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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.

Caution Abounds

Apr 06, 2012

Brugler

Market Watch with Alan Brugler

April 6, 2012

Caution Abounds

 

Last week we left you with the thought that March went out like a lion, with rollicking bull markets on Friday March 30 after the quarterly USDA reports. For the most part, the first week of April was a more sedate affair, with money flows as soft as the warm April breezes. Caution was evident in both the market and the field. Ag producers mostly refused to be seduced by excellent planting conditions and kept the corn planter in the shed. USDA showed 3% of the US corn crop planted, just slightly ahead of the 2% average pace for the first of April. With more than a month before typical frost free dates, only a few producers were willing to go whole hog on planting. The fact that they could not yet qualify for replant payments from crop insurance likely influenced that decision. That will change this week, as acceptable first planting dates for crop insurance fall into place. For corn in Missouri that was April 5, for Nebraska April 10, and Iowa April 11. Market action was equally cautious, with only cotton and KC wheat showing moves larger than 4% for the week.

Corn futures rallied 14 cents per bushel for the week. Weekly export sales were stronger than expected this past week at 1.22 MMT. US export sales commitments are 79% of the USDA forecast for the year. The 5 year average commitment is 81%, so we appear to be slightly below pace to hit the USDA number for the year. Unshipped sales are 12% smaller than last year at this time. New crop corn continues to lose ground to soybeans in the revenue department, based on the soy/corn ratio. It was at 2.51:1 on Friday night. Historically, ratios over 2.3:1 start to attract swing acres to beans. The March 1 stocks of 6.01 billion bushels indicated that total second quarter disappearance was record large. If that pace continues, USDA will have to reduce projected ending stocks on Tuesday and move the stocks/use ratio closer to the all time record low set in 1995/96.

Minneapolis futures continued to rally on the strength of the tighter than expected spring wheat planting intentions number (11.976 million acres). The winter wheat futures contracts were lower.Informa raised its projection of HRW production by 199 million bushels, which got the attention of the bears and bulls alike. The first 18-state USDA crop condition ratings of the year were also released and hint at excellent production potential. The Brugler500 index was 355, vs. less than 300 a year ago. Export sales commitments are at 96% of the USDA sales total for the year, with 2 months remaining. They are typically at 100% by now, so there is little likelihood that USDA will increase projected exports at this time. Weekly export sales were also on the low end of trade estimates last week, at 511,700 MT.

Soybeans gained 31 cents for the week in the nearby May, despite the real buying interest being in the new crop November as it tries to pull acreage away from other crops. November was up 22 ¾ for the week. USDA reported 73.9 million acres intended for 2012, well below the 75.5 million acre average guess. Production estimates for Brazil continue to leak lower as the combines roll and the full extent of the drought damage is uncovered. Informa lowered its estimate to 66 MMT for Brazil. USDA will weigh in on Tuesday morning and is widely expected to reduce its South American production and ending stocks figures. US weekly export sales were above 1 MMT for combined old and new crop, with China as usual representing the bulk of the business.

Cotton futures were down a hard 5.33% for the week after gaining 3.89% in the previous week. Weekly export sales were acceptable, adding to total commitments which are now 110% of the USDA projection for the year. Outstanding sales currently on the books are 21% smaller than last year, but expectations are also diminished. US planting intentions as of March 1 were measured at 13.155 million acres, close to the trade average guess. The bearish flavor this week came from the international markets. Those fears were warranted, with USDA showing net negative export sales for the last week of March. However, export shipments were also the largest of the marketing year @ 392,200 running bales.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

03/16/12

03/23/12

03/30/12

04/05/12

Change

% Change

May

Corn

$6.73

$6.47

$6.44

$6.58

$0.14

2.21%

May

CBOT Wheat

$6.72

$6.54

$6.61

$6.39

($0.22)

-3.37%

May

KCBT Wheat

$7.06

$6.95

$6.96

$6.62

($0.34)

-4.92%

May

MGEX Wheat

$8.23

$8.17

$8.34

$8.46

$0.13

1.50%

May

Soybeans

$13.74

$13.66

$14.03

$14.34

$0.31

2.21%

May

Soybean Meal

$374.40

$373.00

$388.70

$391.90

$3.20

0.82%

May

Soybean Oil

$55.50

$54.88

$55.10

$56.64

$1.54

2.79%

Apr

Live Cattle

$125.30

$124.50

$120.45

$118.33

($2.13)

-1.76%

Mar

Feeder Cattle

$153.40

$153.30

$148.83

$148.73

($0.10)

-0.07%

Apr

Lean Hogs

$85.88

$85.03

$83.43

$84.50

$1.08

1.29%

May

Cotton

$87.48

$89.63

$93.52

$88.54

($4.98)

-5.33%

May

Oats

$3.34

$3.33

$3.41

$3.37

($0.04)

-1.25%

May

Rice

$14.54

$14.60

$14.77

$15.05

$0.28

1.90%

 

Cattle futures flirted with bullish thoughts on Friday, but ended the week down another $2.13 or 1.76%. Cattle have both a supply problem and a demand problem at the moment. The number of cattle available for slaughter is expected to rise seasonally. Excellent rates of gain are being seen due to mild weather and good grain quality. Estimated carcass weights are now 29 pounds above last April’s actual.  Estimated beef production for the week was up 2.6% from the same week in 2011, despite 1.3% fewer cattle coming through. The supply is weighing on wholesale prices. Weekly export sales for beef were decent at 13,200 MT, and typically get larger from now until July. Ability to capture more of that business is likely key to keep beef from piling up in the coolers.

Lean Hog futures gained 1.3% for the week. The pork carcass cutout value lost 1.79% on a Friday/Friday basis, keeping downward pressure on packer margins and what they could pay for hogs. Pork production year to date is up 0.9% from last year. Production this past week was 0.6% larger than last week, and up 3.5% from the same week in 2011. Carcass weights are estimated at 209 pounds, which would be up 1# from the 2011 actual weight.  

Market Watch: The main USDA reports this week will be on Tuesday morning, with Crop Production and the WASDE Supply/Demand estimates. While some of the numbers have been telegraphed via the Grain Stocks report, there is still quite a bit of uncertainty about how USDA will flow the tighter than expected March 1 numbers into the annual balance sheets. The first 2012/13 crop estimates are typically not released until May. There is ongoing interest in weekly export shipments (Monday) and Export Sales (Thursday). Monday night’s Crop Progress report is expected to show a rise in US corn and cotton planting, with an above normal pace. Cattle traders will be adjusting to the expiration of the April cattle options, which went off the Board on Thursday.

 

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 or 402-289-2330 for information on our individualized subscription and consulting services. Our web site is www.bruglermarketing.com.

 

 Copyright 2012 Brugler Marketing & Management, LLC

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