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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.

Russia Is Still A Hot Topic

Aug 13, 2010

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Market Watch with Alan Brugler

August 13, 2010

 

Russia Is Still A Hot Topic

 

Wheat is still getting all the bullish press, but the corn and soybean markets are showing some pretty respectable chart uptrends as well. USDA cut projected Russian wheat production to 45 MMT from 53 MMT, and dropped their projected exports to only 3 MMT from an earlier projection of 15 MMT. The Russians are embargoing shipments, with the initial announcement starting August 15. That drives the USDA assumption that the exports won’t be made. US ending stocks are still burdensome, but USDA now sees HRW and HRS exports for the year at record high levels, and that’s dropping the expected ending stocks to a more manageable 952 million bushels instead of 1.093 billion bushels.

 

Corn was up another 7 cents per bushel for the week, and is up 19 cents in three weeks. This past week’s 1.67% advance came mostly courtesy of the USDA reports on Thursday. USDA cut projected 2009/10 and 2010/11 corn ending stocks, seeing additional US corn exports. That flows from the reductions in projected world ending stocks for both wheat and coarse grains. There is essentially more "room" for U.S. sales. In fact, the projected stocks/use ratio of 9.7% for corn in 2010/11 is the tightest since 1995/96 if you ignore some interim monthly forecasts in 2006 that didn’t pan out. USDA is projecting a record U.S. average corn yield, with the second highest average number of ears per acre and the heaviest ears (grain weight) since 2004. If there is room for more bullishness, that is where it might originate if not from the export sector.

 

Soybeans weren’t about to be left out of the rally in the other grains, and in fact they really can’t be left out of a feed grain rally for very long. Soybean meal is a substitute, and has often followed the corn and wheat. Meal was $7.90/ton higher for the week, up 2.52%.  USDA tightened projected old crop soybean ending stocks to 160 million bushels. They projected record soybean production with a record high August yield estimate of 44 bushels per acre. That was neutralized in the 2010/11 balance sheet by a dramatic upward revision in projected exports. It’s almost as if the Brazilians and Argentines hadn’t had a record crop last year, with China and other buyers unusually active in the U.S. market.

 

Cotton futures broke conclusively through the 80 cent mark for new crop December futures and are making a run at 85 cents. USDA revised world cotton stocks downward for several years, dramatically shrinking the projected 2010/11 stocks to 45.6 million bales from over 49 million projected a month ago. US production is seen as the largest in several years, but due to an expected 15 million bales in exports the ending stocks will be just barely above 2009/10 at 3.2 million bales.


Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/23/10

07/30/10

08/06/10

08/13/10

Change

% Change

Sep

Corn

$3.71

$3.93

$4.05

$4.12

0.07

1.67%

Sep

CBOT Wheat

$5.96

$6.62

$7.26

$7.03

0.23

3.20%

Sep

KCBT Wheat

$6.15

$6.75

$7.20

$7.24

0.04

0.49%

Sep

MGEX Wheat

$6.29

$6.88

$7.23

$7.15

0.08

1.14%

Aug

Soybeans

$10.17

$10.53

$10.59

$10.52

0.07

0.66%

Aug

Soybean Meal

$299.90

$310.90

$313.60

$321.50

7.90

2.52%

Aug

Soybean Oil

$39.07

$39.83

$41.39

$41.80

0.41

0.99%

Aug

Live Cattle

$93.42

$92.65

$92.77

$94.32

1.55

1.67%

Aug

Feeder Cattle

$115.17

$113.72

$112.35

$111.70

0.65

0.58%

Aug

Lean Hogs

$83.23

$85.82

$82.02

$82.87

0.85

1.04%

Oct

Cotton

$80.32

$82.36

$84.40

$87.49

3.09

3.66%

Sep

Oats

$2.55

$2.71

$2.80

$2.74

0.06

2.15%

Sep

Rice

$10.28

$10.55

$10.61

$11.00

0.39

3.68%

 

Cattle futures were up 1.67% and $1.55 for the week, closing at $94.32 on the soon to expire August contract. The monthly USDA WASDE report projects a decline in beef production into the first quarter of 2011 lifting live cattle cash prices to an estimated $101 to $104 on the high end and $93 to $96 on the low end for the first and second quarter of 2011. Beef export sales were 8,907 MT with accumulated shipments at 339,258 MT (747,935,650 pounds) to date. USDA is projecting 2010 beef exports at 2,193 million pounds or 994,728 MT. Beef exports for 2011 were raised 70 million pounds from the July report to 2,070 million pounds. Most of the cash cattle business was done midweek and at $2 higher money with cattle selling for $93 to $95 in the live and $150 in the dressed.  Beef prices rallied this week ahead of Labor Day business.

 

Hogs were up 1.04% and $0.85 for the week with the expiration of the August Lean Hog contract. October hogs finished the week at an $8.22 discount to the August so have some catching up to do. The contract change over will leave a trend breaking gap on the weekly continuation chart. This week the U.S. Department of Commerce published the hog export data as of June 30th, which showed pork exports were up 16% from last year for the same period. USDA raised pork export estimates for 2010 by 141 million pounds and raised 2011 export projections by 125 million pounds from last month. The monthly USDA WASDE report showed a drop in pork production from last month for both 2010 and 2011. Pork production for 2010 is estimated at 22,238 million pounds, down 9 million pounds from last month and 22,655 million pounds for 2011 down 20 million pounds from last months projections. Barrow and Gilt prices estimates lost $1 on the high end of the range with USDA narrow their projections from $54 to $55 for 2010. Annual barrow and gilt prices for 2011 ranged from $53 to $57.

 

Market Watch:

 

Cattle traders will start the week anticipating steady to higher money in the cash market with good movement of cattle this week leaving the early part of the week a bit short. The monthly cattle on feed report will be out Friday along with the cold storage report. The weekly crop progress report should show the effects of the heat stress on the soybean crop in the southeast and Iowa floods for corn and soybeans in the Midwest. Wheat harvest progress in Montana and Idaho will also be a focus.

 

 

Looking for professional help with your marketing decisions? Consider subscribing to our daily Ag Marketing Professional service or Special Research Reports. Call our office for details at 402-697-3623, or visit www.bruglermarketing.com.

 

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 more extensive paid subscription and consulting services.

 

   Copyright 2010 Brugler Marketing & Management, LLC

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