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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.

Showers Too Late for Corn?

Jul 27, 2012



Market Watch with Alan Brugler

July 27, 2012


Sprinkles too late?


This week we saw some rains in the Midwest and High Plains but areas were spotty and amounts had a wide variance. There were also high winds in some areas that literally flattened the corn with the corn mining the stalk to fill the ear. Since mid June moderate drought ratings for the continental U.S. have gone from 40 % to 64% and extreme to exceptional drought from 4% to 14% according to the U.S. Drought Monitor. Much of the corn is maturing far ahead of normal with some areas of southern Kansas and central Illinois reportedly already combining. World weather has also been extreme with northern Europe getting above normal rainfall and parts of southern Europe dry and hot. India is also way behind normal for their monsoon season. China however is receiving rains and growing conditions for the crops is thought to be adequate for most areas.

We have witnessed a pull back in the grains this week after reaching new all time highs in corn, soybeans and soybean meal the previous week. Chicago wheat rallied to take out 2011 highs but is still a long way from its exceptional all time high in 2008. Minneapolis wheat and KC wheat have yet to take out the 2011 highs. Nearby corn futures were down 3.15% for the week. We have been seeing demand destruction in the corn market with weekly export sales for both marketing years showing a net reduction this week. We have not seen that occurrence in the 22 years of weekly export history we have tracked.  Weekly ethanol production also dropped to the lowest level since weekly data releases were begun. If ethanol production continued at the current rate for a full year, corn use for ethanol would drop more than 700 million bushels from that seen this year. That is some significant price rationing, but also increases the need to feed corn due to the lack of DDG’s.















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Soybeans lost 4.17% for the week. Weekly soybean export sales were larger than expected for the reporting week ending July 19. With 79% of the crop blooming and 36% said to be setting pods, the Brugler500 index crop condition index is at 287. Compare that number to the same week in 1988 when the Brugler500 index was 303. Ratings are now lower than in 2008 and 1988. The Memphis based analytical firm Informa reduced their US soybean yields to 38.5 BPA and put projected production at 2.9 billion bushels.

The three wheat markets were all lower this week, by 3 to 5%. All three were up on Friday, with the gains in MPLS muted by the solid yields being reported by the Spring Wheat Quality Tour this week. The WQT put estimated average yield at 44.9 BPA, with 42.4 bushels per acre for durum. Weekly export sales were only 367,000 MT. That was down 11% from the previous week as price rationing begins to do its work. The IGC left projected world wheat production UNCH at 665 million metric tonnes.   The IGC left projected world wheat production UNCH at 665 million metric tonnes.  The IGC expects Russian output will fall to 45 MMT with a French firm estimating 47 MMT.

Nearby cotton futures dropped 1.85% this past week. USDA reported net weekly export sales for last week were 142,300 RB for Upland cotton and 10,800 RB for Pima for combined marketing years with a net reduction of 800 RB for 2011/12 Pima delivery. Total old crop commitments are 113% of the current USDA forecast for the year. They would typically be at 111% by now. The CFTC report on Friday afternoon showed Managed Money added to their net short position and Index Funds decreased their net long.

Cattle futures rose 1.4%, or $1.65 per cwt.  All but 20 cents of that gain came on Friday. Cash cattle prices were up $1-2 for the week. Wholesale beef prices slowed down. For the week, choice boxed beef was down $2.37, or 1.3%. Estimated beef production for the week was 2.6% smaller than the same week in 2011. YTD production is down 2.2%. Weekly beef export sales reported by USDA slowed further, due in part to the strength of the US dollar during the reporting period.
Hog futures were up $1.50 or 1.6% for the week. Pork production was up 1.7% from the previous week. It was still up 2.2% from the same week in 2011. Cumulative pork production for the year is 1.7% larger than last year on 1.2% more hogs slaughtered. Average weights are still running 3-4 pounds above last year.  The pork carcass cutout value was up $1.06/cwt this week or 1.16%. Pork bellies finally revealed hints of BLT demand, gaining 5.32% for the week.


Market Watch:

The market will begin the week with traders adjusting positions created by the expiration of the August soybean complex options on Friday and the resulting new futures positions. The main USDA reports this coming week will be the crop progress report Monday which has shown continued deterioration in the corn and soybeans week to week. Export sales will be Thursday along with EIA Gas Storage.  


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. Visit our web site at https://www.bruglermarketing.com for more information on our consulting and advisory services for farm family enterprises and agribusinesses.


 Copyright 2012 Brugler Marketing & Management, LLC

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