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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.

Whither Goest the Economy?

Oct 21, 2011

Brugler

Market Watch

October 21, 2011

Whither Goest the Economy?

 

The US stock market hit a 4 week high, and at mid-week 70% of the companies reporting earnings were beating the analyst estimates on profits. Companies important to ag, such as railroads and trucking companies were showing strong earnings and rising volumes. At times the media make it look like we’re in another recession, but the numbers don’t say that. They point to slow growth, which is a better environment for commodity consumption. The wild card is still Europe, the crisis that keeps on giving. Chinese growth is slowing, but of course that is exactly what they have been trying to accomplish! They were in a bubble, and they knew it. And if you are reading this, the world didn’t end on October 21st as predicted (again since he was wrong in May) by Mr. Camping. Thus, we better look at commodity prices!

Corn was up 9 ¼ cents for the week, a 1.45% gain and the third week in a row with a higher close. Prices continue to attract foreign buyers, with USDA reporting weekly export sales of more than 1.8 MMT on Thursday morning. This was the third week in a row with net new sales over 40 million bushels. Cumulative commitments are now 4.9% larger than they were a year ago at this time. The cash market continues to show very firm basis bids, with producers rejecting prices that are still more than $1.20 below where they were at the end of August. Ethanol production rose for the most recent week, which of course means a greater need for cash corn to grind. Ethanol margins have been squeezed a bit but are still positive for most if not all plants.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

09/30/11

10/07/11

10/14/11

10/21/11

Change

% Change

Dec

Corn

5.925

6

6.4

6.4925

0.0925

1.45%

Dec

CBOT Wheat

6.0925

6.075

6.2275

6.32

0.0925

1.49%

Dec

KCBT Wheat

7.04

6.845

7.075

7.23

0.1550

2.19%

Dec

MGEX Wheat

8.9225

9.195

8.925

9.1925

0.2675

3.00%

Nov

Soybeans

11.79

11.5825

12.7

12.1225

0.5775

4.55%

Dec

Soybean Meal

308.6

304.3

327.6

316.5

11.1000

3.39%

Dec

Soybean Oil

50.21

49.32

53.54

51.25

2.2900

4.28%

Oct

Live Cattle

122.15

121.975

121.65

121.925

0.2750

0.23%

Oct

Feeder Cattle

140.525

139.625

139.9

139.4

0.5000

0.36%

Dec

Lean Hogs

87.8

89.4

90.075

89.65

0.4250

0.47%

Dec

Cotton

100.19

101.98

101.94

97.1

4.8400

4.75%

Dec

Oats

3.28

3.21

3.4

3.37

0.0300

0.88%

Nov

Rice

15.95

15.625

16.625

16.405

0.2200

1.32%

 

All three wheat exchanges were higher for the week. Minneapolis was the strongest, up 3%. Export sales have slowed, and cumulative shipments are now lagging last year. That’s to be expected, with Black Sea wheat crowding out US wheat in the Egyptian tenders. Last year the US was getting some of that business because Russia was out of the export market. The US is still making sales, and in fact SRW is doing well compared to year ago. KC wheat rallied due to dry weather forecasts and HRW planting delays. Some areas have seen welcome moisture, but not enough to break the drought in the Plains. SRW plantings are also being delayed in the ECB. The problem there is too much moisture, with producers having a slow time getting the soybeans out of the field. While some producers plant wheat after corn, most plant after soybeans so that they don’t have to deal with the cornstalk trash.

Soybeans lost 4.5% for the week, giving back a big chunk of their rally out of the harvest low. It is tough to rally the beans when both the meal and oil products created from those beans were losing ground. Soybean meal dropped 3.4% for the week, due to competition from DDGS supplies as ethanol plants ramped up production. Soy oil was also lower. South American soybean planting is underway, under mostly favorable conditions at the moment. La Nina concerns are hovering over the market. US soybeans are competitive to the key Chinese market out of the PNW, but berthing space appears to be maxed out until the end of November. The US is less competitive out of the Gulf (vs. Paranagua), needing basis or futures to back off.

Cotton was down a huge 4.75% for the week. So much for the quiet week preceding this one! Exports are still the problem. While weekly export bookings are now consistently positive they’re not huge. The good news is that total export commitments through October 13 are 61% of USDA’s revised estimate for the year, while the 5 year average is only 47%. There is a little room for coasting before sales need to pick up in order to meet USDA forecasts for the year. Many end users don’t need to buy because they are already covered. Higher global stocks are also limiting buying interest at the moment.

Cattle futures were up a sparse 27 cents for the week, just about erasing the loss from the previous week. Cash cattle prices were $2 higher than the previous week, with the bulk of the trade at $120-121 although a few transactions were as high as $122.50. The Friday afternoon USDA Cattle on Feed report showed a few more cattle in the feedlot than the trade had expected. The October 1 On Feed number was the second largest since 1996, at 104.86% of last year. Placements were 100.6% of last year, with light cattle continuing to flow into the feedlots because of the lack of grass and high cost of hay. September marketings were 100.6% of last year.

Lean Hog futures were down 42 cents for the week. Wholesale prices saw the pork carcass cutout value top the $100 mark, a contra-seasonal move higher that likely caught some retailers short on inventory. Weekly export sales reporting for pork is still at least 4 months away, and likely longer. Strong export interest appears to be behind the strength in the pork, and in what packers can pay for the hogs. Domestic consumers are buying less pork, but paying higher money for it, so demand is still solid. Estimated pork production for the week was 2.3% smaller than last year for the same week. The main reason is that estimated weights are about 3 pounds lighter.

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service.  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 start the week reacting to surprise positions inherited by traders as part of the November options expiration on Friday. The most intense fight was for the Nov 650 corn strike price. The 650 calls ended up being worthless, but were worth 15 cents at one point during the day on Friday. You gotta know when to hold ‘em and known when to fold ‘em! This will be a fairly tame week, report wise. We have the usual USDA weekly reports, such as the Export Inspections, Crop Progress (Monday) and Export Sales (Thursday). October feeder cattle expire on the 27th, but October live cattle don’t go off until the following Monday, October 31.

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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