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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.

Take a Weak Dollar, Add Water

May 22, 2009

 

           

 

Market Watch Summary with Alan Brugler

May 22, 2009

 

Take a Weak Dollar, Add Water

 

All commodities in our survey, except for Lean Hogs, were higher this past week. That should suggest to you that there was an underlying variable that affects a wide spectrum of commodity prices. That variable was the US dollar index. It dropped all 5 days of the week, losing about 3.6% of its value for the week. The CRB Index was up 3% as it takes more dollars to buy the same amount of fundamental value if the dollar is weaker.

 

Corn futures got the bull talk on wet weather and planting delays, but basically could do no better than gain what they were given by the weaker dollar. They were up 3.1%. Planting clearly is behind the average pace, and there is potential for a yield drag from late planting. However, last year showed that we can make up for the late planting with favorable summer weather. Export sales were on the low end of trade expectations, as poor livestock profitability isn’t limited to the US. Ethanol use was a bright spot, with plant margins improving and several bankrupt plants being bought by firms who intend to get them back on line quickly and resume grinding corn.

 

The three wheat markets were all higher. Minneapolis lost its bull leader status as weather turned warmer and drier and allowed some late planting to progress. KC was the weakest of the three markets as harvest is now underway in Texas and there has been some test cutting as far north as Oklahoma. While the wheat crop in those two states will be much smaller than last year, producer sales to elevators can still generate hedge pressure. CHI futures were up the most, due to speculative buying concentrated there, and also concerns about fungus and disease risks tied to the wet weather in SRW country.

 

Soybeans were up another 36 cents per bushel, or 3.14% for the week. The advance has been orderly, and persistent, price rationing. We can project 2009 ending stocks as low as 75 million bushels if use doesn’t slow down. Since that is below pipeline stocks levels and in theory impossible, the market’s job is to slow down use and make stocks last. That can be done by dissuading further export purchases, delaying existing contracts into the new crop time slot, encouraging soy processors to take more down time due to poor margins, or by shrinking residual use. Meal futures were trying to encourage crushers to continue, rising 4.69% for the week. Soy oil prices lagged behind, however, up only 0.19%. That added only 2 cents to soybean value. Export Sales were strong for beans, but smaller than expected for bean oil.

 

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

 

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Weekly

Weekly

 

05/01/09

05/08/09

05/15/09

05/22/09

Change

% Change

July Corn

$4.14

$4.21

$4.17

$4.30

0.13

3.12%

July CBOT Wheat

$5.70

$5.91

$5.78

$6.13

0.35

6.06%

July KCBT Wheat

$6.15

$6.33

$6.31

$6.61

0.30

4.76%

July MGEX Wheat

$6.85

$7.00

$7.05

$7.45

0.40

5.64%

July Soybeans

$10.91

$11.12

$11.31

$11.66

0.36

3.14%

July Soy Meal

$342.00

$341.50

$358.20

$375.00

16.80

4.69%

July Soy Oil

$37.75

$39.61

$37.90

$38.10

0.20

0.53%

June Live Cattle

$82.10

$82.97

$82.37

$82.53

0.16

0.19%

Aug Feeder Cattle

$98.45

$100.70

$101.65

$101.93

0.27

0.27%

June Lean Hogs

$58.48

$61.12

$66.52

$65.98

0.55

-0.82%

July Cotton

$57.20

$59.85

$56.30

$57.11

0.81

1.44%

July Oats

$2.07

$2.26

$2.28

$2.50

0.22

9.43%

July Rice

$13.24

$12.65

$11.94

$12.06

0.12

1.01%

 

 

Cotton futures advanced 1.4% for the week, getting a big boost from the weakness in the dollar and the rising value of field crops with which it competes for acreage.  The Acreage War may not be as obvious as it was last year, but there are still commodities that need acreage, and commodities that don’t want to get them up. China indicated that it will start offering price support cotton bought earlier in the year at prices roughly 2% above what the government paid for the cotton. This will represent an increase in domestic supply, but will only cut into imports if world prices plus freight are high enough to match or exceed domestic prices.

 

Live Cattle were up a whole 16 cents per hundred pounds for the week. For the most part, they were marking time and awaiting fresh info from the Cattle on Feed and Cold Storage reports to be released by USDA after the close of trading on Friday night. The COF report showed May 1 On feed numbers just slightly above the average trade estimate at 97.19% of year ago. Placements were a little lighter than the average guess at 104.17%, but April marketings were also smaller than anticipated at 93.1% when the average analyst estimate was over 94% of last year.

 

Hog futures were the sole loser for the week, down .82%. Pork cutout values declined after got past the main wholesale buying period for Memorial Day barbeques. They firmed up a little later in the week as the dollar dropped and export potential improved, but cash hogs were under pressure due to the drop in carcass value. Futures had been carrying a big premium to cash, and dropped to reflect the lack of progress in advancing cash hog prices.

 

Market Watch:  The markets are closed on Monday for the Memorial Day holiday in the US. There is also a bank holiday in the UK. Globex trading will resume on Monday evening.  USDA’s weekly Crop Progress report will be delayed until Tuesday afternoon due to the holiday. Tuesday is also the last trading day for May Pork Bellies. Thursday morning will feature Census Crush and Cotton Consumption reports along with macro economic reports like New Home Sales and Jobless Claims. On Friday, USDA will release the weekly Export Sales report for the period ending May 21. Since this will also be the end of the month, we can expect the usual asset allocation position adjustments by the managed money crowd.

 

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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