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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.

Grains Still Lag!

Feb 18, 2011

 brulogomed

Market Watch with Alan Brugler
February 18, 2011
Grains Still Lag!
 
Yes, you read that right. While corn posted a new high for 2011, it is still 50 cents away from the 2008 high. Soybeans are below their 2008 high, and wheat is well below its 2008 high. This is not the case for commodities in general. The CRB Index, basket of commodities, traded more than 8% above the 2008 high this week. That doesn’t mean that the grains and oilseeds necessarily have to go to new highs, but it does show there is potential. Cotton, of course, hit the highest price in history this week, finally eclipsing the Civil War era top.
 
Corn tacked on another 3 cents this week, a 0.46% gain. That seemed like nothing after recent weeks, and it almost was. Without the more than 20 cent gains on Thursday, the market would have been down for the week. The Acreage War is still underway, but corn appeared to be winning. USDA showed 92 million acres in their baseline forecast released on Monday. Soybeans were under pressure, moving the soy:corn ratio toward corn. As we had anticipated, the bulls again came in late on Friday and dress up the close. Fundamentally, ethanol weekly production slowed down. Weekly ethanol stocks were close to UNCH. The weekly USDA Export Sales report again showed stronger business than the trade had expected at 1.17 million metric tonnes (46 million bushels) with the trade estimates ranging between 800 thousand and 1.1 MMT.
 
The soybean complex was down for the week. Brazilian producers have sold nearly half of their production already, and much of it at much lower prices. Merchants are thus able to be competitive and offer FOB prices below US levels. Brazilian harvest is more than 10% completed, and the beans are starting to be available. Argentina isn’t harvesting yet, but did avert a port strike and thus allowed more soy products into the global export market. China raised bank reserve requirements again, in another attempt to slow inflationary pressures. There were rumors that China would reduce import duties for soybeans and soy oil, which would pressure internal prices and presumably open the door for more US (and South American) shipments because it would make them cheaper to end users.
 
Wheat futures were lower on all three exchanges this week. Export interest has been coming in waves, and that buying continues. Egypt bought two cargos of US soft wheat. Turkey bought 100,000 MT of HRW. Japan bought their usual MOA tender requirements. The selling pressure was mostly long liquidation as prices hit longer term technical targets. USDA weekly export sales were 726,500 MT for last week, above the published trade estimates of 600,000 MT. 
 
Cotton futures set new all time highs, with limit up moves driving the March contract as high as 215.25 before a limit down drop on Friday. Some players were clearly scared of the volatility and margin call risk. The folks who ended up paying for the panic were mills with on call cotton positions that needed to be priced before first notice day. Weekly cotton export sales were modest, and contained little Chinese business. Export sales were 299,200 RB of combined upland and pima bookings.
 
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
01/28/11
02/04/11
02/11/11
02/18/11
Change
% Change
Mar
Corn
$6.44
$6.79
$7.07
$7.10
0.03
0.46%
Mar
CBOT Wheat
$8.26
$8.54
$8.67
$8.22
0.45
5.16%
Mar
KCBT Wheat
$9.12
$9.43
$9.73
$9.30
0.43
4.45%
Mar
MGEX Wheat
$9.62
$9.89
$10.18
$9.56
0.62
6.12%
Mar
Soybeans
$13.98
$14.34
$14.16
$13.68
0.48
3.39%
Mar
Soybean Meal
$377.00
$383.20
$378.10
$362.00
16.10
4.26%
Mar
Soybean Oil
$57.27
$58.98
$58.49
$56.49
2.00
3.42%
Feb
Live Cattle
$107.50
$108.25
$107.78
$111.05
3.27
3.04%
Mar
Feeder Cattle
$126.22
$125.00
$126.03
$130.08
4.05
3.21%
April
Lean Hogs
$91.63
$91.65
$92.38
$92.28
0.10
0.11%
Mar
Cotton
$164.75
$167.86
$189.97
$197.02
7.05
3.71%
Mar
Oats
$3.86
$4.16
$4.18
$4.10
0.08
1.97%
Mar
Rice
$15.01
$15.80
$15.89
$14.75
1.14
7.15%

 
Cattle futures jumped $3.27 for the week, a 3.04% advance. That was fueled by tightening numbers of cash cattle that are market ready, with cash trading at $109-110 on Friday. Wholesale prices ran into some resistance, with the choice boxed beef quoted at $167.29 on Friday. Select was at $166.59 and the choice/select spread rebounded above zero.
 
Hog futures wandered around some, but ended the week only 10 cents lower. They have settled in less than a dollar range for the past four weeks. The CME Index has been rising, and is now at $84.49. April futures are way up at $92.27 and expecting cash to continue to rally. The pork carcass cutout value is at $90.39 and also implies a more bullish view of the market than what we saw in the sliding cash hog prices this past week.  
 
Market Watch:  This will be a short week, with the US markets closed on Monday for the President’s Day holiday. That delays the usual Monday USDA Export Inspections report until Tuesday. Those who inherited futures positions at the March grain options expiration on Friday Feb 18 will have to wait until the Monday evening Globex session to do anything about it. USDA will release the monthly and annual Cold Storage reports on Tuesday. Tuesday will also be FND (First Notice Day) for March cotton futures. Thursday will mark the release of the monthly Census Crush and Census Cotton Consumption reports. USDA weekly export sales will be delayed until Friday morning.
 
Join us for one of the Brugler Marketing Winter Seminars and get the fundamental and technical information you need to navigate these markets over the next 6 months. Click on the following link and then choose the registration packet link for the location nearest you.
 
 
 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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COMMENTS (1 Comments)

NAGEL
CME LEAN HOG INDEX WAS $72.93 ON FEB 10. THE INDEX WAS HIGHER EVERY DAY FOR 24 CONSECUTIVE DAYS PEAKING ON FEB 11 @$85.88 FOR A $12.95 MOVE. THIS IS A $.539 AVERAGE DAILY MOVE. THE LEAN INDEX HAS NOW DROPPED 3 CONSECUTIVE DAYS TO $84.49 ON FEB 16. THIS IS A -$1.39 MOVE IN 3 DAYS WITH AVERAGE DAILY POSTING DOWN TO $84.05. WATCH FOR A MAJOR CORRECTION IN CME LEAN HOG FUTURES.
9:24 AM Feb 19th
 
 
 
 
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