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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.

Mostly Black Ink

Dec 02, 2011

Brugler

Market Watch w/Alan Brugler

December 2, 2011

Mostly Black Ink

 

It turns out that much of the Thanksgiving weakness may have been due to traders parking money for ....Thanksgiving. A flood of buying came back into the commodities and equities markets this week. The S&P had the biggest up week since March 2009, with a coordinated global central bank intervention coinciding nicely with a bounce from the 61.8% Fibonacci retracement support on the S&P chart. The European debt crisis story continues, but Italian interest rates dropped sharply after the intervention and bought some time to work out other issues. Most of the ag commodities were in the black for the week due to the perceived monetary easing and the weaker US dollar. The dollar was firmer on Friday, but dropped for the week.

It wasn’t much, but it was a plus. Corn was up 4 cents per bushel for the week, a 0.7% gain. Ethanol production reached the highest level of 2011 @ 930,000 bpd. Despite the strong production, ethanol stocks dropped to 17 million, reflecting good demand both domestically and for export. On the bear side, corn gluten feed (wet mill byproduct) exports to Europe have declined amidst the economic issues there. Corn export sales bookings also have been slow for the past month, although total commitments year to date are down only 28 million from last year at 872 million bushels. Feed wheat competition continues in the world market, with some Asian destinations taking delivery of their first Ukrainian feed wheat purchases ever.

The wheat complex showed solid advances at all three exchanges. MPLS was up 3.45%, KC was up 5.05% and Chicago rose 6.57%. There was a confluence of bullish factors. Chicago was helped by the CFTC report on Monday which showed a record large net short spec fund position. Some shorts wanted a quick exit from what had become a ‘crowded’ trade. Weekly export sales were solid again, and featured the higher quality/more expensive wheat grades. The Ukraine also reduced projected exports to only 6 MMT on Friday, when previous estimates had been 2-3 MMT higher. That left a little more wiggle room for US exports. Gains were limited by the ongoing Russian exports and expanded new crop sales out of Argentina.

Soybeans were up 2.6% for the week, or almost 30 cents per bushel. Soy oil contributed, up 3.77% for the week. Changes to Indonesia palm oil export taxes disrupted the soy oil market. US biodiesel production is also rapidly drawing down US soy oil stocks. US export shipments last week were a solid 1.2171 MMT, mainly to China (893,500 MT). The Commitment of Traders report showed the large spec funds (managed money) cutting back on their net short positions after dipping into minus territory a week earlier. That group is rarely net short in the soybean market, with the exception of a couple months in 2006 when US projected ending stocks were over 500 million bushels.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

11/11/11

11/18/11

11/25/11

12/02/11

Change

% Change

Dec

Corn

6.385

6.1025

5.825

5.865

0.0400

0.69%

Dec

CBOT Wheat

6.1675

5.9825

5.745

6.1225

0.3775

6.57%

Dec

KCBT Wheat

7.04

6.6725

6.435

6.76

0.3250

5.05%

Dec

MGEX Wheat

9.3425

9.145

8.2725

8.5575

0.2850

3.45%

Jan

Soybeans

11.755

11.6825

11.065

11.3575

0.2925

2.64%

Dec

Soybean Meal

299.5

298.4

282.7

286.4

3.7000

1.31%

Dec

Soybean Oil

50.98

50.88

48.23

50.05

1.8200

3.77%

Dec

Live Cattle

120.55

119.7

121.1

121.9

0.8000

0.66%

Jan

Feeder Cattle

145.675

147.425

144.625

147.075

2.4500

1.69%

Dec

Lean Hogs

86.45

87.475

88.3

86.25

2.0500

2.32%

Dec

Cotton

99.24

94.9

90.82

91.35

0.5300

0.58%

Dec

Oats

3.215

3.04

2.92

3.18

0.2600

8.90%

Jan

Rice

15.22

14.68

14.235

14.455

0.2200

1.55%

 

Cotton eked out a 53 point net gain for the week after falling 842 points in the two previous weeks. The coordinated central bank move to lower interest rates on Thursday helped boost commodity prices in general and improve the demand outlook. China’s plan to reduce bank reserve requirements on December 5 was also seen as potentially stimulating buying interest there. US retail sales over the Thanksgiving weekend proved to be a mixed bag. Large HD TV’s were a big seller, but clothing heavy retailers like Kohl’s and JC Penney didn’t do as well. US weekly export sales also fell off sharply from the week before. The good news is that 92% of the projected exports for the year have already been sold/contracted. They just need to be shipped.

Lean Hog futures plunged $2.05 (2.3%) for the week. The value of a hog carcass continued to decline, defying those analysts who had been predicting a seasonal uptick after Thanksgiving. The pork carcass cutout value was down $1.16 or 1.3% for the week. The big "IF" in the picture continues to be the substantial premium that cutout value has over where it was last year or the year before. Estimated weekly pork production was up 14.5% from the short holiday week, but also 1.3% larger than the same week in 2010. Pork production YTD is up 1.1%.

 

Cattle futures closed 80 cents higher than they did on the previous Friday. US weekly beef export sales dropped to the lowest level since June 2, @ 9,100 MT. The reported cutout value of a choice graded steer dropped $4.11 in a week, a 2.1% drop Friday/Friday. Select beef was down 3%. Beef production for the week was estimated by USDA at 513.2 million pounds. That is 3.1% smaller than the same week in 2010, and YTD beef production is now 0.3% smaller than last year despite having larger numbers of cattle on feed. Actual slaughter is down 0.4% through this week.

Call in consulting service with Alan is available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 

Market Watch: Cattle traders will start the week dealing with any surprise positions inherited in the December options expiration on Friday. December cotton expires on Wednesday.  USDA’s main reports will be on Friday morning, with Crop Production and the WASDE supply/demand estimates. Traders will also look at weekly Export Inspections on Monday and Weekly Export Sales on Thursday, since one of the key questions for grains is whether the US is moving enough exports to hit USDA’s reduced expectations for the marketing year or if it needs to further reduce those estimates.

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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