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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.

Winter Games

Jan 13, 2012

Brugler

Market Watch with Alan Brugler

January 13, 2012

Winter GameThe term Winter Games usually applies to the Winter Olympics. Those won’t happen until February 2014 in Sochi, Russia. We’re talking about market games, the kind that are played around USDA reports and other major news events. For the January 12 USDA reports, the grain bears were the clear winners, outpointing the bulls in rather lopsided fashion.

Corn futures were down 44 cents per bushel for the week, a 6.8% drop. All of that occurred on Thursday and Friday following the USDA reports. It wasn’t so much what they said as what they didn’t say. Traders had convinced themselves USDA was going to reduce projected ending stocks for 2011/12 to 750 million bushels or so. When USDA found more than 9.6 billion bushels sitting around the country on December 1 (about 250 million more than the trade collectively had expected) it was tough to argue for a cut in ending stocks. USDA also raised the production estimate for 2011. The net result was a limit down market on Thursday, and some additional weakness on Friday after a half hearted rally attempt. Cumulative export shipments continue to run close to last year’s total, but net weekly sales continue to struggle with cheap feed wheat competition. One area that is good right now is ethanol exports. The US shipped out a record 152.5 million gallons in November, and is on pace for a billion gallon year. That represents about 364 million bushels of corn exported in liquid form, and totally offsets losses in whole corn shipments.

The wheat complex was mixed. Minneapolis actually gained a quarter of a cent per bushel for the week despite a post-report slide. KC was down 1.5% and Chicago lost 3.5%. Weekly export sales continue to be less than stellar, although USDA raised projected sales for the year based on progress toward the projection. Argentine new crop is now available in the world market. The Egyptians continue to buy wheat from countries closer to home, with lower freight costs. USDA hiked projected world ending stocks to 210 MMT, the largest pile in history if the estimate holds up through a couple years of revisions and updates. The stocks/use ratio would be the loosest since 2001.  

Soybeans dropped 2.5% for the week. Product value was under pressure, with meal losing 1.5% and soy oil losing 1.2% on the week. The USDA numbers were a mixed picture. USDA trimmed projected Argentine production to 50.5 MMT from 52 MMT, and cut expected Brazilian output to 74 MMT. However, those were smaller cuts than private industry expected, and USDA raised projected US ending stocks to a comfy 275 million bushels.

Cotton broke its string of up weeks, losing 0.4%. Weekly export sales were net positive 92,800 RB for 2011/12 marketing year and 2,600 RB for 2012/13 for upland cotton. Pima sales were a combined total of 11,900 RB for both marketing years. The problem is still global demand and the potential for further slowing as austerity measures are implemented in Europe and potentially nudge the Eurozone back into recession territory. Chinese appears to be taking steps to ease tariffs for mills that import cotton and promise to export the finished product. That could be friendly for US export prospects. They need the help, with USDA raising projected ending stocks to 3.7 million bales because of a cut in expected export shipments. The sales are on the books, but we continue to see cancellations of cotton purchased last spring at much higher prices. You can’t trust the sale until it is delivered and the payment has cleared.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/23/11

12/30/11

01/06/12

01/13/12

Change

% Change

Mar

Corn

6.195

$6.47

$6.44

$6.00

0.4400

6.84%

Mar

CBOT Wheat

6.22

$6.53

$6.25

$6.02

0.2250

3.60%

Mar

KCBT Wheat

6.75

$7.12

$6.80

$6.70

0.1000

1.47%

Mar

MGEX Wheat

8.445

$8.50

$8.01

$8.01

0.0025

0.03%

Jan

Soybeans

11.63

$11.99

$11.90

$11.60

0.2950

2.48%

Jan

Soybean Meal

297

$309.40

$309.60

$304.80

4.8000

1.55%

Jan

Soybean Oil

50.96

$52.09

$50.80

$50.20

0.6000

1.18%

Feb

Live Cattle

124.325

$121.45

$124.60

$126.40

1.8000

1.44%

Jan

Feeder Cattle

147.625

$146.35

$147.30

$150.58

3.2750

2.22%

Feb

Lean Hogs

85.85

$84.30

$83.90

$85.60

1.7000

2.03%

Mar

Cotton

87.24

$91.38

$95.86

$95.47

0.3900

0.41%

Mar

Oats

3.1125

$3.10

$2.87

$2.83

0.0475

1.65%

Jan

Rice

13.905

$14.61

$14.46

$14.39

0.0750

0.52%

 

Cattle futures were back and forth all week but on Friday night they settled 1.4% higher for the week thanks to a triple digit gain on Friday. Beef production year to date is 50 million pounds below last year, but this is partly a function of the calendar and when the holidays fall. Beef export sales are typically slow in January and February, and this is significant to a beef market that has become heavily dependent on those exports. Boxed beef prices were down again on Friday, with choice off $2.63 at $184.12. They lost 5.1% of their value in one week. Select product was down 2% on a Friday/Friday basis.

Lean Hog futures were up a handy 2% for the week. Estimated pork production for the week was up 7.3% from the holiday limited prior week, and up 3.3% vs. the same week in 2011. Pork production YTD is down 1.4% from last year, but keep in mind this is only for 13 days. The pork carcass cutout value slipped 0.25% for the week, mostly due to weakness in ribs and picnics.

Market Watch: The markets will be closed on Monday the 16th for the MLK holiday in the United States. There will be normal Monday evening Globex trade. The USDA export inspections report will be delayed until Tuesday, and Export Sales will be delayed until Friday. The monthly NOPA crush report is expected on Tuesday morning. The main monthly USDA reports will be the Cattle on Feed and Cold Storage reports issued on Friday afternoon.

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 or visit our web site at www.bruglermarketing.com.

 

 Copyright 2012 Brugler Marketing & Management, LLC

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