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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.

Race to the Bottom

Sep 02, 2011

Brugler

Market Watch with Alan Brugler

September 2, 2011

Race to the Bottom

 

Corn yield guesses were spiraling lower all week, from the Linn Group figure of 149.1 bpa down to FCStone’s 146.3 bpa to Lanworth’s 143 on Friday. It appeared to be a contest to see who could put out the lowest number, a race to the bottom. Soybeans weren’t immune, with FCStone lowering their bean yield estimate to 41.05 bushels and Linn Group at 41. Will USDA really cut the numbers that far? The average drop in corn yield from August to September is much smaller than the trade estimates would require, but there is historical precedent for a drop of 14 bushels or more in corn. USDA did that in 1983. That was a severe fall drought year. All of this has consequences for projected ending stocks, and the price needed to make consumption fit the available supply.

 

Corn closed 2 ¼ cents lower for the week, as the big rally on Friday was not enough to offset losses on Thursday. Most of the week was spent trading yield estimates, which grew lower as the week went on. Yield numbers as low as 143 bpa were floating around on Friday. The demand side is another story. With hogs and cattle prices lower, and chick placements down nearly every week, domestic feed use is assumed to be slipping. USDA weekly export sales were also unexciting. With the outside markets under serious "get me out" pressure on Thursday and Friday because of perceived economic weakness, it was tough to get the bulls interested in committing more money to the long side.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/12/11

08/19/11

08/26/11

09/02/11

Change

% Change

Sep

Corn

$7.02

$7.11

7.525

7.5025

0.0225

0.30%

Sep

CBOT Wheat

$7.03

$7.31

7.6225

7.3

0.3225

4.23%

Sep

KCBT Wheat

$7.98

$8.19

8.6325

8.58

0.0525

0.61%

Sep

MGEX Wheat

$8.61

$9.45

9.5625

9.8425

0.2800

2.93%

Sep

Soybeans

$13.37

$13.60

14.1475

14.365

0.2175

1.54%

Sep

Soybean Meal

$348.60

$354.10

376

377.8

1.8000

0.48%

Sep

Soybean Oil

$54.60

$55.39

56.6

57.74

1.1400

2.01%

Oct

Live Cattle

$120.45

$115.50

115.2

114.8

0.4000

0.35%

Sep

Feeder Cattle

$137.53

$133.80

132.6

132.65

0.0500

0.04%

Oct

Lean Hogs

$89.47

$88.38

87.1

85.8

1.3000

1.49%

Oct

Cotton

$101.25

$106.76

103.92

106.59

2.6700

2.57%

Sep

Oats

$3.45

$3.49

3.79

3.69

0.1000

2.64%

Sep

Rice

$16.81

$16.75

16.99

17.96

0.9700

5.71%

 

Wheat futures were a mixed bag. The Minneapolis market was up nearly 3%, with a bit of a short squeeze in the September deliveries, and with harvest still lagging well behind the average pace for this date. KC and Chicago were down for the week, as rain forecasts turned slightly more favorable for winter wheat planting.

 

Soybeans were up 1.5% for the week. Global ending stocks are seen shrinking in 2011/12, due to a smaller crop in the United States and expectations that Brazilian producers will have more corn this year. FC Stone put out a 41.05 bushel yield estimate, lower than other private estimates from the previous week and thus supportive. Projected ending stocks are dropping with the production ideas, with the main question being whether USDA will go along with the private cuts in expectations. It is also noteworthy that Census biodiesel use of soy oil was up sharply in July, but other domestic use slowed. Chinese soy oil futures  prices are the highest in quite some time, but they also appear to have access to more South American soybeans than would usually be available by September. That slows the likely ramp up of US exports.

Cotton prices are back to about where they were two weeks ago. For bulls, that is a good thing, up 2.57% from the previous week. Back to school sales data was a little stronger than some of the talking heads would have suggested, but there are still problems with working high priced yarn into products that consumers are willing to buy. US weekly export sales did improve, thanks to a sharp drop in the rate of cancellations. Some cotton was lost due to Hurricane Irene, and the market is building in a little premium against further losses due to Tropical Storm Lee in the Gulf this weekend or perhaps T.S. Katia next week. The computer models still disagree about whether Katia will make US landfall.

 

Cattle futures were down 40 cents (0.35%) for the week, not a bad showing given the weakness in wholesale prices. Choice boxed beef was down to $181.80 on Thursday. That was a 3.19% drop on a Thursday/Thursday basis. Beef production was down an estimated 1.6% for the week, and down 2.2% from the same week in 2010. Estimated carcass weights are running 3 pounds below last year.

 

Lean Hog futures were down 1.5% for the week.   Pork production was up 0.6% for the week, and estimated to be almost identical to last year’s 422.5 million pounds for the pre-Labor Day week. Estimated hog carcass weights have dropped to 198 pounds after having been at 206 and higher last spring. Pork carcass cutout values were under severe pressure, dropping 7.06% on a Friday/Friday basis. That of course translated directly into plunging cash hog prices.

 

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also 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: There will be no trading in the US markets on Monday due to the Labor Day holiday. The usual Monday USDA reports, i.e. Export Inspections and Crop Progress, will be delayed until Tuesday.  Energy traders will be measuring the impact of Tropical Storm Lee, which forced some oil and gas platform shut ins in the Gulf of Mexico on Friday. USDA weekly Export Sales will be delayed until Friday morning. Then we will get to the main event, which is the USDA Crop Production report on September 12. Coinciding as it does with the full moon, all kinds of irrational exuberance will be possible!

  

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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