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Market Watch

RSS By: Alan Brugler,

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

The Raging Bull Roller Coaster

Feb 25, 2011


Market Watch with Alan Brugler
February 25, 2011
Roller Coaster
There was a lot of red ink on the screens this past week, particularly on Tuesday and Wednesday. Some of the commodities rallied back to net gains for the week, notably corn, soy oil and cattle. For others, the peak of the Raging Bull roller coaster wasn’t high enough to get them to a net gain. Oats saw the largest loss, down 9.88% for the week and no longer showing a “4” in front of the price.
Corn survived a wicked Tuesday sell off to close 2 cents higher for the week, extending the string of higher weekly closes to four weeks. Weekly USDA export sales were 1.168 MMT, comfortably above trade expectations. Mexico bought 640,600 MT to offset projected losses of 1.3 MMT from the February freeze. Most of this was known business, but hardly suggests price rationing is working. Weekly ethanol production was the slowest since January, suggesting that at least a few of the plants are having trouble making money in the current environment. Ethanol did rally to $2.544/gallon on Friday, but for much of the week ignored the higher gasoline prices and encouraged voluntary blending.
The soybean complex was mixed. Higher energy futures prices gave soy oil a boost, as did smaller than expected Census soy oil stocks for January 31. Those hinted at a potential pick up in soy oil use for biodiesel. Meal was unable to climb out of the early week hole and lost 0.64% for the week. With the drag from meal on product value, soybeans were down 3 cents for the week, or 0.18%. They were down for the third week in a row. The Census Crush report on Thursday put January soy crush at 149.17 million bushels, below trade estimates. Census meal stocks were 467,590 tons, down from a revised 510,700 tons in December and well below the 630,497 tons from a year ago. Soy oil stocks were 3.423 billion pounds. That was bullish, with the trade guess up around 3.536 billion. USDA weekly export sales on Friday morning were a net 396,400 MT, compared to the trade guesses at 300 to 500 thousand MT. Chinese purchases for the week were 79,500 MT of old crop and 45,000 MT of new crop. 
Wheat futures were sharply lower at all three exchanges, despite double digit gains on Friday. Chicago dropped 5.56%, with KC off 4.54% and MPLS off 4.16%.  Weekly export sales were 726,300 MT of combined old and new crop sales, on the low end of trade guesses in the 700 thousand to 1 MMT range. The EU granted export licenses for 439,000 MT of soft wheat this week, the largest total in six weeks and quashing rumors that they were running out of export inventory. The USDA Chief Economist is projecting total U.S. wheat production to fall to 2.08 billion bushels in 2011/12 but is forecasting World wheat supplies will increase.
Cotton futures lost 2.88%, but finished with a limit up day on Friday. They were quintessential roller coaster, with 7 cent limit move days in both directions. USDA weekly export sales were 299,200 running bales for combined upland and pima bookings. USDA Chief Economist Joe Glauber spoke at the Ag Forum in Washington on Thursday, projecting cotton stocks will rebuild in 2011/12. Global production is forecast at a record 127.5 million bales, an increase of 10.6 percent over last marketing year. Consumption is expected to rise to 120 million bales, up about 3 percent. Global stocks are expected to be over 50 million bales, the highest since 2008/09 but still tight relative to consumption and average historical cotton stocks. US planted acreage is expected to be 13 million acres of combined upland and pima, up from the 12.8 million projected previously.
Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

% Change
CBOT Wheat
KCBT Wheat
MGEX Wheat
Soybean Meal
Soybean Oil
Live Cattle
Feeder Cattle
Lean Hogs

Cattle futures were higher for the week. The cash cattle market was firm again, with declining ready numbers into March. Packers paid $111 in the south, and $180 in the north. February futures rallied to get above the cash, and April maintained a premium in case the rally continues. USDA reported weekly export sales of 15,100 MT. The wholesale market was firmer for the week, with choice boxes up 1.7% and select boxes quoted 2.3% higher on a Friday/Friday basis. Beef production for the week was down an estimated 1.5% from the previous week, but up 2.7% from the same week a year ago. Estimated carcass weights are up 13 pounds from last year, despite the high cost of feed and lack of a meaningful premium for producing choice grade cattle.
Hog futures were down 2.25% for the week. Part of that was standard gap trading. April futures were at a premium to February when the latter expired on the 14th. The market is trying to close the chart gap, lacking evidence that cash hogs were moving to the higher price being shown by the April. Pork production YTD is up 0.4% from 2010, while the estimated production this past week was up 0.9%. Average slaughter weights are running persistently higher at 208 pounds vs. 203 a year ago. Wholesale prices were up $1.69 for the week, a 1.9% rise in the carcass value that allowed for more packer spending but didn’t require it.
Market Watch:  Monday marks first notice day for March futures deliveries in the grains and metals. Cotton, of course, is already well into the delivery period with little to show for it. USDA will release weekly Export Inspections on Monday and Export Sales on Thursday morning. Friday will be the last trading day for March options in cattle, currencies and the US dollar index. Otherwise, it should be a low news week for commodities, with more direction provided by the Middle East situation.
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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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