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Market Watch

RSS By: Alan Brugler,

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

Big Downs, Small Ups

May 04, 2012


Market Watch with Alan Brugler

May 4, 2012

Big Downs, Small Ups


Churchill Downs may have the Kentucky Derby this week, but those mint julep drinking folks have no corner on down markets. The ag markets had some big down moves in things like wheat and hogs and cotton, but the commodities in the plus column like corn and cattle were up less than 2.5% while the losers were down 6% or more. The US dollar didn’t help the commodities priced in dollars, gaining 1% for the week in the DX futures.

Corn futures gained 9 cents for the week after being up 6.6% the previous week. This is a function of the short squeeze in the May contract. May was up 11 ½ cents on Friday, while December was down 5 ¼. The CFTC report showed the large managed money specs increased their net long in corn for the reporting week ending May 1. USDA reported weekly net export sales of 1.33 MMT for 2011/12 marketing year and net sales of 2.14 MMT for the 2012/13 marketing year. These are very large numbers, but of course the next question was "Ya got any more money?" A Memphis based analysis firm increased projected 2012 corn acreage to 96.1 million acres vs. the USDA number of 95.9 million.

Soybeans were down 22 cents for the week after gaining 50 cents the week before. Profit taking was a big factor after prices topped the $15 mark for the first time since 2008. Rains were delaying soybean planting in the Midwest, but it is still fairly early for beans. Weekly export sales were very large at 598,000 MT for 2011/12 delivery and 1,134,000 MT for 2012/13 delivery. Additional sales were reported under the daily reporting system and will show up in next week’s report. Soybean meal was up $4.70/ton or 1.1%. Reduced fish meal supplies are supportive, and DDG prices in some areas have soared to 100% of the value of the underlying corn. That said, some hog producers are said to be stepping up DDG feeding because it is cheaper than $400+ meal.

The three wheat markets were sharply lower, down 4.4 to 6%, with CHI the weakest. The Kansas and Oklahoma wheat tours showed record yield potential for those two states, with Oklahoma production more than double last year and the estimated Kansas yield at or above the 1998 record of 49 bushels per acre. Wheat harvest is still several weeks away, but barring weather losses the US appears to have more HRW than previously expected. SRW is a different story, with agronomists reporting a number of fields with losses from mosaic and from freeze damage. That wasn’t supportive this week because it didn’t knock down the crop ratings. The Brugler500 index was UNCH at 365.

Nearby cotton futures dropped 3.54% for the week. USDA again reported net negative old crop export sales, with cancellations exceeding new sales. The weekly export sales report from USDA showed a reduction of 25,200 RB for 2011/12 with China decreasing by 49,100 RB not offset by increases in sales to other destinations. Net sales of 79,200 RB for 2012/13 were primarily for Malaysia, Mexico and China. Net Pima sales were 11,000 RB. Cotton export shipments were 320,600 RB, up 14% from the four week average. Total commitments are 105% of the USDA forecast for the year.
















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Cattle futures shook off the effects of the BSE sell off and rallied $2.53 for the week, a 2.24% gain. Beef production was estimated to be up 1.9% for the week from the prior week, but still down 2.8% from the same week in 2011. YTD production is off 3.3% on 5.1% fewer cattle slaughtered. Wholesale prices held their ground, with net gains of two cents and six cents per hundred pounds for choice and select carcasses respectively. Packers made up some ground on a continued rebound in LFTB and ground beef.

Lean Hog futures lost a lot of ground, with May down 6.67% for the week as the futures premium to cash totally evaporated and futures anticipated even further weakness in cash before the contract expires on the 14th. Futures action was a bit of a death spiral, with longs wanting out but nobody willing to step in with little time remaining in the contract. Pork production for the week was up 4.9% vs. the same week a year ago, a problem with questionable export demand to siphon off the surplus. YTD pork production is up 1.6%. While you couldn’t see it in the cash hog market, the cutout value quietly increased $1.97/hundred.

Market Watch: The main USDA reports will be on Thursday, with monthly WASDE and Crop Production estimates. This will be the first official set of world and US supply/demand numbers for the 2012/13 marketing year, replacing the armchair estimates released in February at the Outlook Forum. We’ll also have the regular USDA weekly export inspections and Crop Progress reports on Monday evening and the Export Sales on Thursday morning. May cotton futures expire on the 8th.


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. Copyright 2012 Brugler Marketing & Management, LLC. Visit our website at or call us at 402-289-2330 for further information.  

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