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RSS By: Alan Brugler, AgWeb.com

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

Seven Dollar Corn

Feb 11, 2011

 brulogomed

Market Watch with Alan Brugler
February 11, 2011
Seven Dollar Corn!
 
There were a couple rare events that happened this past week. Of course, Egypt’s President Mubarak resigned on Friday, leading to a new government in that country for the first time in over 30 years. The one that got OUR attention, however, was the first close over $7 per bushel for nearby corn futures since the week of July 4th in 2008.
 
Corn tacked on another 28 cents this week, a 4.1% move that made it the second largest gainer for the week after the surging cotton market. As we had anticipated, the bulls again came in late on Friday and dress up the close. Fundamentally, ethanol weekly production slowed down, and ethanol stock piles increased. That didn’t seem to affect ethanol prices much. The weekly USDA Export Sales report again showed stronger business than the trade had expected.
 
The soybean complex was down for the week. The Chinese came back into the market after their spring holiday week, but the business was mostly originated in Brazil, where cheap new crop beans are available. Brazilian producers have sold nearly half of their production already, and much of it at much lower prices. Merchants are thus able to be competitive and offer FOB prices below US levels. USDA raised projected Brazilian bean production 1 MMT on Wednesday, and the trade is convinced that the final number will have a 7 in front of it rather than USDA’s 68.5 MMT. USDA cut projected Argentine production by 1 MMT, but took a go slow approach on yield reduction due to improved crop moisture there.
 
Wheat futures were higher at all three exchanges again this week. Export interest has been coming in waves. Egypt bought one cargo of US soft wheat on Friday, along with other origins. Jordan bought wheat, Tunisia is tendering for 50,000 MT of soft wheat, Japan bought their usual MOA tender requirements. More Aussie supplies are showing up in the world market, both as milling wheat and feed wheat. Thailand bought 40,000 MT of Aussie prime hard wheat on Thursday night. That is the most available supply right now, with the EU trimming the quantity of export licenses issued as exportable supplies there shrink. The numbers of licenses to date is 12.8 MMT vs. 10.7 MMT at this point last year.
 
Cotton futures literally jumped, up 13.17% in a single week. The CFTC approved, and ICE implemented, new daily trading limits of 7 cents (700 points per day) when futures are above $1.70 per pound. The market went after it like a hot new toy, with several limit up moves during the week. Some players were clearly scared of the volatility and margin call risk. Others just wanted out before March options expired on Friday and they lost the thin veil of production offered by fading their futures position in the options market. Weekly cotton export sales were modest, and contained little Chinese business. India appears to have ample cotton supplies, but is not making those available for export at the present time.
 
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
01/21/11
01/28/11
02/04/11
02/11/11
Change
% Change
Mar
Corn
$6.57
$6.44
$6.79
$7.07
0.28
4.13%
Mar
CBOT Wheat
$8.25
$8.26
$8.54
$8.67
0.13
1.55%
Mar
KCBT Wheat
$9.00
$9.12
$9.43
$9.73
0.30
3.21%
Mar
MGEX Wheat
$9.37
$9.62
$9.89
$10.18
0.29
2.96%
Mar
Soybeans
$14.12
$13.98
$14.34
$14.16
0.18
1.22%
Mar
Soybean Meal
$379.60
$377.00
$383.20
$378.10
5.10
1.33%
Mar
Soybean Oil
$57.56
$57.27
$58.98
$58.49
0.49
0.83%
Feb
Live Cattle
$107.95
$107.50
$108.25
$107.78
0.47
0.44%
Mar
Feeder Cattle
$125.55
$126.22
$125.00
$126.03
1.03
0.82%
Feb
Lean Hogs
$80.33
$85.75
$84.50
$86.40
1.90
2.25%
Mar
Cotton
$156.94
$164.75
$167.86
$191.23
189.97 
13.17%
Mar
Oats
$3.86
$3.86
$4.16
$4.18
0.02
0.60%
Mar
Rice
$14.87
$15.01
$15.80
$15.89
0.08
0.54%

 
There is a Japanese saying that the nail which sticks up is hammered down. Cattle futures gained 75 cents a week ago, and were sticking up above the prior two weeks. They were hammered back down into that $107-108 range this week, losing 47 cents or 0.44%. Wholesale prices ran into some resistance, with the choice boxed beef losing $3.49 on the week, or 2%. The select cuts were down 1.3% or $2.09 and the choice/select spread dropped below zero. Finishing cattle to choice grade is costing producers money rather than making them money.
 
Hog futures were up $1.90 for the week or 2.25%. February futures need to converge with cash when they expire on February 14. They have been hanging above the cash market for several weeks, anticipating that it would rally, and it has. The CME Index has been rising, but is now at $84.53 and up from $81.50 as of last Friday. Feb futures closed at $86.40 on Friday, so the basis has narrowed to less than $2. The pork carcass value was down a little less than 1% on a Friday/Friday basis, losing 86 cents per hundred for the week.  
 
Market Watch:  We start off the week with Valentine’s Day, the traditional US holiday for lovers. Data lovers will see the monthly NOPA crush report on Monday, along with USDA’s weekly Export Inspections. Hog traders will say goodbye to the February contract as it expires on the 14th. Cotton traders will be getting used to life without the March options, which expired on the 11th and left some folks with unexpected futures positions. Grain traders face the same separation anxiety on Friday, February 18th , when the March grain options expire. Cattle producers will also see the monthly Cattle on Feed report from USDA on Friday.
 
Join us for one of the Brugler Marketing Winter Seminars and get the fundamental and technical information you need to navigate these markets over the next 6 months. Click on the following link and then choose the registration packet link for the location nearest you.
 
  
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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