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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.

Sell The Rumor, Buy The Fact

Sep 11, 2009

 

Market Watch with Alan Brugler

September 11, 2009

 

Sell The Rumor, Buy The Fact

 

September corn futures showed a 14 cent gain for the week. December futures were up 13 ½ cents. USDA raised its estimate of the 2009 US corn yield to 161.9 bushels per acre, driving up the crop size to 12.954 billion bushels. It could have been worse, as they also raised old crop ethanol use and new crop export and residual use. The net result was a new crop ending stocks figure of 1.635 billion bushels. The average trade guess had been 1.769 billion, so there was a little bullish afterglow from the report. True to conventional trade wisdom, traders sold the rumor of the big crop estimate and bought the fact. And, of course, debate continues about whether all the acres are actually there, and whether the yield number will hold up after colder weather sets in and some of the extremely late fields presumably get “caught” at less than fully mature stages.

 

Wheat still struggled with bearish world fundamentals. In Friday’s WASDE report, USDA hiked projected world wheat production to 663.72 MMT from 659.29 MMT, with additional production seen in the EU and Russia. The increased crop production outstrips demand growth, with USDA seeing world ending stocks growing to 186.61 MMT. The relevance to US producers is the inability to export needed quantities because the US wheat is still in many cases higher priced than the competition after freight is added to the destination. USDA made no changes in the US ending stocks forecast on Friday, deferring until after the September 30 Small Grains production and Grain Stocks reports.

 

Soybean futures were a mixed bag. The soon to expire September contract shown in the table gained 24 cents on the week because of limited availability of new crop supplies and solid export and crush demand. November futures, on the other hand, were down 18 cents for the week. Soybean meal lost big chunks of price premium due to widespread availability of DDGs from expanded ethanol production and the big price discount for feeders by using that byproduct in feed rations. There were even rumors of big export interest in DDGs. Lower soy oil prices weighed on soybean product value. USDA raised projected average yield to 42.3 bushels per acre and raised the likely crop size to 3.245 billion bushels. On the other hand, likely Brazilian production was raised 2 MMT.

 

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

             

Market Watch

 

 

 

 

Weekly

Weekly

 

08/21/09

08/28/09

09/04/09

09/11/09

Change

% Change

September Corn

$3.22

$3.21

$3.01

$3.15

0.14

4.66%

September CBOT Wheat

$4.60

$4.67

$4.44

$4.42

-0.02

-0.51%

September KCBT Wheat

$4.94

$5.00

$4.77

$4.67

-0.10

-2.15%

September MGEX Wheat

$5.32

$5.22

$4.84

$4.76

-0.08

-1.65%

September Soybeans

$10.23

$11.36

$9.61

$9.85

0.24

2.45%

September Soy Meal

$333.00

$387.00

$332.20

$338.00

5.80

1.75%

September Soy Oil

$36.33

$36.07

$33.65

$33.36

-0.29

-0.86%

October Live Cattle

$88.60

$86.70

$86.65

$87.22

0.57

0.66%

September Feeder Cattle

$100.70

$98.15

$98.95

$99.17

0.22

0.22%

October Lean Hogs

$47.85

$48.07

$50.50

$52.47

1.97

3.90%

October Cotton

$56.45

$56.30

$57.53

$59.31

1.78

3.09%

September Oats

$2.05

$2.11

$1.96

$1.96

0.00

0.13%

September Rice

$13.13

$13.51

$13.93

$13.33

-0.60

-4.27%

 

Cotton futures extended their rally by another 3.09%, thanks to a 32 point gain on Friday. Friday action was really pretty bearish, since October turned a 136 point gain at the high into a 32 point gain by the close. USDA showed the expected increase in cotton production and also in exports, but left projected new crop ending stocks UNCH at 5.6 million bales. A drop in projected world ending stocks was seen as positive for US exports.

 

Cattle futures bulls worked hard to extract a 0.66% gain in prices for the week. Ready cattle numbers are tight, but beef demand hasn’t fully recovered. Choice beef prices bounced on Tuesday due to refill demand from grocery stores, but by Thursday and Friday wholesale prices were leaking lower. Cash cattle traded at $84.50-85.00 on Friday, essentially steady with the previous week.

 

Hogs extended their rally of the 3 previous weeks, up another 3.9% for the holiday shortened week. October futures held a dollar premium to the rising CME Lean Hog Index. A jump in the cutout value of the hog helped firm hog prices, but a big drop in the quoted value of pork loins at the wholesale level weighed on futures prices on Friday by taking the carcass value down $1.34/hundred. 

 

Market Watch:  With the crop report out of the way, grain traders are likely to go back to weather forecasting, trying to be the first to spot any potential for frost/freeze damage. The Monday night USDA Crop Progress report will be important input, showing how much maturity has advanced since last week and thus how many bushels of corn or soybeans are now safe from premature death. Monday will also be the expiration day for September grain futures contracts. On Monday morning, NOPA is also expected to report on its members’ August crush activity. On Friday, USDA will give livestock producers some fresh information, with both the monthly Cattle on Feed and Milk Production reports.


 

 

 

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 (5 Comments)

Anonymous
Rumor: Demand is good, and thus makes a bull market. Fact: Supply will outpace demand. Doesn't matter how good demand is, if there's too much supply for the demand, prices will fall.
2:09 PM Sep 18th
 
Anonymous
Because he just stated the bare facts. Also left the door open, meaning their are still variables out there that could take the top end of what appears to be a good corn crop. Test weights, frosts, and fertilizer. Its not in the bin yet attitude. My corn isnt even fully dented and my usual frost date is a week away. It would be nice to have a year with normal planting dates again.....
9:29 PM Sep 14th
 
 
 
 
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