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July 2009 Archive for Market Watch

RSS By: Alan Brugler, AgWeb.com

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

Weather, China, Outside Markets....

Jul 31, 2009

 

Market Watch with Alan Brugler & Kyung Ra

 

Week Ending July 31, 2009

 

Weather, China, Outside Markets…

 

Soybeans were the bull leader for the week, up 11% from the previous Friday. The August soy complex (beans, meal oil) rallied on Thursday due to better than expected weekly export sales of soybeans and soy meal, coupled with a huge sale announcement of China's purchase of 1.8 million metric tons of US soy exports for 2009/10 delivery coupled by a 120,000 MT purchase for 2008/09 delivery. That was made under USDA’s daily reporting system.  The continuing concern over the tightening of old crop soybeans and soy meal lent a supportive tone to the soy complex this week. With cash prices above delivery equivalents, August futures rallied in anticipation of a short squeeze. News reports out of Argentina indicate that a new round of conflicts between the Argentine government and farmer groups over the export taxation of soy has started.

 

            Good crop weather over much of the central part of the US, marked by mildly below normal temperatures, and some periods of rainfall was the dominant underlying bearish influence on new crop corn futures and the new crop soy complex.  Overall good crop condition ratings for both corn and soybeans as reported weekly by the USDA reflected the effect of this recent string of favorable crop weather.  Harvest of the remaining winter wheat crop and development of spring wheat crops also benefited from the recent string of good weather along the nation’s midsection.

 

Below is a table of selected futures prices as of the close of pit trading on Friday for the past four weeks.  The weekly gain or loss from this week to last week and the weekly percentage change are also shown.

 

Market Watch

 

 

 

 

Weekly

Weekly

 

07/10/09

07/17/09

07/24/09

07/31/09

Change

% Change

September Corn

$3.28

$3.22

$3.16

$3.40

0.23

7.35%

September CBOT Wheat

$5.19

$5.15

$5.16

$5.28

0.12

2.32%

September KCBT Wheat

$5.48

$5.67

$5.49

$5.59

0.10

1.87%

September MGEX Wheat

$6.03

$6.16

$5.92

$6.05

0.14

2.28%

August Soybeans

$10.45

$10.10

$10.21

$11.34

1.13

11.07%

August Soy Meal

$344.80

$317.50

$323.20

$361.00

37.80

11.70%

August Soy Oil

$32.73

$34.82

$33.89

$35.06

1.17

3.45%

August Live Cattle

$83.48

$86.38

$84.52

$84.70

0.18

0.21%

August Feeder Cattle

$102.93

$104.60

$102.55

$102.35

-0.20

-0.20%

August Lean Hogs

$63.60

$64.67

$59.05

$56.02

-3.03

-5.13%

October Cotton

$60.39

$62.10

$57.39

$57.93

0.54

0.94%

September Oats

$2.12

$2.15

$1.95

$1.98

0.03

1.54%

September Rice

$13.02

$12.97

$13.40

$13.77

0.37

2.72%

 

            Corn

            Better than expected USDA export inspections on Monday and export sales on Thursday lent support to corn futures this week.  On the export front, Argentina, the US's chief competitor for corn exports reportedly will reduce its 2009 corn production by a third.  The second auction this week by China to sell 2 million MT each week of corn from its grain reserves brought in 928,300 metric tons in sales.  China has an estimated 40 million MT of corn in its grain reserves.  In its first week, the Chinese auction brought in 745,900 MT in sales.

 

            Wheat

            Wheat futures at all three grain exchanges this week had a net percentage gain from 1.87% to 2.32%.  Support to wheat came from the corn and soy rallies, and better than expected export sales numbers on Thursday.  After the close of pit trading this past Thursday, the Wheat Quality Council tour calculated average 2009 hard red spring wheat yield at 46.2 bushels per acre, up from the 2008 average at 37.7 bpa.  Average 2009 durum yield was estimated at 36.2 bpa, up from 2008’s 23.7 bpa.  These numbers were derived from scouts surveying for three days in spring wheat areas of North and South Dakotas, Minnesota and Montana.  These yield forecasts were higher than the current 2009 USDA yields at 38.8 bpa for HRS, and 33.1 bpa for durum.

 

            Live Cattle

            Multi-year lows in July on-feed numbers lent a supportive tone to live cattle futures and resulted in a higher close for the week. However, Boxed beef cutout values for choice and select were lower compared to last Friday, due to continuing light wholesale beef demand. Earlier this week cash fed cattle were expected to trade $1 higher on a live basis compared to last week, but ended this week trading $1 lower. That forced futures down, as they had been carrying a larger premium to the cash market.

 

            Feeder Cattle

            Historical lows in the US cattle herd and calf crop along with better weekly pasture conditions provided support to feeder cattle futures.  On Monday cash feeders at the Oklahoma City auction sold for $2 lower compared to the previous week which weighed on futures this week.  Spillover from the live cattle pit provided support.  August contracts trading at a premium to the CME cash feeder index this week limited futures, as did the rise in corn prices.

