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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.

A Change in the Weather

Oct 07, 2011

 

 

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Marketwatch

October 7, 2011

A Change in the Weather 

We’re now officially in Autumn, and in the 4th calendar quarter, and in the new federal fiscal year for the United States. On top of the calendar changes, the US weather pattern changed. Persistent rains in the ECB finally ended (we had 7" on our family farm in NE Ohio during September), and at least for the weekend rainfall chances looked the best in months for the Plains and the winter wheat growing areas. Ill winds were still blowing out of Europe and out of Washington, but for this week at least things seemed a little calmer. 

Corn was up this week, with some shorts buying back positions as we began the 4th quarter and looked ahead to the October 12 crop reports. Weekly export sales for the last week of September were the largest in 6 months at 50.8 million bushels, showing that low prices do in fact still attract buyers of the cash commodity. Feed users were also sounding more positive this week, with the hog crush margins going positive by $10-15 per head out into  next summer and a few of the cattle crush spreads also offering the opportunity to hedge cattle at a profit. These changes mean more corn will be fed in 2011/12 than might have been the case without the price break. Weekly ethanol production also recovered modestly from the previous week as plants came back on line following maintenance and the switchover to winter gasoline formulations. Bears are still focused on outside market risk, i.e. funds potentially liquidating more futures and ETF positions if the banking problems in Europe intensify again.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

09/16/11

09/23/11

09/30/11

10/07/11

Change

% Change

Dec

Corn

6.92

6.385

5.925

6.000

0.0750

1.27%

Dec

CBOT Wheat

6.8825

6.4075

6.0925

6.075

0.0175

0.29%

Dec

KCBT Wheat

7.84

7.3125

7.04

6.845

0.1950

2.77%

Dec

MGEX Wheat

8.5625

8.51

8.9225

9.195

0.2725

3.05%

Nov

Soybeans

13.555

12.58

11.79

11.5825

0.2075

1.76%

Oct

Soybean Meal

348.7

326

304.7

300.1

4.6000

1.51%

Oct

Soybean Oil

56.55

52.4

49.95

49.07

0.8800

1.76%

Oct

Live Cattle

118.5

116.825

122.15

121.975

0.1750

0.14%

Oct

Feeder Cattle

137.475

134.825

140.525

139.625

0.9000

0.64%

Oct

Lean Hogs

87.35

88.8

93.375

94.675

1.3000

1.39%

Oct

Cotton

109.08

99.99

98.71

101.48

2.7700

2.81%

Dec

Oats

3.455

3.315

3.28

3.21

0.0700

2.13%

Nov

Rice

17.89

16.485

15.95

15.625

0.3250

2.04%

 

Wheat futures were down .29% in Chicago and 2.77% in KC for the week. They were up 3.05% in Minneapolis. Minneapolis was the strongest as USDA confirmed smaller spring wheat acreage and production in the Small Grains report and is expected to confirm smaller acreage on the 12th because of FSA acreage adjustments being incorporated in this report.  Weekly export sales were less than stellar, and the "lead" over year ago on shipments is down to 8 million bushels. USDA does of course see smaller exports for this year than last year, so this is not a real surprise.

Soybeans were 1.76% lower for the week, pulled by a drop in crude oil. Weekly Export Sales were healthy at 742 TMT. Bloomberg’s survey of analysts showed an average guess of 3.102 billion bushels of production on a yield of 42.06 BPA in the October WASDE. Spec longs were seen getting less long in the CFTC Disaggregated Futures & Options Report as of Tuesday.

Cotton was up 2.81% for the week, supported by a rally in the equities market and a lower dollar. Weekly export sales data on Thursday were net positive, but smaller than the previous week. Speculative liquidation is the biggest concern, with most commodity related spec funds and ETF’s losing money in the 3rd calendar quarter. Spec longs were seen adding to their long position in the CFTC Disaggregated Futures & Options Report as of Tuesday.

Cattle futures were down 17 1/2 cents for the week after the October contract posted new record highs on the weekly continuation chart. Cash cattle prices were $1 to $2 higher than last week with the majority of the cash business completed by Wednesday at $121 to $122 in the live and $190 in the dressed. Cattle supplies are expected to be tight through next spring. Packers have to be price competitive with other meats so it’s a balancing act to maintain a profit margin but with the recent $1.65 drop in corn feedlot profits are looking to improve. Choice beef prices were up about $1.50 from Thursday to Thursday while Select prices were up about $0.80. The Choice/Select spread is seasonally wide but is at the widest point since December of 2007. As of Tuesday Managed Money had increased their net cattle long positions by 17,693 contracts from the previous week.

Lean Hog futures were up $1.30 for the week with the spot month closing at $94.675. The CME Lean Hog Index was at $92.79 trying to converge before expiring next Friday. The December contract is lagging the October by $5.27. The Carcass cutout didn’t show much change from Thursday to Thursday with the cutout at 97.91 Thursday. Cutout values remain at record highs. U.S. pork export demand has been significant with China business competing with shifting domestic demand in the U.S. and Canada. U.S. pork producers have an opportunity to lock in some profits with the hog corn ratio at much better values than in August. As of Tuesday Managed Money had added 12,361 net longs to their Lean Hog position from the previous Tuesday. 

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 

Market Watch: The main USDA report this week is on the 12th, with both Crop Production and the WASDE balance sheets being released at 7:30 am CDT. The export Inspections and Crop Progress reports will be out Tuesday due to the government holiday Monday. Later in the week offers Weekly Export Sales, NOPA crush, and monthly trade data. Be on the lookout for continued Euro woes as this will continue to be a theme.

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 individualized subscription and consulting services.

 

 Copyright 2011 Brugler Marketing & Management, LLC

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