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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.

Old Fashioned Weather Market

Jul 15, 2011

Brugler

Market Watch with Alan Brugler

July 15, 2011

Old Fashioned Weather Market

 

While we can’t ignore the role of the investment crowd, price action this week in the grains was as close to an old fashioned weather market as we have come for a while. Above normal temps have been building over the eastern 2/3 of the US for a while, and now the Texas drought has joined with typical summer highs to form a ridge of hot and mostly dry air over the nation’s midsection. The forecasts as of Friday had that pattern holding into at least July 29, with hints of a shift to the ECB (eastern corn belt) toward the end of the period. We’ve had hot weather, and the stuff is designed to grow outside, but the tight old crop ending stocks for corn and soybeans magnify the importance of a big US crop.  

 

Corn futures shot up 59 cents per bushel this week in the September contract, a 9% advance for the week. The two week gain is 94 cents per bushel. USDA supported the rally by showing more ambitious usage than the trade expected, leaving projected old crop ending stocks at 880 million bushels. New crop ending stocks were projected to be 870 million bushels. However, there are questions about the harvested acreage estimate given Missouri River flooding, and the average yield estimate of 158.7 bushels is being challenged by 95-105 degree temps during pollination. Adding weather premium was the name of the game all week.

 

Soybeans were 3% higher for the week, over 40 cents per bushel.  USDA’s ending stocks figure of 200 million bushels was widely anticipated, but the 175 million bushel new crop number is snug. As with corn, the trade is trying to figure out if and how much the crop is being hurt by the much above normal temps throughout the US growing area. Those were shifting a little further east in the July 23-29 period, but an estimated 30-40% of the crop will be under the ridge for a week or more and getting stressed with limited moisture and high temps. Soybean meal futures were up 3.45% for the week, boosted by corn. Soy oil advanced 1.41%, with the NOPA report hinting at larger biodiesel use in June.

 

Attend the Brugler Marketing Summer Seminar nearest you for the complete picture of the grain and livestock markets, also with some fantastic farmer oriented options training. Call 402-697-3623 and ask for a registration packet or send an email request to seanp@bruglermktg.com.Seminars will be held July 25-26 in West Chester, OH (north of Cincinnati) and August 1-2 in Omaha, NE.

Wheat prices were higher once again, although for MPLS wheat it was a struggle. New crop September MGE wheat was up only 0.83% for the week, while Chicago gained 6.68% over the same 5 trading days. The inter-market spread relaxed a little bit as spring wheat crop condition ratings improved and USDA boosted projected HRW production in the Tuesday crop reports. Weekly export sales business is holding in there, but Russia successfully sold another 180,000 MT of wheat to Egypt on Friday, at prices well below US values.

October cotton plunged nearly 13% for the week. World demand for cotton over $1 per pound has dwindled to something approaching zero. USDA again reported negative weekly export sales, with more cancellations than new purchases. The spinners and mills have been pushing prices higher, but the weakness of the US and European economies is limiting the price hikes that can be passed on at retail. That’s backing up cotton in the system, while at the same time more synthetic fiber is being used in an attempt to keep prices down. USDA raised projected ending stocks by 500,000 bales, but only by cutting projected production by 1 million bales to keep up with reduced export sales estimates in both old crop and new crop.

 

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

06/24/11

07/01/11

07/08/11

07/15/11

Change

% Change

Sep

Corn

6.57

6.0675

6.4225

7.0125

0.5900

9.19%

Sep

CBOT Wheat

6.61

6.1225

6.5125

6.9475

0.4350

6.68%

Sep

KCBT Wheat

7.6725

7.2075

7.2725

7.645

0.3725

5.12%

Sep

MGEX Wheat

8.185

8.045

8.17

8.2375

0.0675

0.83%

Sep

Soybeans

13.1075

13.095

13.45

13.8575

0.4075

3.03%

Sep

Soybean Meal

339.5

342.5

348.3

360.3

12.0000

3.45%

Sep

Soybean Oil

55.61

55.55

56.55

57.35

0.8000

1.41%

Aug

Live Cattle

113.5

112.85

114.65

110.6

4.0500

3.53%

Aug

Feeder Cattle

138.6

140.475

143.6

135.7

7.9000

5.50%

July

Lean Hogs

96

95.5

95.875

95.15

0.7250

0.76%

Oct

Cotton

126.92

121.81

116.58

101.46

15.1200

12.97%

Sep

Oats

3.4

3.47

3.495

3.55

0.0550

1.57%

Sep

Rice

14.505

14.91

16.13

16.995

0.8650

5.36%

 

Cattle futures sank more than $4 for the week, losing 3.53%. USDA reported solid weekly export sales of more than 17,000 MT for the previous week, but cash cattle traded at only $111 vs. mostly $114 the week before. Wholesale prices were higher for the week, so packer margins got a little better. Beef production for the week was 0.2% larger than the same week in 2010. The YTD tonnage is up 0.5%, while slaughter numbers have actually been 0.1% smaller. Estimated carcass weights are now the same as last year, but they were heavier earlier in the year.

 

Lean Hog futures marked time while waiting for the CME Lean Hog Index to decline into expiration of the July futures contract. July expired on Friday. Net change for the week was only 72 cents, in the southerly direction. Estimated pork production for the week was up 16% over the holiday shortened July 4th week, and up 1.6% vs. the same week in 2010. The pork carcass cutout value was up 3% for the week on a Friday/Friday basis. That gave the packers more spending money, but they were reluctant to share it with hog producers. Cash prices were irregular throughout the week.

 

Market Watch: The main USDA reports this week are bookends, with Crop Progress and condition ratings on Monday and the Cattle Inventory, Cattle on Feed and Cold Storage reports on Friday afternoon. There will also be a weekly Export Sales report on Thursday morning. The August grain options expire on Friday the 22nd as well.

 


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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