Sep 23, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin

Market Watch

RSS By: Alan Brugler,

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

Waiting for the End of the Train

Jun 26, 2009


Market Watch Summary with Alan Brugler

June 26, 2009


Waiting for the End of the Train


A common phrase in commodity trading is that you “Don’t step in front of a freight train”. The soybean market has been such a train, with old crop July soybeans rallying $4.46 cents per bushel from their March low to the June 11 high. Commercials have been short hedgers because they had to be, but the large speculator position has been net long and getting longer for most of the spring. That was tied to tight old crop ending stocks forecasts (USDA is at 110 million bushels) and the need to slow down export sales and domestic crush use. That work appears to have been accomplished, with China  routinely cancelling old crop purchases and whittling down their outstanding book of US old crop business to about the same level it was last year at this time. Crush may not have been as effectively choked off, due to strong soy meal export sales that have supported prices despite huge domestic meal inventories that suggest demand isn’t really all that good. Given poor livestock profitability that is probably a valid assumption. Now, the would-be bears are waiting for the end of the train (they don’t use cabooses anymore). Tuesday’s USDA reports will either show the last cars (i.e. larger than expected June 1 soybean stocks or perhaps projected 2009 acreage in excess of 79 million acres) or reveal that there are a few cattle cars (bulls, get it?) left in the train because of tight stocks and questions about 2009 production.


Corn prices were under pressure all week, with a little bounce on Friday. The net change for the week was -15 cents. Ethanol plant margins are still positive, but were under pressure for much of the week. Export sales were within the range of trade estimates. Crop condition ratings probably take as much blame as anything for the sell off, as they are still very good for late June and if they happen to improve in July a 2004 type yield is still possible. There are questions about these yield estimates because of various weather problems around the country, but we need to remember that actual yield potential in the US is probably close to 180 bpa if everything went right. It never does, and that’s how we end up with trendline yields of 160 bushels or less. The average trade guess for US acreage on Tuesday is 78.3 million acres, with June 1 corn stocks expected to be just a whisker under 4.2 billion bushels.


Wheat prices fell another 3.78 – 4.54% for the week. When we were in an uptrend, elevator hedge selling just provided liquidity for specs to buy into. In a downtrend like the one since June 1, the funds don’t want to buy, but the elevators still have to sell. That creates the historical seasonal tendency to drop into a harvest low, and this year is developing a classic pattern. The Congressional report on wheat speculation and the index funds was perceived as long term bearish if it forces the funds to reduce positions, but that is a long way from happening.


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


Market Watch













% Change

July Corn







July CBOT Wheat







July KCBT Wheat







July MGEX Wheat







July Soybeans







July Soy Meal







July Soy Oil







June Live Cattle







Aug Feeder Cattle







July Lean Hogs







July Cotton







July Oats







July Rice








July cotton futures ended the week higher. While stock market action wasn’t stellar, some of the economic reports contained revisions that were a little more positive for economic activity and potential consumer demand down the road. India’s monsoon has also been late, potentially hurting their crop. The Census consumption report on Thursday showed a modest improvement in US mill use during April, but the annualized rate is still more than a million bales below last year. The most positive indicator is the export market, where commitments are running high enough to equal or exceed USDA’s projection for the year.


The Cattle complex was up for the week. June live cattle futures expire on the 30th, and need to remain close to the cash market. That prevented them from selling off much, and some “get me out” activity boosted the board sporadically throughout the week. Wholesale prices continue to struggle, as beef output is large enough (and demand soft enough) that packers have been unable to ask higher prices and make them stick. For the week, the choice cutout lost 0.29 cents and select cutout lost 0.53 cents.  Cash fed cattle trade was steady compared to the previous week at $82, while cash feeders this week traded steady to $3 higher.  Good demand for feeder cattle as reflected by last weeks USDA report (which indicated low feedlot populations) lent supportive tone.  Good conditions of grass pastures also were supportive to feeder futures this week.


Hogs were the worst performing commodity on the list this week, dropping more than 7%. Wholesale pork prices dropped and stayed down, pressuring cash hog values, where the afternoon average wholesale pork cutout value was $54.33. This was a 6-year low, since April 21, 2003. Technically, futures remained above the long term trendline support on the weekly and monthly charts, but July was dropping toward that support and toward the cash hog values indicated by the cutout. Going home on Friday, the lean pork cutout was at $55.28 per cwt.  After trading the USDA released its quarterly Hogs and Pigs report.  The All Hogs number on June 1 was 98% of year ago, right at the trade average guess. The breeding herd was 97.3% of year ago, a little lighter than the 97.6% average guess. Market hogs were at 98.1% of last year, again very close to the 98% guess. Pigs per litter offset the light Mar-May farrowings to a degree, at 102.5% of year ago.


Market Watch:  Grain traders will start this week dealing with any unexpected positions inherited because of July options expiration on Friday. On Monday night they’ll glance at the Crop Progress and Condition reports for insight into remaining soybean planting and for ideas on whether yield prospects are improving or backing off a little. That will be less of a factor than usual, due to the big show for the week. That would be the USDA Grain Stocks and Planted Acreage reports to be issued on Tuesday morning. Tuesday will also be first notice day for July futures deliveries. Weekly export sales will get a little attention on Thursday morning, and then everyone will start heading out for the holiday weekend. The US futures exchanges are closed on Friday for the July 4th holiday weekend.


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 @


© 2009 Brugler Marketing & Management, LLC

Log In or Sign Up to comment

COMMENTS (2 Comments)

Im sure we will have more soybean acres around 78 mil. Corn will be up a bit more than expected, perfect bearish report. But dont worry these numbers were already factored in by the trade, should be neutral. Just an opinion.
9:15 PM Jun 28th
Thanks for a little bit of bullish comment: the cattle car comment. So I cant give you a bad time about not being bullish again.
9:09 PM Jun 26th
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by|Site Map|Privacy Policy|Terms & Conditions