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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.

Violent Reactions

Dec 03, 2010

 brulogomed

Market Watch with Alan Brugler
December 3, 2010
Violent Reactions
 
The soybean complex was up sharply, despite the well advertised Chinese efforts to slow down economic growth and food prices. China continues to buy U.S. soybeans at a brisk clip, and has inked a deal to buy at least 5.5 MMT more. They bought 1.484 MMT in the most recent reporting week, including 456,000 MT of switches originally sold to other destinations. Soy oil was the big story in the complex, up 6.37% for the year. The highest crude oil prices since October 2008 gave motor fuels a boost. Soy oil use for biodiesel is down to almost nothing in the United States, but a lot is being used in South America. More palm oil is also expected to go to biodiesel in Indonesia due to new production capacity.
 
Corn prices were up 21 cents for the week, or 3.8%.  The acreage battle of 2011 is still simmering, with bulls on hold while they Washington political process debates the extension of the ethanol blend credits. Old crop basis has firmed 21 cents per bushel nationally since early October, signifying commercial demand for the cash corn. It is out there, but the bin doors have been shut by the price drop following the November crop report, and due to tax considerations in some cases. Weekly export sales bookings have picked up with the price drop over the past couple weeks. They were 758,100 MT in the most recent reporting week.
 
Wheat futures posted double digit gains for the week, at all three exchanges. Chicago was the biggest mover in percentage terms, up 13.84%. Egypt bought both hard and soft wheat from the U.S. during the week, and there were indications from Russia that the country might actually import wheat in order to maintain orderly markets. USDA reported combined old/new crop wheat export sales were 704,200 MT in the week ending November 25. Continued wet weather played havoc with the mature Australian wheat crop and threatened to turn a substantial quantity of it into feed quality wheat rather than export quality milling wheat.
 
Cattle futures were up another 95 cents this week. Boxed beef prices have been firm in the post-holiday period, with solid restaurant demand and annual beef export sales that will be the largest since 2003. The price rise is impressive given that beef production YTD is now 0.6% above last year, an the tonnage in the most recent week was up 16.5% from the Thanksgiving holiday week. Cash cattle prices were stronger than packers had expected, with some Texas cattle trading at $104 as the trading wrapped up early on Thursday. Early week sales were in the $102 range. On a Friday/Friday basis, choice boxed beef was up 1.3% and select was up .2%.  Restaurant traffic has picked up in several categories, which is helping with the choice beef demand.
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
11/12/10
11/19/10
11/26/10
12/03/10
Change
% Change
Dec
Corn
$5.34
$5.21
$5.38
$5.59
0.21
3.86%
Dec
CBOT Wheat
$6.69
$6.45
$6.48
$7.38
0.90
13.84%
Dec
KCBT Wheat
$7.30
$7.10
$7.21
$8.12
0.91
12.63%
Dec
MGEX Wheat
$7.45
$7.26
$7.34
$8.17
0.83
11.34%
Jan
Soybeans
$12.69
$12.02
$12.39
$13.00
0.62
4.99%
Dec
Soybean Meal
$339.70
$325.80
$336.80
$350.10
13.30
3.95%
Dec
Soybean Oil
$52.53
$48.96
$49.90
$53.08
3.18
6.37%
Dec
Live Cattle
$98.40
$101.45
$102.23
$103.18
0.95
0.93%
Jan
Feeder Cattle
$114.40
$117.40
$118.75
$118.68
0.08
0.06%
Dec
Lean Hogs
$68.98
$69.13
$70.35
$69.28
1.07
1.53%
Dec
Cotton
$140.18
$127.90
$116.06
$144.99
28.93
24.93%
Dec
Oats
$3.40
$3.53
$3.44
$3.67
0.23
6.61%
Jan
Rice
$14.07
$13.90
$13.41
$14.67
1.27
9.44%

 
Hogs went back to about where they were two weeks ago.  Pork cutout value dropped $2.12/cwt to $77.12 this past week. All of the major cuts except ham were lower on the week, and packers were inclined to be conservative on their hog buys as a result. Pork production for the week was up 12.4% from the holiday depressed prior week, but were also up 3.5% from the same week in 2009.
 
Cotton futures had a complete reversal of fortune after the dollar index started to reverse, with multiple limit up days. Weekly export sales data from USDA was supportive, as the weekly total was almost double the average trade guess ahead of the Thursday morning report. Old crop upland sales were 323,000 running bales, but in a sign of the more inflationary attitudes China booked 264,600 RB of 2011/12 cotton from the U.S.
 
Market Watch:  Dec cattle options expired on Friday, along with the currencies. That will lead to a few position adjustments as futures traders either lost their cover or gained unexpected positions. The main USDA reports for the week are on Friday morning, with USDA Crop Production and WASDE supply and demand estimates. USDA is unlikely to do much on the US production side, but a number of world adjustments are possible given the dryness in Argentina, wetness in Australia, and the Stats Canada production revisions announced on December 3. Monday December 6 will be first notice day for December cattle deliveries. Wednesday will be the last trading day for December cotton futures. 
 
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.  
 
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 2010 Brugler Marketing & Management, LLC
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