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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.

Landing On Some Hard Numbers

Oct 12, 2012

Brugler 

Market Watch with Alan Brugler

October 12, 2012

 Landing on Some Hard Numbers

Continuing our airport analogy from last week, we made our connecting flight on Thursday, with USDA rolling out some in some cases surprising crop numbers. The corn market caught a tailwind from tight projected US and world corn ending stocks, while the bean bulls had to return to the runway because of heavier projected ending stocks for 2013. 

Corn futures managed a nickel gain for the week after coming within pennies of limit up on Thursday following the USDA reports. That tells you things were weak early and also retreated on Friday. Weekly export sales were delayed until Friday and very disappointing at only 14,200 MT. Of that figure, 10,000 MT was for 2013/14 delivery. The current year net sales were battered by a number of cancellations. Ethanol weekly production rebounded 15,000 barrels per day from the prior week. Ethanol stocks ballooned, however, as the market failed to absorb the extra supply. The USDA report numbers themselves were bullish. USDA cut projected average yield to 122 bushels per acre, and added only 300,000 harvested acres based on FSA data. Projected ending stocks were dropped to current pipeline level at 619 million bushels. The cash average price midpoint dropped 10 cents to $7.80.

Soybeans dropped 1.9% for the week, despite a solid day on Thursday. Weekly export sales were modest at 523,700 MT for both 2012/13 and 2013/14.  USDA also reported 180,000 MT of new export business to China under the daily reporting system on Friday, along with 21,000 MT of soy oil sold to China for 2012/13 delivery. None of that helped, with futures down 26 cents after the export numbers came out. The USDA numbers on Thursday were mostly bearish. Production was hiked to 2.86 billion bushels, and average yield rose to 37.8 bushels per acre on the highest average bean weight per pod in 10 years in the objective yield plots. Harvested acres rose 1.1 million after the FSA data was incorporated. The good news for producers is that the increased production is all expected to leave the country. USDA bumped up exports by triple digits, leaving ending stocks at a still snug 130 million bushels. The average cash price midpoint dropped to $15.25. November futures settled at $15.225 on Friday.

Two of the three wheat markets were higher this week, while Chicago lost a penny per bushel. Poor weekly export sales are a problem. USDA had to cut projected exports for the year because the cumulative bookings are running too far off of the pace needed to meet the old 1.2 billion bushel forecast. USDA did cut projected ending stocks for 2013 by 44 million bushels to 654 million. They raised feed use to reflect the larger pace of first quarter consumption shown by the September 28 grain stocks report. The world ending stocks estimate continues to shrink, and is now at 173 MMT after USDA took 3 MMT off of Australia and made some other adjustments.  

Nearby cotton futures lost 0.18% for the week, a moral victory for the bulls. USDA raised projected US ending stocks to 5.6 million bales, with average yield rising to 795 pounds per acre. Even worse, the projected world ending stocks were bumped up to 79.11 million bales, a record large surplus that represents 270 days of use at the current global consumption rate. China is a problem, as their stocks rebuilding program in 2011/12 was a little too successful. They are staring at a multi-year high in stocks and a multi-year drop in consumption/exports of finished goods. USDA’s projection of their ending stocks would leave China holding 46% of the global surplus at the end of July.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

09/21/12

09/28/12

10/05/12

10/12/12

Change

% Change

Dec

Corn

$7.48

$7.56

$7.48

$7.53

$0.05

0.64%

Dec

CBOT Wheat

$8.97

$9.03

$8.58

$8.57

($0.01)

-0.09%

Dec

KCBT Wheat

$9.26

$9.28

$8.78

$8.90

$0.12

1.37%

Dec

MGEX Wheat

$9.58

$9.59

$9.18

$9.24

$0.06

0.65%

Nov

Soybeans

$16.22

$16.01

$15.52

$15.23

($0.29)

-1.87%

Oct

Soybean Meal

$484.50

$487.00

$474.70

$474.30

($0.40)

-0.08%

Oct

Soybean Oil

$54.45

$52.18

$50.76

$49.89

($0.87)

-1.71%

Oct

Live Cattle

$125.53

$122.08

$123.05

$123.90

$0.85

0.69%

Sep

Feeder Cattle

$147.23

$143.80

$144.83

$143.10

($1.73)

-1.19%

Oct

Lean Hogs

$75.80

$77.18

$81.33

$82.75

$1.43

1.75%

Dec

Cotton

$73.25

$70.65

$71.49

$71.36

($0.13)

-0.18%

Dec

Oats

$3.76

$3.71

$3.67

$3.92

$0.25

6.74%

Nov

Rice

$15.24

$15.48

$15.11

$15.03

($0.08)

-0.53%

 

Cattle futures gained 85 cents for the week after a similar advance the week before. The cash cattle market was mostly $1 higher, and October futures tracked the increase in value. Wholesale beef prices were higher, with choice cutouts up 0.9% for the week and select product was up 0.8% on a Friday/Friday basis. Estimated beef production for the week was down 1.3% from the same week in 2011, and tonnage for 2012 YTD is now 2.0% below last year. Weekly export sales at 15,100 MT were down slightly from the previous week.

Hog futures rose another 1.75% this week after a 5.4% jump the prior week. This is the 5th week of strong gains. Estimated pork production for the week was up 1.6% from the previous week, and up 1.9% from the same week in 2011. Pork production YTD is up 2.4%. Estimated carcass weights are down 3 pounds from last year, which is offsetting the larger slaughter numbers. The pork carcass cutout value rose 3.28% for the week on a Friday/Friday basis, led by hams. The increasing product value allowed hogs and the CME Lean Hog Index to rise, along with October futures which converge with the Index at expiration.

Market Watch:

The market will start this week looking at the NOPA monthly crush report on Monday morning. Since Census discontinued monthly Crush reports in 2011, the NOPA series has been important for getting a grasp on trends in crush and product production. USDA will also issue weekly Export Inspections and Crop Progress reports on Monday. The weekly Export Sales report on Thursday is also significant given the huge percentage of expected US soybean sales that are already on the books, and the reverse situation in corn. Livestock producers will have the monthly Cattle on Feed report on Friday the 19th. A number of financial market options also expire on Friday (November grain options don’t expire until the following week).

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. Visit our web site at https://www.bruglermarketing.com for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

Copyright 2012 Brugler Marketing & Management, LLC

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