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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.

Losing Week for Most

Jun 01, 2012

Brugler

Market Watch with Alan Brugler

May 25, 2012

Losing Week for Most

 

It was a tough week for nearby corn futures, down 4.7% after losing 9% the previous week. Weekly export sales were again poor at only 282,700 MT. China continues to buy small quantities, but increased competition from Brazilian new crop has hurt sales out of the Gulf. On a bullish note, wheat futures are now high enough to remove themselves from feed ration consideration unless basis is extremely weak. July futures were down 79 cents for the month of May, while new crop December was only off 21 cents. New crop has to maintain at least a minimum of weather risk premium because of the above normal temps and below normal precip in the weather forecasts for the Corn Belt.

 

Soybeans were down 2.7% for the week, held down by a 3.6% loss in soybean meal. Weekly soybean export sales were smaller than expected for the reporting week ending May 24 at 418,700 MT. Chinese buying slacked off, but their estimated imports for May are record large at 7.23 MMT from all sources. US export commitments (shipments plus open contracts) fully cover the USDA export estimate for the year. The Chinese government sold a few very old soybeans from reserves at discounted prices. These reserve sales should be seen as housekeeping and not an attempt to lower domestic bean prices. Chinese veg oil prices have dropped sharply, raising demand concerns but also likely a function of the strong imports of soybeans for crushing.

 

The three wheat markets were all sharply lower. The big futures rally in the middle of the month proved to be nothing more than a short covering panic. World ending stocks are very likely to tighten in 2012/13, and may tighten further when USDA updates the numbers on June 12. However, the rally also priced wheat out of feed rations in several countries, resulting in more corn feeding this summer. That could mean a cut in the global feed use estimate. US weekly export sales were on the low end of trade estimates Thursday. The marketing year ended May 31, with the final export sales report coming next Thursday.

 

Nearby cotton futures lost more than 20% during the month of May. For the week they were down 6.8%. Export sales continue to be robust. The USDA weekly export sales report showed strong net old and new crop sales of 310,000 RB, China was in for 89,500RB for 2011/12, and 226,700RB for 2012/12. However, commercials are leery of the long side with poor global demand forecasts and a projected build up of stocks in 2012/13. There was also considerable exodus of speculative longs out of the July contract ahead of the Goldman and DJ-AIG roll period and the July options expiration.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/11/12

05/18/12

05/25/12

06/01/12

Change

% Change

July

Corn

$5.81

$6.36

$5.79

$5.52

($0.27)

-4.67%

July

CBOT Wheat

$5.97

$6.95

$6.80

$6.12

($0.68)

-9.96%

July

KCBT Wheat

$6.10

$7.05

$7.00

$6.37

($0.63)

-9.00%

July

MGEX Wheat

$7.26

$7.92

$7.86

$7.40

($0.47)

-5.95%

July

Soybeans

$14.06

$14.05

$13.82

$13.44

($0.38)

-2.73%

July

Soybean Meal

$408.50

$417.90

$409.30

$394.50

($14.80)

-3.62%

July

Soybean Oil

$52.24

$50.32

$50.12

$48.59

($1.53)

-3.05%

Jun

Live Cattle

$115.15

$119.53

$117.65

$117.70

$0.05

0.04%

Aug

Feeder Cattle

$157.45

$160.70

$158.50

$157.38

($1.13)

-0.71%

June

Lean Hogs

$85.30

$87.43

$85.20

$90.73

$5.53

6.48%

July

Cotton

$78.97

$77.99

$73.62

$68.59

($5.03)

-6.83%

July

Oats

$3.32

$3.40

$2.96

$2.85

($0.11)

-3.80%

July

Rice

$15.71

$15.18

$14.51

$14.04

($0.47)

-3.21%

 

Cattle futures were up 5 cents for the week. Cash cattle trade developed at mostly $121 on Friday, with some additional offers at $122-123. Nebraska business was mostly $194-195 on a dressed basis. Weekly beef export sales reported by USDA totaled 20,300 MT, the highest since the reporting week ending May 3. Cumulative exports are 8% larger than 2011 at this point, and 2011 was a record sales year. Wholesale prices did rise 0.9% for the week in the choice, with choice boxes up $1.75 but Select up only 21 cents on a Thursday/Thursday comparison. Estimated carcass weights are now 11 pounds above last May’s actual.  They had been running 27 pounds high earlier in the spring. Estimated beef production for the week was down 2.5% from the same week in 2011. Year to date production is now down 2.9% from last year, although the head count is down 4.7%.

 

Lean Hog futures jumped more than $5.50 per hundred pounds this past week.  The pork carcass cutout value was up $3.75 on a Thursday/Thursday basis, a 4.8% increase. Refilling business after the holiday was supportive to pork, with packer offerings termed light to moderate while demand was moderate. Pork production year to date is up 1.7% from last year. Production this past week was up 4.52% from the same Memorial Day week last year. Carcass weights are estimated at 208 pounds, which would be up 2# from the 2011 actual weight.  

 

Market Watch:

June cattle options expired on Friday, so the first order of business for cattle futures this week will be dealing with any surprise futures positions arising out of options expiration. With the massive liquidation of speculative fund positions last week, more attention than usual will be paid to the outside markets and whether we will experience more of the same. We continue to describe the European situation as the "crisis that keeps on giving". While financial institutions have had 2 years to make adjustments for a Greek or Italian or Spanish default the size of the problem makes it hard to cover all the risks. Just ask JP Morgan! The grain market will be focused on the USDA crop condition ratings on Monday evening. The wheat crop is far enough along for the ratings to correlate well with final yields. Corn and soybean ratings should be treated only as "hints". We’ll also have the regular USDA weekly Export Sales report on Thursday, with keen interest in whether the sharp drop in grain prices has attracted any additional export business.

 

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. Our web site is www.bruglermarketing.com.

 

 Copyright 2012 Brugler Marketing & Management, LLC

 


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