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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.

Out Like a Lion?

Mar 26, 2010
 

Market Watch with Alan Brugler
March 26, 2010
 
Out Like A Lion?
 
There is an old saying that March comes in like a lion and goes out like a lamb. Market weather appears to be a flipping that formula, getting more volatile in the run up to the March 31 USDA reports.
 
Corn prices gave back all 11 cents gained in the previous week, and lost 8 cents more. Rain forecasts were revised several times, usually to lower totals. That made a normal spring appear more likely, and the market pulled some of the weather premium out of the new crop futures. Spec funds were also liquidating longs ahead of the Planting Intentions report, respecting trade forecasts for a 3 million acre increase in 2010. Export sales commitments are running 6.2% above year ago. That is larger than USDA’s revised projection for the year, but it has slowed dramatically from the 20% lead it had back at the beginning of the year. Expected supplies out of Argentina are a factor in that loss of enthusiasm for buying US corn.
 
Soybeans dropped 10 cents per bushel for the week, just over 1%. Meal futures were able to eke out a rise of 75 cents/ton for the week, despite bearish Census meal stocks of 700 thousand tons as of February 28. Decent export business supported the meal, and there were also ideas of stronger replacement buying interest in March. Soy oil was down .89% for the week, as the stronger US dollar limited gains in the energy complex. There was also some back tracking on use of vegetable oils for motor fuel. A palm  oil biodiesel mandate was delayed until 2011. For soybeans, it is a struggle between tight old crop stocks and a large perceived 2010 US acreage chasing a record large South American crop into the world market.
 
Wheat futures were lower at all three exchanges this past week. The bear story in wheat is very well advertised, with world production 17 MMT smaller than last year (International Grains Council) but still running ahead of global demand. The world stocks/use ratio should be the loosest since the turn of the century, putting constant pressure on prices. The US winter wheat crop appears to have come out of the winter in pretty good shape, with excellent moisture conditions in the southern Plains.
 
Cotton prices were down 3.03% for the week, erasing the advance from the previous week. The surge in the value of the U.S. dollar played out as weakness in commodity prices including cotton. Weekly US export sales were weaker than expected at 128,400 RB, but saw good shipments of outstanding contracts at 308,700 RB. USDA put the AWP at 69.14 for this week. USDA also announced another weekly import quota of 69,141 bales for April 1 under the Farm Bill formula.
 
Hogs were down a sharp 5.02% for the week. The pork market wasn’t impressed with the resumption of export sales to Russia. The cutout value dropped 4.1% for the week, to $70.76. Ham prices dropped 9% for the week, as Easter demand has been met and retailers are buying their needs for the week after the holiday. Obviously, that weighed on what packers were willing to pay for the cash hogs. Futures saw profit taking type selling as we approached month end and also the expiration of the April contract. It was aggravated by the selling pressure in the cattle pit and the weakness in cash hogs.
 
Cattle futures had an ugly week, losing 4.03% in a week, or $3.95/cwt. That was 2/3 of what they had gained in the prior three weeks. Wholesale prices rose sharply for the week, with choice boxed beef up $6.05, a 3.86% advance for the week. A combination of reduced beef tonnage and improving export demand has fueled the advance. The US consumer may also be helping out a little bit as the weather improves. Cash cattle trade was mostly in the $96-97 range for the week, with an unusual weekly pattern. Packers were active buyers on Monday and Tuesday, with business pretty well finished by mid-week instead of just getting started.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
03/05/10
03/12/10
03/19/10
03/26/10
Change
% Change
May
Corn
$3.75
$3.64
$3.75
$3.56
0.19
-5.00%
May
CBOT Wheat
$4.93
$4.85
$4.83
$4.65
0.18
-3.68%
May
KCBT Wheat
$5.00
$4.95
$4.93
$4.76
0.17
-3.45%
May
MGEX Wheat
$5.12
$5.13
$5.09
$4.97
0.12
-2.41%
May
Soybeans
$9.43
$9.25
$9.62
$9.52
0.10
-1.01%
May
Soybean Meal
$257.70
$251.30
$270.25
$271.00
0.75
0.28%
May
Soybean Oil
$40.05
$39.55
$39.30
$38.95
0.35
-0.89%
April
Live Cattle
$92.95
$95.10
$97.97
$94.02
3.95
-4.03%
April
Feeder Cattle
$105.23
$105.98
$108.68
$107.20
1.47
-1.36%
April
Lean Hogs
$73.10
$72.65
$73.35
$69.67
3.68
-5.02%
May
Cotton
$82.43
$80.47
$82.18
$79.69
2.49
-3.03%
May
Oats
$2.27
$2.19
$2.25
$2.12
0.13
-5.57%
May
Rice
$13.09
$12.43
$12.70
$12.46
0.24
-1.89%
 
Market Watch: Hog traders will begin the week reacting to the smaller than expected numbers in the quarterly Hogs & Pigs report which was released on Friday night. Grain traders are without their April options coverage, which also expired on Friday. There are routine grain Export Inspections and Export Sales reports from USDA on Monday and Thursday. The big reports for the week, as you may have heard, are the USDA Prospective Plantings report and the quarterly Grain Stocks report. Both are scheduled for 7:30 am CDT on Wednesday morning. The trade has had a tendency to miss big on Intentions report guesstimates, so there is potential price volatility. The Grain Stocks reports will drive feed and residual use adjustments in the April WASDE report. Wednesday also marks the end of the first calendar quarter, with some asset allocation adjustments and plain old profit taking tied to the calendar. The US futures markets will be closed on Friday for the Good Friday holiday.
 
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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COMMENTS (4 Comments)

Anonymous
March 27, 2010 1:27 PM
I think the real problem is not that farmers are planting too many acres, but rather no one really knows how many acres are planted, harvested or the total actual production of any crops. Nor do we know what the real current stocks on hand numbers are.
The USDA (NASS) is either not able to do their job or they do not want to. Their fake numbers serve a purpose (for the traders on CBOT), but nothing in their reports is meant to help the farmer.
They have no clue of how many acres of corn are still standing unharvested, but now they are going to guess how many will be planted this spring. They claim an 80% response on their farmer’s surveys (they do not use any other real numbers, but they want us to believe this 80% response number), but how stupid would a farmer have to be to tell them “Yep I am going to plant more corn this year. I do not think the price is low enough, could you please lower it further by releasing anther negative report."
I have heard the whole list of excuses of why the USDA uses only estimates and never uses real numbers even if they are available. The main reason is they “can” and “no one” can do anything about it.
Market analysts like volatile and low markets, if prices were stabile and over the cost of production no one would need their services.

5:49 PM Mar 29th
 
Anonymous
Yes acres are expected to be up. I just dont feel it is fair as a producer when we tie in next years production already off of this years production. Pretty easy to say we always have grain in this country when half of it has to be exported. We really have to start looking more at what is a fair price of corn not only at harvest but what is a fair price when were closer to 60-70% consumed.
10:44 PM Mar 28th
 
 
 
 
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