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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 Steamy

Jul 30, 2010
 

Market Watch with Alan Brugler
July 30, 2010
 
Still Steamy
 
Corn was down 24 cents one week and up 22 cents the next. We didn’t quite close where we were two weeks ago, but it felt like a pretty strong week. The net change was 5.79%, enough to gladden the heart of any spec fund manager staring at .25% yields on government debt as an alternative investment. Weekly export sales weren’t great, at less than a million metric tonnes. However, the story is world feed use, coupled with much above normal temps in the Corn Belt and considerable doubt about how that will impact the average U.S. corn yield. The feed use angle has to do with the Russian drought, which is impacting pastures and feed crops such as barley as well as it is the well publicized wheat.
 
Wheat, once again posted the largest percentage gains overall in our table. Continued weather problems in the FSU and Europe are still fueling the rally in wheat. Now that the spec funds have painfully bought back all of their short positions in wheat, some have “got religion” and are aggressively buying the market in an attempt to make back the money they lost. World buyers are also having flashbacks to 2007 and 2008, when hoarding behaviors by net exporter countries made food staples like wheat and rice very expensive and hard to buy. On paper the world stocks of wheat are still much above 2007 levels, but once burned is twice shy as they used to say. The French wheat futures contracts for November posted new life of contract highs this week. The EU is authorizing exports, but at a slower pace than last year.
 
Soybeans weren’t about to be left out of the rally in the other grains, and in fact they really can’t be left out of a feed grain rally for very long. Soybean meal is a substitute, and has often followed the corn and wheat. With crush plants taking downtime in August and Census meal stocks down sharply from the spring peak, supplies have snugged up. There were no deliveries vs. August futures on first notice day, and August meal gained $11/ton for the week. Soy oil was also up almost 2%. USDA weekly export sales for soybeans were very strong at 1.48 MMT.
 

 

Cotton was up a stout 2.54% for the week, following all of the other field crops higher. Crop condition ratings are still quite high, but the big crop story is already built into the price. Investment demand for commodities such as cotton is a wild card. Cert stocks have dwindled to around 50 thousand bales, the lowest level since 2004. Open in interest in the October contract is quite small because shorts don’t want to be there when they can’t get receipts to deliver
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
07/09/10
07/16/10
07/23/10
07/30/10
Change
% Change
Sep
Corn
$3.84
$3.95
$3.71
$3.93
0.22
5.79%
Sep
CBOT Wheat
$5.38
$5.87
$5.96
$6.62
0.65
10.94%
Sep
KCBT Wheat
$5.53
$5.99
$6.15
$6.75
0.60
9.67%
Sep
MGEX Wheat
$5.63
$6.12
$6.29
$6.88
0.59
9.43%
Aug
Soybeans
$9.93
$10.20
$10.17
$10.53
0.36
3.49%
Aug
Soybean Meal
$300.90
$307.80
$299.90
$310.90
11.00
3.67%
Aug
Soybean Oil
$37.50
$38.31
$39.07
$39.83
0.76
1.95%
Aug
Live Cattle
$90.20
$92.27
$93.42
$92.65
0.77
0.82%
Aug
Feeder Cattle
$113.25
$113.10
$115.17
$113.72
1.45
1.26%
Aug
Lean Hogs
$80.03
$81.70
$83.23
$85.82
2.60
3.12%
Oct
Cotton
$78.15
$79.96
$80.32
$82.36
2.04
2.54%
Sep
Oats
$2.65
$2.68
$2.55
$2.71
0.16
6.38%
Sep
Rice
$9.99
$9.86
$10.28
$10.55
0.28
2.68%
 
Cattle futures were down 77 cents for the week. Beef demand turned soft, with only light inquiries and equally light packer offerings. The choice cutouts were down 1.2% for the week. Cash cattle traded $2 lower than the previous week, both out of concern for the product demand and because hedgers had a very favorable basis for lifting hedges with a net gain. The Cattle on Feed and Cattle Inventory reports had been fresh news at the beginning of the week, but by Friday they were old news and had had little impact on the market other than failing to provide any new bullishness.
 
Hogs were up smartly for the week, gaining 3.1%. Unlike the beef, the pork primal cuts were stronger, including a jump of just under $10 in the pork bellies on Wednesday following bullish weekly out movement numbers from the warehouses reported on Tuesday night. Hog numbers will be on the light side for another month, based on typical production and marketing patterns. BLT demand is the star at the moment, but will give way to ham interest by October. On a Thursday/Thursday basis, the pork cutout was up 4.5%. Pork bellies were up 11.1%.
 
Market Watch: The calendar turns to August, the month when soybean yields are “made” or “not made”. The focus will remain on crop weather and ratings, lacking other inputs until USDA releases their first survey based production forecast for the year on August 12. August soybeans and products are in delivery, with little expected for either meal or beans. This week’s USDA reports are the usual Export Inspections on Monday morning, Crop Progress on Monday afternoon, and weekly Export Sales on Thursday morning. Friday will mark the last trading day for August cattle options.
 
Looking for professional help with your marketing decisions? Consider subscribing to our daily Ag Marketing Professional service or Special Research Reports. Western Corn Belt and Plains readers are also invited to attend our Summer Seminar in Omaha, NE Aug 2-3. Call our office for details at 402-697-3623, or visit bruglermarketing.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
Did somebody finally sit down and figure out 3 dollar corn and 4 dollar wheat doesnt cut it in todays world? Grew corn under stress conditions last year as far as moisture goes and it yielded 17 bushel less than the year before when ample moisture was received. Food for thought.
12:12 PM Jul 31st
 
 
 
 
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