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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.

Cruising Along, or Cruise Missle?

Jan 14, 2011

 

brulogomed
Market Watch with Alan Brugler
January 14, 2011
Cruising Along, or Cruise Missile?
 
The main thing that jumps out at you from the weekly table down below is that the numbers are black except for Chicago wheat, and it was down only a penny. That is a complete reversal from the previous week, when generalized selling had all of the ag commodities in the red! The week was a mirror image in other ways as well. The US dollar index was higher all five days during the sell off, and weaker all five days during this week’s rally. We get bursts of fundamental influence, but currency translation apparently still matters to commodities priced in greenbacks! Some markets were on cruise control, with fractional or 1% gains, while others resembled a cruise missile still in boost mode. Corn and oats posted the sharpest gains.
 
Corn prices were definitely in the cruise missile category, up more than 9% for the week. All of the USDA report numbers came in below the average trade estimates. World ending stocks of corn were lowered to 127 MMT, a 3 MMT drop from the December report. US corn production and yield were reduced, the Dec 1 corn stocks were only 10.040 billion bushels, and USDA had to cut projected ending stocks for next fall to 745 million bushels.  Traders were thinking weekly export sales would be between 300 and 700 thousand MT. The actual USDA number was a neutral 507,500 MT on Thursday morning, but the main focus for the week was the long term stocks tightening.
 
The soybean complex was solidly higher for the week, with nearby January beans gaining 49 cents before going off the board on Friday. That was a 3.59% gain for the week. Meal futures were up an even more robust 4.98%, drafting in the wake of the corn market. USDA cut projected soybean ending stocks to only 140 million bushels, with a smaller U.S. soybean crop projection tightening things. Global soy production was also smaller, with a reduction in the Argentine crop. Chinese futures at Dalian were up 18 cents for the week, a notable lag compared to the U.S. gain. The government continues its controls on veg oil prices, and that is squeezing crush margins and soybean prices to a degree.
 
Wheat futures were higher in KC and MPLS, but lower by a penny in Chicago. High protein milling wheat continues to sell well into the export market. USDA raised projected HRW exports for the year to a record 605 million bushels. The January WASDE report showed world wheat ending stocks at 177.29 MMT up slightly from the December report, but projected US stocks were cut 40 million bushels to 818 million. The Winter Wheat Seeding report showed 40.99 million acres planted.  This was a rare instance where the actual number was larger than the trade average guess for that report.
 
Cattle futures set new all time highs on Wednesday, and then faded the rest of the week on profit taking type selling ahead of the three day weekend. Cash cattle sales were lukewarm in KS at $108 in the middle of the week, but carcass based sales in NE were $172-173 on Friday, up $4 from the previous week. Rising wholesale prices supported the higher cash trade, with Select boxes up $6.27 for the week, a 3.9% increase (Friday/Friday).
 
Hog prices rose a modest 0.13% for the week. That was actually a bit disappointing, as index fund allocation buying had been expected to come into hogs. If it did, it had little effect. The pork carcass cutout value was up a stout $5.65 for the week, on a Thursday/Thursday basis. That provided some support to the cash market. All of the primals were higher.


 Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
12/23/10
12/31/10
01/07/11
01/14/11
Change
% Change
Mar
Corn
$6.14
$6.29
$5.95
$6.49
0.54
9.03%
Mar
CBOT Wheat
$7.83
$7.94
$7.74
$7.73
0.01
0.10%
Mar
KCBT Wheat
$8.45
$8.51
$8.46
$8.60
0.14
1.62%
Mar
MGEX Wheat
$8.68
$8.82
$8.71
$8.90
0.20
2.24%
Jan
Soybeans
$13.50
$13.94
$13.58
$14.07
0.49
3.59%
Jan
Soybean Meal
$360.00
$370.30
$359.10
$377.00
17.90
4.98%
Jan
Soybean Oil
$56.59
$57.74
$56.35
$56.70
0.35
0.62%
Feb
Live Cattle
$104.00
$107.90
$106.38
$109.38
3.00
2.82%
Jan
Feeder Cattle
$121.45
$121.88
$121.60
$125.60
4.00
3.29%
Feb
Lean Hogs
$78.73
$79.75
$79.43
$79.53
0.10
0.13%
Mar
Cotton
$148.12
$144.81
$140.60
$141.44
0.84
0.60%
Mar
Oats
$3.94
$3.94
$3.71
$3.92
0.21
5.73%
Jan
Rice
$13.40
$14.00
$13.39
$13.70
0.31
2.28%

 
 Cotton futures were up 6/10 of a percent for the week, hurt by selling pressure on Thursday and Friday. The Wednesday USDA reports showed minor revisions from the December report. 2010/11 cotton production was raised to 18.3145 million bales due to increased average yield. The stronger than expected domestic mill activity increased domestic usage by 50,000 bales to 3.6 million. Cotton ending stocks were UNCH at 1.90 million bales for 2010/11. Exports at 15.75 million bales were also unchanged from last month. The USDA export sales report on Thursday showed export sales for the week ended 1/6 at a combined total of 326,564 RB for both marketing years for all upland cotton, over 125,000 RB above the high end of trade estimates.
 
Market Watch:   It will be a short trading week, with the US markets shut down on Monday for the ML King holiday. That means the weekly Export Inspections report will be released on Tuesday morning, and the weekly USDA Export Sales numbers will be delayed until Friday morning. Friday will also have the main USDA reports for the week, which are the monthly Cattle on Feed report and the Cold Storage report. The February serial options for corn, soybeans and the other grains will also expire on Friday. A number of ag producers used those as cheap price insurance for the January 12 reports, but they have a short shelf life.
 
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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