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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.

Cotton Leads the Bulls, Feed Grains Take a Break

Oct 22, 2010

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Market Watch with Alan Brugler
October 22, 2010
Cotton Leads The Bulls, Feed Grains Take a Break
 
Cotton futures were limit up again on Friday, as a hail storm raked the Lubbock, TX area. More than 90% of the Texas cotton crop has bolls open, but only 26% had been harvested as of Sunday. That means a lot of the crop is vulnerable to severe weather, and with the welcome rains came some unwelcome wind and hail. Actually, the rains weren’t welcomed by cotton producers, but did prove beneficial for winter wheat and pasture. This was just the latest in a rash of limit moves in cotton. World stocks are tight and the market is sensitive to changes in production anywhere in the system. Combined upland and pima export sales bookings were over 600,000 running bales in the weekly export sales report from USDA, another expression of the buying interest. The U.S. already has export commitments for 71% of the projected exports for the year.
 
 Soybeans were up 15 cents per bushel for the week, 1.22%.  Huge export demand continues, with weekly sales in excess of 2 MMT for the USDA reporting week ending October 14. Rising Chinese crush demand accounts for most of the growth, helped along by a persistent discount of U.S. beans to domestic Chinese futures. Even with import tariffs, VAT and ocean freight, US beans are still cheaper than what Chinese futures are signaling for 2011. Accumulated soybean exports since September 1 are 79% larger than last year at this time. Soy oil and meal were also up for the week, supporting crush margins.
 
Corn was down .53% for the week, ending a string of impressive weekly gains. It is still up 94 cents for the month to date, with a week to go. The rally lost steam because of evidence that price rationing might be kicking in. The USDA weekly export sales report was a mere 212,500 MT. While commitments for the marketing year are 13% ahead of last year, the sales pace has slowed down dramatically from the post-Russian embargo period. Most of the end users who were caught short appear to have at least some coverage in place. Rapid harvest progress has also stuffed the cash grain channels with corn.
 
Wheat futures were down at all three exchanges again this week, as was the case last week. Again, a small short covering rally was seen on Friday. Wheat weekly export sales for the prior week were improved, at 574,000 MT vs. trade expectations for 400-600,000 MT. A much more aggressive pace is needed to meet USDA’s forecast for the year. A rain front crossing the Plains and Midwest is improving soil moisture conditions for 2011 crop winter wheat, which also weighed on the market.


 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
10/01/10
10/08/10
10/15/10
10/22/10
Change
% Change
Dec
Corn
$4.66
$5.28
$5.63
$5.60
0.03
0.53%
Dec
CBOT Wheat
$6.55
$7.19
$7.05
$6.71
0.34
4.79%
Dec
KCBT Wheat
$6.90
$7.59
$7.45
$7.19
0.26
3.49%
Dec
MGEX Wheat
$7.06
$7.65
$7.54
$7.28
0.26
3.42%
Nov
Soybeans
$10.57
$11.35
$11.85
$12.00
0.15
1.22%
Dec
Soybean Meal
$289.90
$316.20
$328.20
$330.90
2.70
0.82%
Dec
Soybean Oil
$43.83
$46.62
$47.77
$48.30
0.53
1.11%
Oct
Live Cattle
$95.95
$95.55
$98.15
$102.20
4.05
4.13%
Oct
Feeder Cattle
$111.80
$107.72
$108.75
$111.20
2.45
2.25%
Dec
Lean Hogs
$72.88
$73.85
$68.90
$70.65
1.75
2.54%
Dec
Cotton
$98.02
$107.17
$109.87
$119.71
9.84
8.96%
Dec
Oats
$3.33
$3.69
$3.70
$3.57
0.13
3.58%
Nov
Rice
$12.37
$13.25
$13.59
$14.24
0.65
4.75%

 
Cattle futures gained a hefty 4.1% for the week. Cash cattle traded at $102.50, a $4-5 jump from the previous week. That buying came early in the week, with packers in a hurry for some cattle. Wholesale prices rose throughout the week. Carcass weights are running close to year ago, but weekly export sales were 27,500 MT and the strongest in several years. That takes beef out of the cooler which the domestic market was assuming it could have. On a Thursday/Thursday basis, choice boxed beef was up $7.37, or 4.81%. Friday afternoon’s USDA Cattle on Feed report showed just a few more head in the feedlots than expected. Placements during September were 103.1% of year ago. Marketings were 102%, leaving total numbers at 102.9% of last year.
 
Hogs recovered on Friday, with diminished competition from beef. Bottom picking or at least short covering fueled a triple digit gain in futures on Friday to ensure the black ink. On a Thursday/Thursday basis, the pork carcass cutout was down $4.49, a more than 5.5% loss.  Friday afternoon’s Cold Storage report showed frozen pork supplies were 20% smaller than last year, but had grown 10% during September.
 
Market Watch: As we come into month end, asset allocation shifts become a bigger part of the futures landscape. Big gainers will be tend to be sold, and big loses have of late been attracting more buying interest. November grain options expired on Friday, leaving a few folks with some surprise positions to be dealt with at the beginning of the week. The main USDA reports for the week are Export Inspections and Crop Progress on Monday, and Export Sales on Thursday. Census Crush is due out on Thursday morning, along with Census Cotton Consumption. Friday will also be first notice day for November soybean deliveries.
 
Looking for professional help with your agricultural 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 individualized subscription and consulting services.
 
 Copyright 2010 Brugler Marketing & Management, LLC
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