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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 Week for Hogs

Sep 19, 2008
It was a good week for hog producers, one of the best in months. Corn dropped almost 4%, mean futures were down 7% and nearby hogs were up more than 3%. That’s the trifecta! Fundamentally, the hogs saw a little improvement in the value of the carcass components that stabilized the cash hogs. Since futures had been discounting the cash, there was room for a rally.
Below is a table showing the weekly change of selected agricultural futures products:
Market Watch
% Change
Dec Corn
Dec CHI Wht
Dec KC Wht
Sep MGE Wht
Nov Soybeans
Oct Soy Meal
Oct Soy Oil
Oct Lv Cattle
Sep Fdr Cattle
Oct Ln Hogs
Oct Cotton
Dec Oats
Nov Rice
Corn prices were down 21 cents per bushel for the week, with significant liquidation of hedge fund and index fund positions as the stress intensified on Wall Street and AIG (sponsor of the DJ-AIG Commodity Index fund) was propped up by a massive government loan program. Crop yield estimates dropped in the private sector due to widespread “down” corn caused by Hurricane Ike, but USDA won’t show that until the October crop report.
Soybeans fell 58 cents per bushel, or almost 5% for the week. Both meal and oil were under pressure. DDG prices (corn ethanol feed byproduct) were down sharply due to localized oversupply, and that put pressure on soybean meal. So did the drops in corn and wheat. Beans were hurt by the loss of product value, and also by unwinding of speculative long positions and the flight to cash.
Wheat futures were lower at all three exchanges, but only by 1 to 3 cents per bushel. It was a violent week in terms of trading action, once again bringing to mind the trade axiom “trade wheat and sleep in the street”. The market continues to be technically oversold, but also faced with record world production that must be priced into human and/or livestock use.
Cotton futures were down 3.5% for the week, but it would have been worse had it not been for a 126 point rally on Friday. Liquidation of speculative and commercial positions pressured the market to the lowest front month futures prices since August 2007. Weekly export sales were regarded as bull friendly, but the impact was swamped by the panic selling at mid-week. Friday’s rally was sponsored by higher prices for competing fibers, due to higher crude oil costs. There are also legitimate concerns about production losses and quality losses from Hurricanes Gustav and Ike.
Cattle futures lost a mere 60 cents for the week despite a hard down day on Thursday. Profit taking ahead of the Friday afternoon Cattle on Feed report pulled the market back up, along with solid export buying by South Korea and others. The COF report showed Placements at 97.3% of year ago, with Marketings at 91.2% and On Feed at 97%. The report is slightly bull friendly because of the lower total numbers on feed and the likelihood of very tight available supplies of finished cattle into the first quarter.
Feeder cattle futures would normally be helped by the weakness in corn, but with the live cattle prices lower, and a fairly low speculative interest, they slipped 1.5% for the week.
Market Watch: Monday is the first day of Autumn, with most stock market watchers and farmers hoping it isn’t the first day of Fall! USDA will have the regular weekly Export Inspections and Crop Condition reports, as well the issuing the monthly Cold Storage report. Wednesday is first notice day for deliveries against October cotton futures contracts. On Thursday morning, we’ll get USDA Export Sales, along with Census Cotton Consumption and Census Crush reports. Friday will feature the quarterly USDA Hogs & Pigs report, and will also be the last trading day for October grain options.
There is a substantial risk of loss in futures & options trading. Past results are not necessarily indicative of future results.                         
Copyright 2008 Brugler Marketing & Management LLC
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