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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 Dollar Slide Helps A Lot

Jan 27, 2012

Brugler

Market Watch with Alan Brugler

January 27, 2012

A Dollar Slide Helps A Lot

 

The US dollar index has been in retreat for 10 trading sessions, a full two weeks.  It is down 3.4% since January 13. That drop has helped boost the prices of commodities in dollar terms. The drop this week was 1.7%. All of the grains we track were up more than that, with fundamental factors adding to the gains. The only commodity that proved immune to the dollar’s siren call was cotton. Prices there were down 2.6% for the week. The dollar drop was partially due to an improved sovereign debt situation in Europe, with several countries seeing much lower yields required for debt auctions than were seen in December. The Fed accelerated the decline by stating their intent to hold interest rates low into 2014, with nary a whiff of inflation in the air. That got the carry trade involved, selling USD and buy Aussie dollars for one example.

Corn futures were up 30 cents for the wee, or 4.95%. The cash market was consistent in saying that futures had run to far to the downside, with basis firming to try to generate cash sales by producers. Spreads were also firm. Export sales were nothing to write home about, but shipments to date are just 4 million bushels or so behind last year. That’s much stronger than USDA’s forecast for the year and makes you wonder if the US farmer reluctance to feed wheat in place of corn is more widespread around the globe than USDA gives it credit for. China continues to buy and ship US corn, mostly via switches from "unknown destinations" sales.

Wheat was higher at all three exchanges. For the second week in a row, it was Chicago’s turn to gain ground.  Smaller Argentine production estimates, concern about Russian winterkill and fund short covering because of the weaker dollar were all part of the rally. Ukraine also cut projected 2012 production to 18 MMT due to poor winter wheat stands and winterkill. In the US, Chicago futures rallied back to a premium to corn. USDA weekly export sales through the 19th were 618,000 MT of combined old and new crop. That was right in the middle of trade estimates, and supportive given the big fund short position in wheat.

Soybeans were up 2.7% for the week after a 2.5% gain the previous week. Weekly export sales were disappointing, and widespread rains in South America raising final yield ideas. Weekly export sales for last week were bearish at only 466,300 MT of old crop and 126,000 MT for 2012/13. Trade guesses had been in the 700-850,000 MT range. Nearby futures did manage to shrug off those bearish numbers and add another nickel by Friday night.

Cotton dropped 2.64% for the week. USDA reported net weekly upland export sales for last week of ‘zero’, although there were decent pima bookings. Prices basically peaked on Monday and spent the rest of the week selling off despite the weaker dollar. Trading volume was lighter than normal, which was blamed on the Chinese holiday week and its limited potential for export sales to be made. The Cotlook A Index was put at 100.95 on Friday, a premium of nearly 5 cents per pound to the spot futures.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

01/06/12

01/13/12

01/20/12

01/27/12

Change

% Change

Mar

Corn

$6.44

$6.00

$6.12

$6.42

0.3025

4.95%

Mar

CBOT Wheat

$6.25

$6.02

$6.11

$6.47

0.3675

6.02%

Mar

KCBT Wheat

$6.80

$6.70

$6.67

$7.00

0.3300

4.95%

Mar

MGEX Wheat

$8.01

$8.01

$7.99

$8.26

0.2750

3.44%

Mar

Soybeans

$11.97

$11.58

$11.87

$12.19

0.3200

2.70%

Mar

Soybean Meal

$312.40

$301.50

$311.90

$322.20

10.3000

3.30%

Mar

Soybean Oil

$51.12

$50.29

$50.43

$51.59

1.1600

2.30%

Feb

Live Cattle

$120.40

$122.77

$124.55

$124.70

0.1500

0.12%

Jan

Feeder Cattle

$147.30

$150.58

$151.63

$154.60

2.9750

1.96%

Feb

Lean Hogs

$83.90

$85.60

$85.33

$86.68

1.3500

1.58%

Mar

Cotton

$95.86

$95.47

$98.60

$96.00

2.6000

2.64%

Mar

Oats

$2.87

$2.83

$2.95

$2.99

0.0425

1.44%

Mar

Rice

$14.68

$14.44

$14.54

$14.64

0.1000

0.69%

 Cattle futures marked time, waiting for the monthly Cattle Inventory report on Friday night, and also for the cash cattle market to show some direction. Bids and asks were still $5-6 apart on Thursday night. Wholesale prices were weaker on Friday, but up 1.2% for the week in the choice and up 2.1% for select. Beef production YTD is down 4.8% from last year. The Cattle Inventory report on Friday showed a slightly smaller cattle herd and calf crop than expected. Beef cows were down 3.3%, which was a little bigger cut than the average guess. However, there were far more heifers being held for replacements than expected, at 101.4%. That could be a bit bearish for back month feeder cattle.

Lean Hog futures were up 1.58% this past week.  Estimated pork production for the week was down 2.1% from the prior week, and 0.2% smaller than the same week in 2011. YTD production is still about 6 million pounds larger. Average dressed weight is estimated at 209 pounds, vs. the 208 actual figure for last year. The pork cutout was down 2.78% on a Friday/Friday basis after being up 2.1% the previous week. Thus, packers are presumed to have a little less money to play with.

Market Watch: The Chinese markets will re-open this week after a week long holiday. Livestock traders will start the week reacting to the USDA Cattle Inventory report, and on Friday the February cattle futures options will expire. Grain trade will be focused still on South American weather and the export pace for old crop. USDA will issue the usual Export Inspections on Monday and Export Sales report on Thursday morning. Wednesday also marks the first day of the month long pricing period for crop revenue insurance for the 2012 crop.

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 2012 Brugler Marketing & Management, LLC

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