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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.

Goodbye 2011

Dec 30, 2011

Brugler

Market Watch w/Alan Brugler

December 30, 2011

Goodbye 2011

By almost any definition, 2011 was a crazy year. You had new all time highs for cattle and corn and cotton, but not in wheat or soybeans. You saw a rash of new governments formed, or at least the old governments thrown out, in North Africa. Others are hanging on in Syria and Yemen. The European Union appears intact, but there are major stresses in the Eurozone and questions about whether the common currency can survive the heavy government social program debts there. Meanwhile the US continued to run up record government debt because of similar social programs and is in political gridlock about how to fix the debt problem before the bond vigilantes turn their guns in this direction.

Corn futures were up another 27 cents per bushel this past week, a gain of 4.36% for the week and 64 cents in two weeks. Potential production losses in South America helped encourage the bulls, as did strong demand for ethanol use. Weekly ethanol production for the US set a record at 962,000 barrels per day, with almost none of that going into storage. Weekly export sales were disappointing, at a combined 345,200 MT.

The wheat complex kept up with corn, with Chicago up 4.9% for the week, and KC up 5.4%. Minneapolis lagged due to spread trading and year end adjustments, gaining 0.6% for the week. USDA weekly export sales, reported on Friday morning, were stronger than the trade had expected at 431,200 MT. Trade estimates had been below 350,000 MT. The Drought Monitor is starting to show very dry conditions in spring wheat country, and only spotty improvements in HRW territory. Spring wheat planting won’t begin until April, but the spec community is monitoring the situation. One reason for wheat to rally is simply the large speculative short position. Traders have to pay income taxes based on marked to market prices on December 31. Shorts had money made, and some didn’t want to pay taxes on it and then see those gains go away with a rally in early 2012.

Soybeans rallied 35 cents per bushel for the week, a 3.05% gain. Prices are up 92 cents per bushel since December 9. Soybean meal was firmer, up 4.18% but still getting cheaper vs. corn and feed wheat because it was going up slower. Soy oil gained 2.2%. Weekly soybean export sales were stronger than the trade expected, at 662,700 MT for 2011/12. Shipments were over a million metric tonnes, with nearly 80% going to China. High temps (up to 109 degrees F) and below normal rainfall continue to stress corn and soybean crops in southern Brazil and Argentina. Even a relatively minor 3-4 MMT production drop there would spur US export sales and tighten projected 2011/12 ending stocks.

Cotton was up a sharp 4.75% for the week despite lackluster export business. USDA reported combined upland and pima sales for the week ending Dec 22 at 129,500 running bales. Open interest did decline modestly in the March contract, confirming a little short covering. Consumer confidence is up, and US economic indicators were generally running in the plus direction and creating ideas of more demand in 2012.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/09/11

12/16/11

12/23/11

12/30/11

Change

% Change

Mar

Corn

5.9425

5.83

6.195

$6.47

0.2700

4.36%

Mar

CBOT Wheat

5.96

5.8375

6.22

$6.53

0.3075

4.94%

Mar

KCBT Wheat

6.615

6.395

6.75

$7.12

0.3675

5.44%

Mar

MGEX Wheat

8.2725

8.1125

8.445

$8.50

0.0500

0.59%

Jan

Soybeans

11.07

11.3

11.63

$11.99

0.3550

3.05%

Jan

Soybean Meal

276.9

290.3

297

$309.40

12.4000

4.18%

Jan

Soybean Oil

49.6

49.55

50.96

$52.09

1.1300

2.22%

Feb

Live Cattle

118.45

118.5

124.325

$121.45

2.8750

2.31%

Jan

Feeder Cattle

142.1

143.05

147.625

$146.35

1.2750

0.86%

Feb

Lean Hogs

86.425

83.15

85.85

$84.30

1.5500

1.81%

Mar

Cotton

90.43

86.07

87.24

$91.38

4.1400

4.75%

Mar

Oats

3.02

3.0125

3.1125

$3.10

0.0175

0.56%

Jan

Rice

14.01

13.685

13.905

$14.61

0.7000

5.03%

 

Cattle futures dropped 2.3% for the week, a $2.87 correction that was somewhat expected after the dramatic $5.821 gain the week before. On Friday, USDA showed a sharp jump in weekly beef export sales, with combined 2011 and 2012 sales of 13,700 MT. USDA estimated beef production for the week was down 6.5% from the same week in 2010. Beef output for the year was down 0.4%, while exports were up sharply. That resulted in lower per capita US consumption and higher average prices. 2011 was the first year in history that front month cattle futures were above $100 for the entire year.

Lean Hog futures lost 1.8%, as the pre-Christmas surge from the Hogs & Pigs report didn’t hold up after traders came back to work. Cash hog prices slipped, mostly because pork cutout values were still declining. The cutout was down .08% for the week. Estimated pork production for 2011 was 1.5% larger than in 2010. Production for the last week of 2011 was 2.6% larger than the same week in 2010.

Market Watch: There will be no US futures trading on Monday, as the market observes the New Years holiday. There will also be no Globex trade on Monday evening. Global markets will trade. With the start of the New Year, we get asset allocation adjustments for the major index funds, and fresh dollars allocated to hedge funds and CTA’s. Those flows tend to be market neutral, but can occasionally cause a big price move that comes out of nowhere when there isn’t enough liquidity.  USDA reports will run a day behind, with Export Inspections on Tuesday and Export Sales delayed until Friday. Friday will be the last trading day for the January serial options in Live Cattle and the currencies. We should also start to see private estimates start popping up for the key January 12 USDA reports.

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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