Vertically Challenged
Jul 24, 2009
Market Watch Summary with Alan Brugler
July 24, 2009
Vertically Challenged
Corn futures were the story of the week, with a major rally of 19 cents on Thursday. However, the bulls didn’t accomplish what they needed, which was to see a higher weekly close. The net loss for the week was 6 cents as the Board gave back more than half of the rally on Friday. Bulls just didn’t have confidence that the gain would hold up over the weekend. The rally came on USDA’s announcement that it would re-survey producers in 7 states to ascertain whether the crops considered planted in June but not yet in the ground were actually planted (or if producers were forced to switch to soybeans or another crop). Some in the trade jumped to the conclusion that such a survey would show fewer corn acres, but historically some revisions have been only the hundreds of thousands of acres, not millions. Strong weekly export sales helped support prices for the week, while generally favorable pollination conditions weighed on the market by threatening higher average yields.
Soybeans managed to eke out a 1.1% gain for the week, despite the risk of USDA finding more acres in the special survey. Higher soybean meal futures were the main driver, helping to boost crush margins. Ongoing Chinese buying interest is also supportive to the beans. They have approximately 40 million bushels of old crop yet to ship, and about 125 million bushels of new crop already on the books. The numbers can add up fast when South America is pretty much sidelined after the beginning of the US harvest!
Wheat futures were mixed. CHI was up a penny for the week, but the higher protein wheat markets were lower as winter wheat harvest moved north and uncovered pockets of better wheat (and export interest for those classes remains lukewarm). The Egyptians went back to buying Russian wheat, apparently having made their point about expecting to receive the quality specified in the contract.
Cotton futures were down a steep 7.6 % for the week. Poor weekly export sales were part of the story, along with liquidation selling that also afflicted the other field crops at times during the week.
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:
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Market Watch
|
|
|
|
|
Weekly
|
Weekly
|
|
|
07/02/09
|
07/10/09
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07/17/09
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07/24/09
|
Change
|
% Change
|
|
September Corn
|
$3.46
|
$3.28
|
$3.22
|
$3.16
|
-0.06
|
-1.86%
|
|
September CBOT Wheat
|
$5.29
|
$5.19
|
$5.15
|
$5.16
|
0.01
|
0.29%
|
|
September KCBT Wheat
|
$5.64
|
$5.48
|
$5.67
|
$5.49
|
-0.18
|
-3.09%
|
|
September MGEX Wheat
|
$6.23
|
$6.03
|
$6.16
|
$5.92
|
-0.25
|
-4.02%
|
|
August Soybeans
|
$11.54
|
$10.45
|
$10.10
|
$10.21
|
0.12
|
1.14%
|
|
August Soy Meal
|
$382.20
|
$344.80
|
$317.50
|
$323.20
|
5.70
|
1.80%
|
|
August Soy Oil
|
$35.34
|
$32.73
|
$34.82
|
$33.89
|
-0.93
|
-2.67%
|
|
August Live Cattle
|
$84.88
|
$83.48
|
$86.38
|
$84.52
|
-1.86
|
-2.15%
|
|
August Feeder Cattle
|
$103.45
|
$102.93
|
$104.60
|
$102.55
|
-2.05
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-1.96%
|
|
August Lean Hogs
|
$61.15
|
$63.60
|
$64.67
|
$59.05
|
-5.62
|
-8.69%
|
|
October Cotton
|
$59.00
|
$60.39
|
$62.10
|
$57.39
|
-4.71
|
-7.58%
|
|
September Oats
|
$2.25
|
$2.12
|
$2.15
|
$1.95
|
-0.20
|
-9.41%
|
|
September Rice
|
$12.89
|
$13.02
|
$12.97
|
$13.40
|
0.43
|
3.32%
|
Cattle futures lost $1.86 for the week, or 2.15%. Packers were able to put a little money on the cutouts, while at the same time buying cash cattle at steady money or even a dollar lower in some cases. That helped the packers, but didn’t give the futures a reason to rally. There was also a fair amount of position squaring ahead of Friday night’s Cattle on Feed report and the semi-annual Inventory report. The COF report showed June placements only 91.6% of year ago, and July 1 On Feed at 94.73 of last year. The Inventory report showed another 1% decline in the size of the herd as we head into the next cattle cycle low. The calf crop was 98.6% of year ago, vs. trade estimates of 98.8%. That is not a substantial miss.
Hogs had a tough week, losing $5.62/hundred for the week. The surging pork carcass cutout prices fell apart at mid-week on weakness in loins and other cuts. Technical weakness was also a problem, with several indicators all pointing in the southerly direction at the beginning of the week. Packers like their work better now, as the downtime did improve wholesale prices and margins. Some Saturday kills are planned, and there is no known scheduled downtime for this week.
Market Watch: As we head into the end of July, month end profit taking and asset allocation adjustments come into play. The rise to new highs for the year in the stock market will cause some cash to be diverted, and shorts also have some big gains in corn, wheat, etc. that may need pruning. Monday night’s crop condition ratings are expected to be a little lower for corn and soybeans, since that is the seasonal tendency and there are a couple dry pockets out there. The trade will be very interested in the extent of any such decline. Any fall out from the July 24th options expirations and exercises will play out on Sunday night and Monday. Friday will be first notice day for August soybean complex deliveries.
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© 2009 Brugler Marketing & Management, LLC
