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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.

Good Week for Grains, Not For Livestock

Apr 27, 2012

Brugler

Market Watch with Alan Brugler

April 27, 2012

Good Week for Grains, Not For Meats

 

The grain markets rallied, as low prices cured low prices in the feed grains, and the looming shortage of soybeans and soy products kept the soybean complex on the march. While Chinese and "unknown destination" buying was huge as corn dipped near the $6 mark, soybeans continue to be a case of get ‘em while you can. On the other hand, livestock prices were under pressure. Speculative funds have a huge short position built up, and profited greatly from the atypical BSE cow case in California and the resulting limit down day. Neither export sales nor US consumers appeared to be concerned about the isolated case, but neither did cattle rally back. Hogs just keep drifting lower in search of export demand or at least more efforts to barbeque.

Corn futures dropped all the way down to $6 a week and a half ago before the bulls got a grip on things and the Chinese (or unknown destination) purchases took advantage of the bargains. Prices were up 6.6% for the week. This past week featured a steady parade of large export sales announcements, boosting basis levels as commercials scrambled to get corn in the pipeline to ship. Basis is strong enough to dissuade deliveries against May futures, which resulted in the short covering rally as specs got out ahead of the delivery period. US export sales commitments through the 19th were 83% of the forecast for the year, lagging the 86% average commitment. The large bookings announced under the daily reporting system will show up in next week’s totals and make the commitments look better vs. the forecast.

Soybeans were up 50 cents for the week, after being up 10 cents the previous week. Production estimates for Argentina continue to leak lower, with some private estimates now another 2 MMT lower than the USDA figure from April 10. US weekly export sales were strong, both in the Thursday report and in the daily system showing sales larger than 100,000 MT. Soybean meal prices also continue to march higher, supporting beans through increased product value. Meal was historically very cheap vs. corn back in December and despite the rally since then is still below the long term average ratio.

The three wheat markets were mixed, with CHI and KC higher while MPLS lost 17 cents per bushel for the week. Chicago was the strongest. Some freeze damage was reported, but milder temps for this weekend took a little steam out of the more bullish arguments. Weekly export sales through the 19th were larger than expected. Old crop sales are now 100% of the USDA estimate for the year, but typically would be 102% by now. US Crop condition ratings continue to be similar to 2010, when the national average yield was 46.4 bushels per acre. The International Grains Council cut their projected world production by 5 MMT this week, overall price supportive.

 

Nearby cotton futures dropped a little less than 1% for the week. Weekly export sales were much improved over the two previous weeks. Overall commitments are back up to 106% of the USDA export forecast for the year. They typically would only be 96% of estimate at this point. The CFTC Disag report on Friday night showed the large commercials adding to their short positions and reducing their longs in the week ending April 24. Managed money, the big speculator group, was cautiously adding a few longs and reducing shorts. The specs were net long cotton by 565 contracts as of last Tuesday night.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

04/05/12

04/13/12

04/20/12

04/27/12

Change

% Change

May

Corn

$6.58

$6.29

$6.13

$6.53

$0.41

6.61%

May

CBOT Wheat

$6.39

$6.24

$6.16

$6.42

$0.27

4.30%

May

KCBT Wheat

$6.62

$6.43

$6.27

$6.47

$0.20

3.19%

May

MGEX Wheat

$8.46

$8.24

$7.91

$7.74

($0.17)

-2.15%

May

Soybeans

$14.34

$14.37

$14.47

$14.97

$0.50

3.46%

May

Soybean Meal

$391.90

$395.80

$406.00

$427.40

$21.40

5.27%

May

Soybean Oil

$56.64

$56.52

$55.83

$55.18

($0.65)

-1.16%

Apr

Live Cattle

$118.33

$120.53

$120.55

$118.45

($2.10)

-1.74%

Apr

Feeder Cattle

$148.73

$150.53

$150.13

$148.78

($1.35)

-0.90%

May

Lean Hogs

$93.90

$91.13

$87.50

$85.50

($2.00)

-2.29%

May

Cotton

$88.54

$92.08

$90.04

$89.23

($0.81)

-0.90%

May

Oats

$3.37

$3.28

$3.22

$3.36

$0.14

4.19%

May

Rice

$15.05

$15.31

$15.51

$14.99

($0.52)

-3.35%

 

Cattle futures dropped 1.74% for the week in nearby April, all of it coming on Tuesday when USDA confirmed a single BSE case in a deceased 10 year old California dairy cow. Cash cattle trade was down $1-3 for the week, partly due to the BSE issue but mostly due to an unusually strong basis that permitted feedlots to take a little less cash for cattle and still show a higher closeout than the one they originally tried to hedge. Beef production YTD is still down 3.3% from last year, but up an estimated 1.6% for the week vs. the same week in April 2011. Wholesale prices were up again, which choice gaining 1.66% for the week and select up a more modest 0.9%.

Lean Hog futures lost 2.3% for the week as the premium of the May contract to the CME Lean Hog index continued to evaporate. It is tough to maintain a $4-5 futures premium when cash hogs and the pork cutouts are showing few signs of life. The pork carcass cutout value was down $1.20 for the week, a drag on cash hog values but caused by higher pork production. Pork production year to date is up 1.4% from last year. Production this past week was up 7.6% from the same week in 2011. Carcass weights are estimated at 209 pounds, which would be up 1# from the 2011 actual weight.  

Market Watch: April cattle futures expire on Monday, leaving a big downside gap on the continuation charts as June takes over. This isn’t unusual, as June is typically at a discount to the April, but something for technical traders to figure out (rally the June or hope for cash cattle prices to come down). The main USDA reports for the week are the usual Monday Crop Progress and Export Inspections reports, and the Thursday morning Export Sales numbers. Monday will also be first notice day or FND for May grain futures contracts. Few deliveries are expected, with the exception of soybean oil. May cattle futures options (serial) expire on Friday.

 

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. Copyright 2012 Brugler Marketing & Management, LLC

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