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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.

Cold Temps But Not Cold Markets

Jan 21, 2011

 brulogomed

Market Watch with Alan Brugler
January 21, 2011
Cold Temps, But Not Cold Markets
 
Midwest temperatures dipped into the -20 Fahrenheit range, chilling the population if not the markets. While gold prices were stone cold for the week, and the US dollar index was sliding, the ag commodities were enjoying and dreaming of more temperate climes.
 
Corn prices were up another 9 cents for the week, remarkable mostly for the 18 cent loss they had to overcome to get there. That 9 cent weekly gain used to be a big percentage move, but with futures above $6 it was only 1.31% for the week. USDA’s weekly sales total was above expectations at 904,800 MT for 2010/11 delivery and 125,000 MT for 2011/12 delivery. The BA Exchange in Argentina trimmed its forecast for corn production there to 19.5 MMT, compared to USDA’s most recent figure of 23.5 MMT. If the recent change to wetter weather fails to revive yield potential, that leaves an even stronger demand pull for old crop US corn in the May-August period.
 
Wheat futures posted much sharper gains at all three exchanges, up 40 to 51 cents. Chicago’s 6.6% advance was the steepest. The bull story is primarily exports, with Algeria, Tunisia, Turkey, Japan, Jordan and others stepping up for purchases this week. USDA is anticipating a stronger US sales pace than usual, in order to meet the projection for the year ending May 31. The weekly export sales report was encouraging in that regard. USDA put the actual weekly export sales for the week ending January 13 at 1,054,300 MT for 2010/11 delivery and 93,500 MT for 2011/12 delivery.
 
Soybeans were down a spare 10 cents for the week. There was a lot of negative news thrown at the market, mostly from China. Chinese crush margins are under pressure due to price controls on veg oil ahead of the high consumption Spring Festival. The USDA put the combined old crop and new crop soybean export sales total for last week at 915,400 MT. China was the main buyer of 493,100 MT of beans for 2010/11 delivery and 120,000 MT for 2011/12 delivery in that report. The market is also being supported by private analyst Informa lowering projected new crop soybean acres from their last report. Meal prices slid due to competition from DDGs that put pressure on basis as well as board values. Bean oil was higher, and supported the product value.
 
The cotton rebound continued. Prices were up a whopping 10.96% for the week in the front month futures, and new crop December posted life of contract highs. The Acreage War of 2011 is still in progress. Combined upland and pima net export sales for last week were 457,500 RB, again exceeding pre-report estimates from the trade. Chinese prices were also firmer. The front three contracts (old crop) were limit up on Friday.
 
Cattle futures were down 1.3% for the week, mostly on profit taking ahead of the Friday evening Cattle on Feed report. Cash cattle prices also appeared to stall out, with a mid-week drop to $106 making the $112 futures high for the week appear a bit rich. Friday’s COF report showed placements during December up 16.11% from year ago. Marketings were up 4.82%, and were the second largest for that month since 1996. That’s significant, given the price increases seen at the farm and wholesale levels while that additional supply was coming into the market. There are still questions about whether consumers will balk when the current wholesale prices (Choice boxes over $173/cwt.) are passed on at retail.
 

 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
12/31/10
01/07/11
01/14/11
01/21/11
Change
% Change
Mar
Corn
$6.29
$5.95
$6.49
$6.57
0.09
1.31%
Mar
CBOT Wheat
$7.94
$7.74
$7.73
$8.25
0.51
6.63%
Mar
KCBT Wheat
$8.51
$8.46
$8.60
$9.00
0.40
4.65%
Mar
MGEX Wheat
$8.82
$8.71
$8.90
$9.37
0.47
5.28%
Mar
Soybeans
$14.03
$13.65
$14.23
$14.12
0.10
0.72%
Mar
Soybean Meal
$373.90
$362.70
$388.10
$379.60
8.50
2.19%
Mar
Soybean Oil
$58.37
$56.82
$57.27
$57.56
0.29
0.51%
Feb
Live Cattle
$107.90
$106.38
$109.38
$107.95
1.43
1.30%
Jan
Feeder Cattle
$121.88
$121.60
$125.60
$126.35
0.75
0.60%
Feb
Lean Hogs
$79.75
$79.43
$79.53
$80.33
0.80
1.01%
Mar
Cotton
$144.81
$140.60
$141.44
$156.94
15.50
10.96%
Mar
Oats
$3.94
$3.71
$3.92
$3.86
0.06
1.53%
Mar
Rice
$14.29
$13.63
$14.01
$14.87
0.86
6.10%

 

 
Hogs had a positive week, up 1.01%. Technically, the market is trying to get back to an overhead resistance line on the weekly and monthly continuation charts. Snow and icy conditions interfered with hog movement in a few areas, but there were no widespread issues. On a Thursday/Thursday basis, the carcass value of a typical hog rose 0.95%. Pork belly values were up 4.7% and were the strongest component.
 
Market Watch:  The market gets back to a semblance of order this week, with 5 full trading days. Livestock traders will begin the week reacting to the Cattle on Feed and Cold storage numbers from Friday night. They will end the week with the semi-annual USDA Cattle Inventory report on the 28th. While that report is not historically a market mover, there is keen interest this year in the expansion or contraction of the cow herd, with related questions about the calf crop. USDA will have the usual export reports on Monday and Thursday. The Census Bureau will issue a Crush report and Cotton Consumption report on Thursday morning. Not to be overlooked, the FOMC will be meeting on Tuesday and Wednesday. 
 
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 2011 Brugler Marketing & Management, LLC
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