Apr 23, 2014
Home| Tools| Events| Blogs| Discussions Sign UpLogin


Market Watch

RSS By: Alan Brugler, AgWeb.com

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

Fool's Gold

Jul 29, 2011

Brugler

Market Watch with Alan Brugler

July 29, 2011

Fool’s Gold

 

Gold futures set a new all time high of $1634.90 this past week. Fool’s gold is of course a rock that has gold coloration but no real gold in it. In this case, the gold is real, but investors are worried about the value of the currencies being used to buy it. The Washington debt ceiling situation continued into the weekend, with the House trying to pass a bill that the Senate promised to veto, while the Senate had no equivalent bill to solve the problem scheduled for a vote. European investors were also uneasy, pulling money out of euros and into gold as well. In a head scratcher, money being pulled out of equities was being parked in Treasuries, which presumably would lose value if the Washington debt situation isn’t resolved before the country runs out of cash.

 

Corn futures were down 24 ½ cents for the week, another 3.5% drop. There is still much debate about the impact of the high temps on pollinating or early ear fill corn, but that is running up against the old trade axiom that rain makes grain. USDA again reported sluggish export sales for the week ending July 21, showing that there is some resistance to higher prices in the world market. That likely has something to do with the availability of the cheap Russian and Ukrainian feed wheat. The Brugler500 crop condition index was the lowest for this week since 2008, and is also below the 5 year average. If it is still below the 5 year average by Labor Day, a below trend national average yield would be expected.

 

Soybeans were down 1.9% for the week, or 26 cents per bushel. Meal futures fell $11.40/ton and lost 3.1%, dragging down product value. Soy oil was down 1.5%. Export sales business to China is picking up, but overall bookings are still soft because supplies are still available out of South America. China bought 224,000 of the 2011/12 sales bringing accumulated new crop soybean sales to China to 7.052 MMT.


Wheat prices were lower at all three exchanges, reversing gains from the previous week. Chicago was the weakest, down 2.85%. Russian wheat continues to dominate export deals in the Middle East, as it is priced 50 to 80 cents per bushel below US offerings. Lower US futures and cash prices can solve that, but one wonders why the Russians persist in giving the wheat away rather than matching the prevailing world prices. They are sacrificing revenues they could be earning. But again, buyers were burned by the export defaults last year, and the discounts may be necessary to get the business back. US export sales last week are near the upper end of the trade guesses, and shipments year to date continue to run ahead of last year.


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

07/08/11

07/15/11

07/22/11

07/29/11

Change

% Change

Sep

Corn

6.4225

7.0125

$6.90

$6.66

0.2450

3.55%

Sep

CBOT Wheat

6.5125

6.9475

$6.92

$6.73

0.1975

2.85%

Sep

KCBT Wheat

7.2725

7.645

$7.80

$7.67

0.1300

1.67%

Sep

MGEX Wheat

8.17

8.2375

$8.39

$8.31

0.0775

0.92%

Sep

Soybeans

13.45

13.8575

$13.80

$13.54

0.2600

1.88%

Sep

Soybean Meal

348.3

360.3

$363.00

$351.60

11.4000

3.14%

Sep

Soybean Oil

56.55

57.35

$56.51

$55.65

0.8600

1.52%

Aug

Live Cattle

114.65

110.6

$110.55

$112.63

2.0750

1.88%

Aug

Feeder Cattle

143.6

135.7

$136.40

$137.05

0.6500

0.48%

Aug

Lean Hogs

96.175

98.95

$100.83

$102.78

1.9500

1.93%

Oct

Cotton

116.58

101.46

$99.14

$102.08

2.9400

2.97%

Sep

Oats

3.495

3.55

$3.53

$3.46

0.0750

2.12%

Sep

Rice

16.13

16.995

$16.74

$16.12

0.6250

3.73%


Cotton Futures were actually up almost 3% for the week in the October contract. It wasn’t due to weekly export sales, which saw another 64,100 RB in net cancellations. The 2010/11 marketing year ends on July 31, so all remaining outstanding business will be rolled to 2011/12. That may not happen until the August 11 Export Sales report, however. Heavy rain was expected this weekend on nearly ripe Rio Grande Valley cotton. While most of Texas could benefit from 3-5" of rain, growers there could lose both yield and quality if rains from T.S. Don score a direct hit on the valley. New crop December futures were up 2.47 cents for the week. Net export sales reported by USDA were 40,600 running bales. Old crop commitments again dropped, with cancellations of 64,100 RB. The Census Cotton Consumption report showed domestic use running at an annualized rate of 3.539 million bales. The pace will have to pick up to meet USDA’s projection of 3.8 million bales for the year.

 

Cattle futures were up $2.07 for the week, despite concerns about a weak cash cattle market. Estimated weekly beef production was up 2.2% from last week and up 1.7% from the same week in 2010. Carcass weights are still running 4-5 pounds above last year, but beef production YTD has still been down 0.1% in total. The wholesale market was mixed, with choice cuts losing ground for the week but the Select boxes up 29 cents or 0.2% on a Friday/Friday basis.


Lean Hog futures were up $1.95, a 1.93% gain spurred by a surge to record high carcass cutout values. With the pork up, the cash hogs were on the rise and futures were anticipating further gains. The pork carcass value jumped 5.77% for the week, led by a 12.7% hike in pork belly prices. Weekly pork production was down an estimated 1% from the previous week, but up 3.2% from the same week in 2010. That leaves pork production YTD up 1.1%. It has to be demand that is supporting the pork price! Estimated carcass weights are 2-3 pounds above last year, so we are getting more tonnage out of 2.2% more slaughter.


Market Watch: This week we’ll be watching the crop condition ratings intently. Generally, expectations are for little change, with some areas stressed by high temps (100 degrees as far north as South Dakota) and others aided by widespread if inconsistent T-storm activity. That report is on Monday evening. Monday is also the first day of the new month, potentially freeing up some new investment flows. That brings us to the other issue, which is the debt ceiling debate. That money is likely to stay on the sidelines until the outcome is determined, be it destruction of the dollar, a "responsible" deal or a punt/extension. The usual USDA Export Sales report will be out on Thursday morning. Friday will mark the expiration of the August cattle options.


Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 


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

Log In or Sign Up to comment

COMMENTS

No comments have been posted, be the first one to comment.
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions