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RSS By: Alan Brugler, AgWeb.com

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

Big Ups and Big Downs

Aug 20, 2010

 

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Market Watch with Alan Brugler
August 20, 2010
 
Big Ups and Big Downs
 
There may be more traders on vacation in August, but it certainly hasn’t meant a quiet month in terms of price movement. Cattle futures were up 5.6% this week alone, with cash cattle trading $5 higher than they did just a week ago. Corn was up a more modest 2.3%, but is up 28 cents/bushel since July 30. On the other side of the ledger, soybean oil plunged 7.1% for the week, and Chicago wheat was down 3.4%.
 
Corn took center stage this week, advancing another 10 cents per bushel. The Russian drought situation hasn’t gone away, but the ripple effects are starting to show up in demand for corn, soybean meal and coarse grains. Various crop tours are also crisscrossing the major US production areas trying to get a handle on actual yields. The Pro Farmer group took the results of the Midwest Crop Tour and projected a U.S. crop of 13.29 billion bushels, with average yield of 164.1 bpa. That is below the USDA’s August forecast. Export demand continues to be outstanding, with weekly net corn sales setting a 15 year high.
 
Wheat was lower on all three futures exchanges, despite a big up day on Thursday. Chicago lost 24 cents per bushel for the week. KC and MPLS were not down as much. SRW stocks are tight due to the small 2010 crop, and that is leading to a higher proportion of HRW and spring wheat sales in the export mix. Having Russia and Ukraine out of the game is also driving more business to the U.S., with sales topping 1.4 MMT last week for the first time in nearly 3 years. Stats Canada .......
 
Soybeans dropped 34 cents per bushel for the week despite weekly export sales bookings of more than 2.2 million metric tonnes. Again, it was a “how ya gonna top that?” reaction. A stronger US dollar weighed on the market, as did indications that China would sell old crop oilseed and veg oil reserve inventory on the open market and then replace it with new crop. This could potentially result in a dip in short term import needs, but there was little evidence of that in the sales bookings. The Pro Farmer group projected a record U.S. soybean crop of 3.5 billion bushels on a record average yield of 44.9 bushels per acre. This was following the Midwest Crop Tour’s extensive pod counting exercise on Monday through Thursday.
 
Cotton futures were down a modest 0.39% for the week. A stronger US dollar index was thought likely to impair export sales going forward, although that clearly wasn’t the case for the prior week. USDA reported the all cotton bookings were 461,900 RB, when trade guesses had been in the 300,000 RB range. Forward sales for new crop are already in excess of 6.183 million bales vs. USDA’s projection for the full year of 15 million. We’re not even three weeks into the year!
 
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
07/30/10
08/06/10
08/13/10
08/20/10
Change
% Change
Sep
Corn
$3.93
$4.05
$4.12
$4.21
0.10
2.31%
Sep
CBOT Wheat
$6.62
$7.26
$7.03
$6.79
0.24
3.35%
Sep
KCBT Wheat
$6.75
$7.20
$7.24
$7.06
0.18
2.49%
Sep
MGEX Wheat
$6.88
$7.23
$7.15
$7.00
0.15
2.06%
Sep
Soybeans
$10.12
$10.39
$10.44
$10.09
0.34
3.28%
Sep
Soybean Meal
$297.90
$302.60
$302.70
$300.80
1.90
0.63%
Sep
Soybean Oil
$39.96
$41.53
$42.52
$39.52
3.00
7.06%
Aug
Live Cattle
$92.65
$92.77
$94.32
$99.60
5.28
5.60%
Aug
Feeder Cattle
$113.72
$112.35
$111.70
$114.60
2.90
2.60%
Oct
Lean Hogs
$79.03
$74.08
$74.65
$77.20
2.55
3.42%
Oct
Cotton
$82.36
$84.40
$87.49
$87.15
0.34
0.39%
Sep
Oats
$2.71
$2.80
$2.74
$2.72
0.01
0.55%
Sep
Rice
$10.55
$10.61
$11.00
$10.91
0.09
0.82%

 
 
Hogs were up 3.4% for the week. Product values have not yet begun their typical fall swoon, and in fact were aggressively higher. Cash hogs followed. USDA’s Cold Storage report on Friday afternoon showed frozen pork supplies had dropped another 5% from the previous month. They are now 28% smaller than last year. Maybe that’s why the pork cutout value was up 5.1% for the week (Thur-Thur)? Pork loins were up 10.6%. Pork bellies in Cold Storage as of July 31 were down 64% from last year.
 
Cattle futures were up a stout 5.6% for the week, our bull leaders for the week. The big story was the two week rally in the wholesale market, fueled by both export sales and Labor Day pipeline filling by retailers. The choice boxed beef quote was up $5.14/cwt for the week on a Thursday/Thursday basis. On Friday afternoon, USDA released a Cattle on Feed report. The report was slightly negative relative to trade expectations, showing fewer than expected marketings during July and more placements in the lots.
 

 
USDA Actual
Avg. Trade Guess
Range of Estimates
On Feed Aug 1
102.45
102.0
101.3-102.7
July Placements
94.15
92.6
89.9-96.6
July Marketings
98.35
99.7
96.9-100.5

 
 
 
 
Market Watch: Livestock traders will start the week reacting to the conflicting signals from the Cattle on Feed and Cold Storage reports that were issued on Friday afternoon. August feeder cattle futures are due to expire on Thursday. Grain traders will remain focused on the weekly crop progress and condition reports, expecting USDA to begin showing some mature corn in the 18 major reporting states. Other than crop progress and exports, the main reports for this week are the Census Crush and Cotton Consumption reports on Thursday morning. Friday will also mark the expiration of the September options for corn, soybeans, wheat, rice, etc.
 
Looking for professional help with your marketing decisions? Consider subscribing to our daily Ag Marketing Professional service or Special Research Reports. Call our office for details at 402-697-3623, or visit www.bruglermarketing.com.
 
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 more extensive paid subscription and consulting services.
 
   Copyright 2010 Brugler Marketing & Management, LLC

 

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