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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.

Chinese Takeout

Nov 26, 2010

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Market Watch with Alan Brugler
November 26, 2010
Chinese Takeout
 
China raised bank reserve requirements a week ago, and now they have doubled the margin requirements for soybean futures, effective Monday. They have also told banks (who are otherwise being encouraged to slow down lending) to make more money available for agricultural production due to food shortages. They are trying to dry up the money in circulation and slow inflation, while also signaling they might need to import more food. They aren’t currently buying U.S. corn, but corn is an obvious target. Beans and cotton are still worried about slowing export sales due to the anti-inflation measures.
 
Corn prices were up 18 cents for the week, more than erasing the loss of the previous week. December options contracts expired on November 26th and there were several attempts to pin large groups of options traders in futures positions. The dollar was firmer all week. Corn export sales have been weak for the past month, but we’re starting to get indications of improved interest. Friday’s weekly total was 823,000 MT and up 54% from the previous week as export customers took advantage of the “pre-Thanksgiving sale” in the corn market.
 
Wheat futures were higher at all three exchanges for the week. Weekly export sales were strong at 745,200 MT. Egypt and Mexico were the two largest buyers. The International Grains Council sees a rebound in acreage globally in 2010/11, with more area for Russia and Canada and the United States. That would imply a lot more Russian spring wheat than usual, as fall plantings of winter wheat were down. U.S. winter wheat acreage won’t be tabulated and released by USDA until January.
 
Soybeans were up 3% for the week, with meal and oil also higher. There was a lot of negative news thrown at the market, mostly from China. However, the Census Crush report showed much smaller than expected soy oil stocks at the end of October, and meal was able to rally in tandem with corn despite a large Census stocks figure in excess of 500 thousand tons. Weekly soybean export sales for the week ending 11/18 were a solid 948,900 MT. China was the largest buyer as per usual, with the Netherlands, Taiwan and Spain next in line.
 
The cotton collapse continued. For the week, prices were down 9.26% following an 8.76% loss the previous week. For the second week in a row, that was the largest loss among the tracked commodities. Weekly export sales were very slow, at 311,800 running bales of combined pima and upland cotton. Speculative liquidation ahead of December delivery notices morphed into more selling as the Chinese continued to try to force their internal markets lower. Futures deliveries were larger than in October, but continue to be limited by tight cert stocks. Much of the U.S. cotton crop has already been sold or committed to either domestic mills or export merchants.
 
Cattle futures were up 77 cents for the week. Cash cattle prices were sharply higher, as packers moved early in the week to lock up cash cattle supplies. Cash was mostly $102-102.50. Many plants were dark on Thursday for the holiday, but that usually leads to catch up activity the following week.  USDA reported a pickup in beef export interest, with 13,700 MT sold the week ending November 18, along with another 3,800 MT for shipments in 2011. Wholesale prices were up 1% for the week.
 
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
11/05/10
11/12/10
11/19/10
11/26/10
Change
% Change
Dec
Corn
$5.88
$5.34
$5.21
$5.38
0.18
3.36%
Dec
CBOT Wheat
$7.29
$6.69
$6.45
$6.48
0.04
0.58%
Dec
KCBT Wheat
$7.86
$7.30
$7.10
$7.21
0.11
1.59%
Dec
MGEX Wheat
$7.97
$7.45
$7.26
$7.34
0.08
1.14%
Jan
Soybeans
$12.84
$12.69
$12.02
$12.39
0.37
3.08%
Dec
Soybean Meal
$348.00
$339.70
$325.80
$336.80
11.00
3.38%
Dec
Soybean Oil
$52.22
$52.53
$48.96
$49.90
0.94
1.92%
Dec
Live Cattle
$97.55
$98.40
$101.45
$102.23
0.77
0.76%
Jan
Feeder Cattle
$110.77
$114.40
$117.40
$118.75
1.35
1.15%
Dec
Lean Hogs
$66.95
$68.98
$69.13
$70.35
1.22
1.77%
Dec
Cotton
$142.23
$140.18
$127.90
$116.06
11.84
9.26%
Dec
Oats
$3.75
$3.40
$3.53
$3.44
0.09
2.55%
Jan
Rice
$14.98
$14.07
$13.90
$13.41
0.49
3.53%

 
Hogs had a positive week, up 1.77%. Packers continue to keep an unusually fat chunk of the wholesale dollar, with the farm share declining. That wholesale price was up for the week, and some of it percolated down to the cash hog market. The pork carcass value was up $1.49 on a Friday/Friday basis, or 1.91%.
 
Market Watch:  The grain market will begin the week adjusting for all of the options exercises that occurred on Friday. The assumption is always that some of the new futures longs and shorts aren’t accustomed to big swings in prices as they come out of the options environment. Sometimes the trade tests the depth of their pockets, other times nothing happens. Tuesday is first notice day for deliveries vs. December grain futures contracts. USDA will have the regular weekly export sales report on Thursday morning. Friday will mark options expiration for December live cattle.
 
I look forward to seeing some of you at the Marketing Rally in St. Charles, Illinois on December 1-2. Be sure to identify yourself as a Market Watch reader!                                 Alan Brugler
 
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 2010 Brugler Marketing & Management, LLC
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