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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.

Volatility Is Still here

Oct 14, 2011

Brugler

Market Watch

October 14, 2011

Volatility Is Still Here

 

Traditionally, price volatility in the ag commodities peaks in the summer and declines in the fall and winter. The crop sizes become better known, and demand components tend to shift more slowly. It sure doesn’t look like the market is any hurry to go to sleep this fall. We had the first ever 40 cent limit up move in corn on Tuesday, and it was even the day BEFORE the USDA report. Soybeans were up more than 50 cents per bushel. The markets are still on pins and needles about demand, and rumors of big Chinese or other international buying get things moving. You can’t overlook the impact of the big speculative traders, either. Asset allocation selling at the end of the third quarter pressured prices, but buying since the beginning of the 4th quarter has boosted a wide variety of markets.

Corn was up 6.7% this week, a 40 cent gain that basically all occurred on Tuesday. The USDA crop report on Wednesday morning was bull friendly in the production side, with reduced harvested acres as USDA incorporated the prevent planting data from FSA into their surveys. The ending stocks estimate rose, however, due to yet another cut in projected 2011/12 exports and the residual effects of old crop carryover being revised upward to 1.128 billion bushels. Projected exports are now 1.6 billion bushels, the lowest since 2002 if realized. On the bullish side, weekly export sales the past two weeks have responded quite nicely to the price decline. Sales in the week ending October 6 were 1.344 MMT, about 300 thousand tonnes above the trade estimates.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

09/23/11

09/30/11

10/07/11

10/14/11

Change

% Change

Dec

Corn

6.385

5.925

6

6.4

0.4000

6.67%

Dec

CBOT Wheat

6.4075

6.0925

6.075

6.2275

0.1525

2.51%

Dec

KCBT Wheat

7.3125

7.04

6.845

7.075

0.2300

3.36%

Dec

MGEX Wheat

8.51

8.9225

9.195

8.925

0.2700

2.94%

Nov

Soybeans

12.58

11.79

11.5825

12.7

1.1175

9.65%

Oct

Soybean Meal

326

304.7

300.1

328.4

28.3000

9.43%

Oct

Soybean Oil

52.4

49.95

49.07

53.2

4.1300

8.42%

Oct

Live Cattle

116.825

122.15

121.975

121.65

0.3250

0.27%

Oct

Feeder Cattle

134.825

140.525

139.625

139.9

0.2750

0.20%

Oct

Lean Hogs

88.8

93.375

94.675

93.575

1.1000

1.16%

Dec

Cotton

101.24

100.19

101.98

101.94

0.0400

0.04%

Dec

Oats

3.315

3.28

3.21

3.4

0.1900

5.92%

Nov

Rice

16.485

15.95

15.625

16.625

1.0000

6.40%

 

The spreads reversed in the wheat complex, with MPLS dropping this week while KC and Chicago were higher. The spring wheat market had been anticipating a USDA cut in production, which it got. However, USDA sees ending stocks at 157 million bushels for spring wheat, and traders had convinced themselves that something in the 125 million range was doable. Minneapolis December sold off sharply after the crop reports were out on Wednesday morning. Export sales have slowed dramatically, and total commitments are 17% smaller than last year at this time. Of course, last year the Russians were out of the market because of drought, but it has changed the game. USDA is also showing big production increases for Ukraine and Kazakhstan.

Soybeans were the biggest bull in our commodity pasture this week. Nearby November beans were up 9.65%. USDA caught the bears leaning the wrong way, cutting projected US average yield by 0.3 bushels per acre when "the market" had been expecting an increase based on the anecdotal yield reports circulating on Twitter and various web sites. USDA cut projected old crop ending stocks to match the September 30 number, and trimmed new crop to 160 million bushels. The cash average price for the year is seen above $13, which means current prices are below the expected average for the year.

Cotton was down 0.04% for the week, essentially UNCH. Exports are the problem. USDA is showing total commitments for upland cotton are down 32% from last year at this time. There were a lot of canceled sales back in August and September, and while weekly bookings are now positive they’re not huge. Commitments through October 6 are 61% of USDA’s revised estimate for the year, while the 5 year average is only 46%. Thus, USDA is betting on further relative underperformance in exports. USDA also found a few more bales of production than had been previously projected, and raised expected ending stocks to a very comfortable 3.9 million bales.

Cattle futures were down 32 cents for the week, or 0.27%.  Cash cattle prices were $1 to $2 lower than the previous week, with the bulk of the trade at $119 although a few transactions were as low as $115-117.  Beef production for the week was estimated at 501.5 million pounds, 2.4% smaller than the previous week and 3.7% smaller than the same week a year ago. Wholesale prices were mixed, with choice boxed beef up 59 cents for the week, but select quoted $2.60 lower on a Friday/Friday basis.

Lean Hog futures were down $1.10 for the week, with October expiring on Friday. Futures had been up $1.30 the previous week.  Estimated pork production this week was down 0.6% from last week, but 1% larger than the same week in 2010. Estimated carcass weights are running 3 pounds below last year. The estimated pork cutout value responded to the smaller weekly production, up 1.06% for the week. Ribs had the biggest percentage gain for the week.

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. 

Market Watch: We get back to the regular USDA schedule this week, with Export Inspections on Monday morning and the Crop Progress and condition reports on Monday afternoon. Weekly Export Sales will be out on Thursday morning. The main "big" reports from USDA will be the Cattle on Feed and monthly Cold Storage reports on Friday afternoon. Friday will also mark the expiration of the November grain options.

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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