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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.

Heating Up

Jul 09, 2010
Market Watch with Alan Brugler
July 9, 2010
Heating Up
Corn extended its gains out of the V-bottom, rising another 3.09% for the week. Rising temperatures were accompanied by rising prices, with all of the ag commodities we track up for the week. The net change for the last two weeks in front month corn futures has been 34 cents per bushel. On Friday, USDA showed slightly larger than expected ending stocks estimates at 1.478 billion bushels for old crop and 1.373 billion for new crop. The new spec longs in corn like the fact that year/year ending stocks are expected to decline, and that the new crop stocks/use ratio is projected to be the tightest since 1996/97. That would also be the second highest national average yield on record, and it is still in question.
            Wheat posted the largest percentage gains in our table, to the consternation of fundamental analysts and economists. USDA cut projected world production and ending stocks, but not as far as some had anticipated. Global ending stocks are still projected to be a very burdensome 187 million metric tonnes. Projected U.S. ending stocks also ballooned to 1.093 billion bushels by May 31, 2011 despite a 100 million bushel increase in projected U.S. exports compared to the June report.
Soybeans jumped 6.5% for the week, aided by an almost identical advance in soybean meal. Meal stocks are ample, but meal is a partial substitute for corn and higher corn and DDGS prices allowed meal to advance. Soy oil was also higher by 3.8% on fresh investment fund buying interest. USDA supported the soybean bulls by dropping its old crop ending stocks projection to 175 million bushels, and more importantly leaving new crop UNCH at 360 million bushels despite increased planted acreage carried over from the June 30 report.
Cotton participated in the bull parade, but without a lot of enthusiasm.  USDA projected an even larger U.S. cotton crop than the trade expected, at 18.3 million bales. That was 10% larger than the June estimate, with larger acreage the main change. USDA also reduced projected abandonment due to better than usual weather in the Southwest. That production jump boosted the new crop ending stocks estimate to 3.5 million bales from a very tight 2.8 million in the previous report. World production was increased, but USDA revised the carryover from the previous year downward and put world ending stocks at 49.91 million bales.
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 were up a more modest 0.8% for the week. Cash cattle traded $1 to $2 higher, and futures rallied from a big discount to cash. The positive basis is profitable for hedgers, who get a higher net price than they initially thought possible when they sold the futures. Meat demand over the long holiday weekend was tepid enough to limit replacement buying interest in the wholesale market. Choice beef was down $1.01/cwt. from Thursday to Thursday, with all of that loss occurring on Wednesday. Select cuts were under even more pressure, losing $1.91 for the week. Increased chicken supplies are competing for meat market share, with both lower end beef and pork directly in the line of fire.
Hogs were also higher for the week, but only by 42 cents per hundredweight or 0.54%. On a Thursday/Thursday basis, the pork carcass cutout was up only 0.8%. Without much strength in the underlying product, cash hogs were limited and so were futures. A weaker US dollar offered some export potential, but even that faded a little on Friday. Weekly slaughter comparisons were messed up by the July 4 holiday on Monday, but packers were trying to make up some ground as the week went along. They didn’t want to flood the market with pork and drag down the price, and they appear to have been successful.
Market Watch: With the USDA reports out of the way, traders will revert to their usual summer time hobby in the grains, which is predicting average yields and thus U.S. and world production. This tends to be a weather game, modified by information inputs such as crop condition ratings, which will be released on Monday evening. USDA will also update export inspections on Monday morning. This is of more interest to soybean traders, due to the tightness of old crop stocks. NOPA is scheduled to release the June soybean crush report on Wednesday morning. Wednesday will also mark the expiration of the July grain futures contracts. July cotton has already expired. Weekly Export Sales will be out on Thursday morning, with analysts looking for indications of additional Chinese demand for corn, soybeans and soy products.
There is a risk of loss in futures and options trading. Such trading is not appropriate for all individuals. 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. 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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COMMENTS (2 Comments)

Only rained 1/2 an inch for the entire month of June for us. I thought the corn was gonna be dead. Rained half an inch last night, and she's perking back up.
12:13 PM Jul 10th
Four dollar corn will look cheap if we get the weather like some are talking about,,, hot and dry. If I were an end user buy now, we still havent broke through upper range highs of winter and spring. JUst an opinion.
9:23 AM Jul 10th
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