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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.

Now We're On Fire

Jul 16, 2010
 

Market Watch with Alan Brugler
July 16, 2010
 
Now We’re On Fire
 
Corn extended its gains another 2.9%, and is now up 45 cents per bushel in 3 weeks. Elevators report plenty of old crop movement, and some are complaining about the heat damage and other quality concerns. That isn’t the market’s concern, however. Collectively, the concern is whether we can make the USDA’s current yield forecast, or if persistent high daytime and nighttime temps will negatively impact the U.S. average yield. USDA projected 1.373 billion bushels of ending stocks for new crop on July 9. With 80 or 81 million harvested acres, a drop of only 3 or 4 bushels per acre in the national average yield would drop stocks very close to pipeline levels. The market is already doing some price rationing against that risk.
 
Wheat again posted the largest percentage gains in our table. There is an old trade axiom that goes “wheat takes no prisoners”.  Global ending stocks are still projected by USDA to be a very burdensome 187 million metric tonnes, but there are a number of estimates floating around that reduce that figure by 8 to 12 MMT. Russia, Ukraine, the EU and other countries are seeing drought issues pop up, along with the infamous sukhovei in Russia.  Projected U.S. ending stocks ballooned to 1.093 billion bushels in the July WASDE report, but exports could grow another 100-200 million bushels if world stocks continue to tighten. Bears point to the extremely weak cash basis and suggest that futures are getting ahead of themselves with the dollar plus gains in CHI and KC over the past three weeks.
 
Soybeans rose 2.6% for the week, a much tamer pace than the 6.5% the previous week. They were limited by the size of the gains in the products. Soybean meal was up 2.3%, and soy oil was up 2.2% for the week. Meal was trying to keep up with corn, but soy oil had to deal with weakness in the overall energy markets. Weekly soybean export sales were strong, notably in the old crop, and a weakening US dollar index supported the rally. Crop condition ratings declined to a level below 2004. NOPA’s monthly crush report was very close to the trade estimates, at just over 126 million bushels.

Cotton was up a similar 2.3% for the week.  USDA’s 18.3 million bales production estimate is still overhanging the market. Drought is beginning to be discussed, with the Drought Monitor showing real problems in Louisiana and spreading to surrounding states. The NOAA 30-day weather forecast looks for moderating temps in August for the main cotton growing areas (not the case for the Corn Belt).
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
06/25/10
07/02/10
07/09/10
07/16/10
Change
% Change
Sep
Corn
$3.50
$3.73
$3.84
$3.95
0.11
2.93%
Sep
CBOT Wheat
$4.71
$5.03
$5.38
$5.87
0.49
9.15%
Sep
KCBT Wheat
$4.95
$5.16
$5.53
$5.99
0.46
8.27%
Sep
MGEX Wheat
$5.24
$5.31
$5.63
$6.12
0.49
8.61%
Aug
Soybeans
$9.41
$9.45
$9.93
$10.20
0.26
2.64%
Aug
Soybean Meal
$280.30
$286.00
$300.90
$307.80
6.90
2.29%
Aug
Soybean Oil
$37.33
$36.16
$37.50
$38.31
0.81
2.16%
Aug
Live Cattle
$89.38
$89.48
$90.20
$92.27
2.07
2.29%
Aug
Feeder Cattle
$113.32
$112.68
$113.25
$113.10
0.15
0.13%
Aug
Lean Hogs
$83.93
$80.05
$80.03
$81.70
1.68
2.09%
Oct
Cotton
$80.21
$77.83
$78.15
$79.96
1.81
2.32%
Sep
Oats
$2.66
$2.48
$2.65
$2.68
0.02
0.94%
Sep
Rice
$10.21
$9.81
$9.99
$9.86
0.13
1.30%
 
Cattle futures were up, you guessed it, 2.29%. Cash cattle traded $1 to $2 higher, at $93-94 in the south and $150-152 in the north. That was above the prior August futures level and futures rallied to close the basis gap. Choice beef was down $0.74/cwt. from Thursday to Thursday, with most of that loss occurring on Wednesday. Select cuts were under less pressure, losing $0.26 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, up 2.09%. On a Thursday/Thursday basis, the pork carcass cutout was down 2%. Bellies and ribs were the strongest. Without much strength in the underlying product, cash hog advances were limited and so were futures. Fund buying was a bullish feature. A weaker US dollar offered some pork export potential, but the final numbers for May that were released mid-week were not as bullish as some had hoped.

 
Market Watch: Hot weather is the fundamental story, and that will have traders poring over the weather forecast maps on Sunday evening when Globex trading resumes. They’ll be looking at Europe as well as the U.S. runs. On Monday night, USDA will tell us if their reporters are seeing any negative effects of the current weather pattern on crop conditions. On Thursday morning, Census will release the monthly Crush and Cotton Consumption reports for June. USAD will follow with Cold Storage in the afternoon. On Friday, cattle traders will get to see both the monthly Cattle on Feed report and the semi-annual USDA Cattle Inventory report. Friday will also mark the last trading day for August futures options in the grains and oilseeds.
 
Looking for professional help with your marketing decisions? Consider subscribing to our daily Ag Marketing Professional service or Special Research Reports. Eastern Corn Belt readers are also invited to attend our Summer Seminar in Ft. Wayne, Indiana on July 22-23. Call our office for details at 402-697-3623, or visit our Brugler Web sites www.bruglermarketing.com or www.bruglermktg.com.
 
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 (1 Comments)

Anonymous
Actually on low protein spring wheat we lost money on the week. Local elevators are not only skittish on bumping up prices along with CBOT and Minnneapolis but they raised the protein discounts dramatically. Minus 10 cents a fifth to .15. On 12 protein spring wheat we went from a 1.00 discount up to 1.50. Needless to say no big market week for lower spring wheat holders.
7:20 PM Jul 16th
 
 
 
 
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