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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.

Persistent Selling

Sep 16, 2011

Brugler

Market Watch with Alan Brugler

September 16, 2011

Persistent Selling

The livestock industry had a good week, with higher selling prices available in the futures, and plunging grain prices. There was persistent selling in grains all week, following the USDA production reports on Monday morning. The USDA numbers were actually as bullish as anticipated (except maybe for wheat), but the large spec funds had loaded up on longs ahead of the report and weren’t getting any upside movement. They decided to leave the party, or at least took some money off the table ahead of end of quarter asset allocation adjustments. A few traders may also be looking ahead to the September 30 USDA Grain Stocks report. Those quarter reports have tended to catch the market off guard in the past two years. 

Corn was down the third week in a row, losing more than 6% of its value. USDA actually showed a smaller yield estimate than the trade average guess, at 148.1 bpa. Production was cut to 12.497 billion bushels. Field reports of harvested yields were the typical "above expected" and "below expected" without defining whether expected was better than last year or just better than earlier gloom and doom ideas. The key question is whether those yields are larger than USDA has already projected for those same counties. Acreage changes can also move the production meter. The FSA folks increased planted acreage and prevented planting claims, but these do not flow directly to the NASS acreage tables. Domestic feed use is assumed to be slipping, and USDA cut projected feed use for the year by 200 million bushels. USDA weekly corn export sales were the largest since March, showing that low prices are beginning to attract buying interest.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/26/11

09/02/11

09/09/11

09/16/11

Change

% Change

Dec

Corn

7.67

7.6

7.365

6.92

0.4450

6.04%

Dec

CBOT Wheat

7.97

7.755

7.2975

6.8825

0.4150

5.69%

Dec

KCBT Wheat

8.92

8.8

8.325

7.84

0.4850

5.83%

Dec

MGEX Wheat

9.3675

9.4275

9.0725

8.5625

0.5100

5.62%

Nov

Soybeans

14.235

14.4575

14.2675

13.555

0.7125

4.99%

Oct

Soybean Meal

376.25

379.9

370.3

348.7

21.6000

5.83%

Oct

Soybean Oil

56.93

57.88

58.34

56.55

1.7900

3.07%

Oct

Live Cattle

115.2

114.8

118.45

118.5

0.0500

0.04%

Sep

Feeder Cattle

132.6

132.65

133.225

135.3

2.0750

1.56%

Oct

Lean Hogs

87.1

85.8

87.25

87.35

0.1000

0.11%

Oct

Cotton

103.92

106.59

110.3

109.08

1.2200

1.11%

Sep

Oats

3.79

3.69

3.4825

3.455

0.0275

0.79%

Sep

Rice

16.99

17.96

18.06

17.89

0.1700

0.94%

 

Wheat futures were again lower at all three exchanges this week, with KC sinking another 5.8% because a respectable portion of the winter wheat growing area saw rain. Planting activity is expected to pick up, but the drought is nowhere near over. Scattered areas might get 2" over a week, but a lot were reporting .15" at a time and central Texas as mostly still bone dry. Chicago and MPLS was down almost as much as KC, with the US still uncompetitive into Egypt and some other major buyers. With freight, US wheat is still as much as $30/MT too high to work into Egypt. On Monday, USDA projected world wheat use for animal feed use in 2011/12 will be record large.

Soybeans were down 5% for the week. Soybean meal prices fell 5.8% and put a lot of pressure on crush margins. Soy oil was also down 3%. Declining chick placements and abundant DDG supplies are working against higher meal prices at the present time. Projected soybean ending stocks rose to 165 million bushels, as USDA trimmed use and raised production. USDA made no changes to expected Brazilian or Argentine soybean production, and also left projected Chinese imports UNCH from last month.

Cotton was down 1.1% for the week. Weekly cotton export sales were net negative, which is rare this time of year. There were more cancellations than new bookings. USDA is now projecting US cotton production at 16.56 million bales on an average yield of 807 pounds per acre. World ending stocks were tightened to 51.91 million bales from 52.66 million last month.

Cattle futures were up only a nickel for the week, as Friday profit taking erased gains. Cash cattle prices were up sharply for the week, with $118-119 trades reported in the south.  Packers were able to use that to catch up from a light kill in the holiday week. Estimated beef production was up 13.2% from the previous week. Unlike hogs, beef production for the week was down 4.1% from the same week in 2010. Wholesale prices were up sharply, with choice boxed beef up 3% for the week. Select was up 1.5%, Friday to Friday.

Lean Hog futures were up one thin dime for the week, courtesy of a triple digit loss on Friday. Pork production jumped 14.3% for the week as packers caught up from the Labor Day week. Production was also up an estimated 4.2% vs. the same post-holiday week in 2010. We’re definitely talking more pork production. Estimated carcass weights were down about 3 pounds from last year, with hogs pulled ahead to free up producers for harvest activity. The pork cutout value was up 23 cents cents for the week on a Thursday/Thursday basis.

 

Market Watch: The market focus shifts a little this week. Harvest progress and updated condition ratings will get attention on Monday evening with the USDA Crop Progress report. The Fed meets on Tuesday and Wednesday, with various "twist" or other easing schemes expected to be discussed due to slow US growth and the shaky banking situation in Europe. USDA will release a Cold Storage rport on Thursday. The Cattle on Feed report is scheduled for Friday the 23rd after the close. Friday will also mark the expiration of October grain and financial futures options.

 

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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