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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.

Limited Reaction

Dec 10, 2010

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Market Watch with Alan Brugler
December 10, 2010
Limited Reaction
 
USDA released its monthly WASDE estimates on Friday morning. Unless several recent reports, these generated little market reaction. That’s mostly because USDA made few changes in the domestic estimates, and most of the numbers were close to the pre-report expectations circulating in the trade.
 
The soybean complex was mixed for the week. Soybeans and soybean meal were lower on the week, while soy oil gained ground. Weekly export inspections and export sales of soybeans were both slower, and the US dollar was firmer. Those put a wet blanket on bullish bean expectations. Speaking of wet blankets, China was also expected to take additional banking steps to slow down inflation of commodity prices over the weekend. USDA raised projected US export sales by another 20 million bushels, due mostly to the aggressive pace of Chinese buying, and cut the expected August carryover to 165 million bushels. That’s just barely above the 151 million bushels from the previous year.
 
Corn prices were just barely positive for the week, up 0.22%. Still, that makes the 3rd week in a row with a higher close.  The acreage battle of 2011 is still simmering, and the old crop situation still looks tight. On Friday morning, USDA raised projected corn ending stocks by 5 million bushels, due to additional imports from Canada. They almost never change the feed & residual category in December, preferring to wait for the Grain Stocks report. This year was no exception. Ethanol and exports were also left at previously predicted levels.  
 
Wheat futures posted double digit gains for the week in MPLS and KC, but Chicago futures ended the week 2 cents lower after posting the biggest percentage gain in the prior week. Egypt bought Argentine and French wheat this week, but none from the U.S. Continued wet weather played havoc with the mature Australian wheat crop and threatened to turn several million tonnes of the production there into feed quality wheat rather than export quality milling wheat.  That’s the reason for the firmness in the KC and MPLS markets. The world needs the more expensive milling quality wheat. USDA did boost their projection for U.S. ending stocks by 10 million bushels due to higher flour extraction rates. The world ending stocks were also increased due to higher production estimates for Australia, Canada, Brazil and others.
 
Cattle futures dropped 2.16% for the week. Feedlots started the week with high expectations, and asking prices around $105-106. However, the wholesale market did a round trip. Boxed beef was up, and then came back down by the end of the week. Choice boxes were only 7 cents higher on Thursday night than they had been the previous Thursday. With the fading beef prices as leverage, cash cattle traded at only $101. That left futures too high during December deliveries, and the market pulled back. Weekly beef export sales were also smaller than in recent weeks, raising concerns about where demand was going to come from as marketings pick up in December.
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
11/19/10
11/26/10
12/03/10
12/10/10
Change
% Change
Dec
Corn
$5.21
$5.38
$5.59
$5.60
0.01
0.22%
Dec
CBOT Wheat
$6.45
$6.48
$7.38
$7.36
0.02
0.34%
Dec
KCBT Wheat
$7.10
$7.21
$8.12
$8.22
0.11
1.29%
Dec
MGEX Wheat
$7.26
$7.34
$8.17
$8.54
0.37
4.53%
Jan
Soybeans
$12.02
$12.39
$13.00
$12.73
0.27
2.10%
Dec
Soybean Meal
$325.80
$336.80
$350.10
$339.10
11.00
3.14%
Dec
Soybean Oil
$48.96
$49.90
$53.08
$53.79
0.71
1.34%
Dec
Live Cattle
$101.45
$102.23
$103.18
$100.95
2.22
2.16%
Jan
Feeder Cattle
$117.40
$118.75
$118.68
$118.18
0.50
0.42%
Dec
Lean Hogs
$69.13
$70.35
$69.28
$69.45
0.17
0.25%
Mar
Cotton
$123.15
$112.11
$132.34
$136.97
4.63
3.50%
Dec
Oats
$3.53
$3.44
$3.67
$4.00
0.33
8.99%
Jan
Rice
$13.90
$13.41
$14.67
$13.93
0.74
5.08%

  
Hogs managed a 17 cent gain for the week.  The pork cutout value was up a modest 64 cents for the week, about 0.82%. Hog futures were up 0.25%. Futures were still maintaining a premium to the CME Lean Hog Index, but need to sync up with the index because December expires this week and is settled against the index. That convergence kept a lid on the Dec futures. Estimated pork production for the week was down 3.1% from the previous week, but up 3.5% from the same week in 2009. Pork production for the year to date is down 3.1%.
 
Cotton futures continued their comeback rally. They were up another 3.5% for the week, and posted the highest front month contract settlement since the November USDA report. Prices were trying to do the limit move thing when USDA put out their WASDE numbers on Friday, but the market faded into the close and settled only 1.02 cents higher in the key March contract. USDA trimmed US production by 150,000 bales, and also added 100,000 to domestic mill use. After a residual use adjustment, that took projected ending stocks down to a squeaky tight 1.9 million bales from the prior estimate of 2.2 million. World stocks were increased slightly to 43.39 million bales.
 

Market Watch:  The USDA reports on Friday generated little market reaction. The main reports for this week are the routine Export Inspections on Monday, Export Sales on Thursday, and the Cattle on Feed report on Friday afternoon. NOPA will issue its monthly soybean crush estimate on Tuesday morning. Tuesday will also be the last trading day for December grain futures.

 
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 2010 Brugler Marketing & Management, LLC
 

 

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