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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.

Still Moving But In Both Directions

Apr 10, 2009

 

           

 

Market Watch with Alan Brugler

April 10, 2009

 

Still Moving, But in Both Directions

 

Soybeans continued their march higher, as did the soybean meal and oil. Tightening world stocks estimates are a big part of this, with USDA reducing the Argentine crop estimate to 39 MMT and leaving Brazil UNCH at 57 MMT. The cut in projected US ending stocks to 165 million bushels on Thursday morning was also supportive to the beans. Forecasts for China were UNCH for beans, meal and oil. Argentine producers appear to be focused on harvest and some negotiations, but not blocking traffic. World buyers are still leery of disruptions and long waits at port, giving the US and Brazil more business than they might otherwise see.

 

Wheat futures prices closed lower at all three exchanges this past week, with Chicago down more than 8% from the previous week. It was a classic case of “buy the rumor, sell the fact”. The trade had gone home the previous Friday looking for freeze damage in HRW and SRW growing areas. Temps definitely got low enough to do some damage, but most of the estimates were in the 100 million bushel range. With a carryover of 696 million bushels from the previous year, the market isn’t nearly as excitable as it was after the 2007 April freeze. There are other variables, of course, such as a much less mature SRW crop than in 2007, with less damage potential. USDA’s first crop condition ratings of the year showed HRW already worse than last year before the freeze hit, but SRW in the best shape since 2006 for that date. Ratings are expected to be lower this week.

 

Corn futures were down 3.7% for the week. Prices were technically overbought heading into the week, and the weakness in wheat also tugged at corn since they compete to a degree in feed rations. USDA dropped the projected ending stocks to 1.7 billion bushels, but this was well anticipated by the trade because the March 31 Grain Stocks report showed smaller than expected supplies on hand. USDA bumped up feed & residual use, but cut 10 million bushels out of industrial use.

 

Cattle and Feeder Cattle saw a nice boost for the week, as cash cattle worked their way higher due to the combined effects of seasonally tight numbers and a modest improvement in the wholesale prices for both choice and select beef. We’re still seeing historically high carcass weights, which mean we’re getting more beef than you’d expect given the level of slaughter.

 

Lean Hog futures had another tough week, because the cash hog market wasn’t rallying to meet up with the soon to expire April futures. In a cash settled contract, convergence is expected, and futures had to drop toward the cash. There was some improvement in the pork cutout values at mid-week to help support cash hogs, and packers were planning some Saturday slaughter activity. 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Weekly

Weekly

 

03/20/09

03/27/09

04/03/09

04/09/09

Change

% Change

May Corn

$3.97

$3.87

$4.05

$3.90

0.14

-3.68%

May CBOT Wheat

$5.50

$5.07

$5.64

$5.22

0.42

-8.18%

May KCBT Wheat

$6.03

$5.50

$6.08

$5.71

0.37

-6.73%

May MGEX Wheat

$6.36

$6.08

$6.72

$6.45

0.27

-4.44%

May Soybeans

$9.41

$9.17

$9.96

$10.07

0.12

1.25%

May Soy Meal

$300.50

$283.80

$306.00

$311.20

5.20

1.83%

May Soy Oil

$32.25

$32.42

$35.32

$35.42

0.10

0.31%

April Live Cattle

$85.20

$84.32

$86.05

$87.52

1.47

1.74%

April Feeder Cattle

$93.78

$93.12

$95.40

$98.15

2.75

2.95%

April Lean Hogs

$61.75

$60.47

$60.27

$58.00

2.27

-3.75%

May Cotton

$44.08

$43.34

$47.60

$48.41

0.81

1.87%

May Oats

$2.00

$1.96

$1.99

$1.96

0.03

-1.53%

May Rice

$12.83

$12.38

$12.78

$13.40

0.62

4.97%

 

 

Cotton futures were higher for the second week in a row. Cold and wet weather in the Southeast was slowing early planting, while other areas were thought vulnerable to the temptation to plant a few extra soybeans because of the rally in that commodity and favorable planting conditions for beans. Export business has picked up a little, and USDA raised projected shipments for the year by 500,000 bales on Thursday. The ending stocks were trimmed to a more manageable 6.7 million bales, which served to support the rally on Thursday.

 

Market Watch:  Traders will return from the Easter break with a renewed focus on planting weather, and an ongoing interest in the behavior of the US dollar. Most commodities have been trading inversely to the Dollar Index. USDA’s Monday night crop progress reports will be scrutinized for signs of delay, but it is still early unless you are in southern TX, Louisiana, etc.  In the Midwest, fertilizer application is the main issue, since not as much was put on last fall as would normally be the case. Report wise, USDA will issue a Cattle on Feed report on Friday the 17th, along with Milk Production. Prior to that we’ll get NOPA Soybean Crush, expected on Tuesday morning. April hog futures will expire on Wednesday the 15th.

 

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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