in ready cattle numbers compared to November, and packers also appeared to be slow to buy them due to an interest in propping up wholesale prices.

 

Market Watch:  Next Monday weekly export inspections will be released and is the first day of delivery notices against the December live cattle contracts.  Tuesday will be the last trading day for December cotton futures.  The USDA on Thursday will release its monthly WASDE and Crop production reports, and its weekly export sales report. No changes are expected for US corn or soybean yields, as USDA usually defers that to the January report. With more unharvested corn than usual, they have every incentive to do so again in 2009.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 content, or visit the web site @ www.bruglermktg.com.

© 2009 Brugler Marketing & Management, LLC

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COMMENTS (1 Comments)

Anonymous
Great job Alan, factual and concise...
10:31 PM Dec 4th
 
 
 
 
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