 

            Lean Hogs

            Three times this week the August lean hog futures kept reaching a new 9-month low.  Weakness in the cash hog markets and lower average pork prices in wholesale trading brought strong downside moves which kept futures in negative territory during 3 out of the 5 pit sessions this week. End of month profit taking brought prices back up a little on Friday.

 

            Cotton

            Moves in crude oil futures and the US dollar index provided outside market influences to cotton futures this week, allowing prices to close nearly 1% higher.  Better weekly crop condition ratings coupled with periods of rains this past weekend and the latter part of this week over west Texas weighed on futures due to improving the crop's outlook.  Spillover support from grains also affected cotton contracts this week.

 

            On Friday, July 31 the Commerce Department’s Bureau of Economic Analysis reported real GDP for the 2nd Quarter of 2009 at -1.0% annual rate.  This is the 4th consecutive quarter of negative real GDP percentage change, and the first time of occurrence since 1947.  Based on this figure, the US economy since 3rd Quarter of 2008 has been in a recession for two consecutive periods.  (Recession is officially defined as two consecutive quarters of negative real GDP annual rate.)

 

            Since the close of pit trading last Friday, front month crude oil gained $1.40 or up 2.06% at $69.45 per barrel.  Front month gold gained for the week 60 cents per contract at $953.70.  The US dollar index as of last Friday lost 40.5 points to be at 78.344 by today.

 

Market Watch:  On tap for next week are some key economic reports:  ISM manufacturing index on Monday, personal income on Tuesday, factory orders and ISM non-manufacturing index on Wednesday, jobless claims on Thursday, and unemployment on Friday.  These along with this week's reports will shed light on the current health of the US economy which will ultimately affect the outlook for commodities.  Besides the usual weekly USDA crop condition reports on Monday, the weekly API/EIA energy stocks report on Wednesday could also affect future prices mainly for corn and soybeans since they are tied in with petroleum through uses as renewable fuel stock. Cattle traders will also be positioning for the expiration of the August cattle options on the 7th.

 

Past performance is not indicative to future results.  Trading in futures and option on futures involve risks.

 

© 2009 Brugler Marketing & Management, LLC

Vertically Challenged

Jul 24, 2009

           

 

Market Watch Summary with Alan Brugler

July 24, 2009

 

Vertically Challenged

 

Corn futures were the story of the week, with a major rally of 19 cents on Thursday. However, the bulls didn’t accomplish what they needed, which was to see a higher weekly close. The net loss for the week was 6 cents as the Board gave back more than half of the rally on Friday. Bulls just didn’t have confidence that the gain would hold up over the weekend. The rally came on USDA’s announcement that it would re-survey producers in 7 states to ascertain whether the crops considered planted in June but not yet in the ground were actually planted (or if producers were forced to switch to soybeans or another crop). Some in the trade jumped to the conclusion that such a survey would show fewer corn acres, but historically some revisions have been only the hundreds of thousands of acres, not millions. Strong weekly export sales helped support prices for the week, while generally favorable pollination conditions weighed on the market by threatening higher average yields.

 

Soybeans managed to eke out a 1.1% gain for the week, despite the risk of USDA finding more acres in the special survey. Higher soybean meal futures were the main driver, helping to boost crush margins. Ongoing Chinese buying interest is also supportive to the beans. They have approximately 40 million bushels of old crop yet to ship, and about 125 million bushels of new crop already on the books. The numbers can add up fast when South America is pretty much sidelined after the beginning of the US harvest!

 

Wheat futures were mixed. CHI was up a penny for the week, but the higher protein wheat markets were lower as winter wheat harvest moved north and uncovered pockets of better wheat (and export interest for those classes remains lukewarm). The Egyptians went back to buying Russian wheat, apparently having made their point about expecting to receive the quality specified in the contract.

 

Cotton futures were down a steep 7.6 % for the week. Poor weekly export sales were part of the story, along with liquidation selling that also afflicted the other field crops at times during the week.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

 Market Watch

 

 

 

 

Weekly

Weekly

 

07/02/09

07/10/09

07/17/09

07/24/09

Change

% Change

September Corn

$3.46

$3.28

$3.22

$3.16

-0.06

-1.86%

September CBOT Wheat

$5.29

$5.19

$5.15

$5.16

0.01

0.29%

September KCBT Wheat

$5.64

$5.48

$5.67

$5.49

-0.18

-3.09%

September MGEX Wheat

$6.23

$6.03

$6.16

$5.92

-0.25

-4.02%

August Soybeans

$11.54

$10.45

$10.10

$10.21

0.12

1.14%

August Soy Meal

$382.20

$344.80

$317.50

$323.20

5.70

1.80%

August Soy Oil

$35.34

$32.73

$34.82

$33.89

-0.93

-2.67%

August Live Cattle

$84.88

$83.48

$86.38

$84.52

-1.86

-2.15%

August Feeder Cattle

$103.45

$102.93

$104.60

$102.55

-2.05

-1.96%

August Lean Hogs

$61.15

$63.60

$64.67

$59.05

-5.62

-8.69%

October Cotton

$59.00

$60.39

$62.10

$57.39

-4.71

-7.58%

September Oats

$2.25

$2.12

$2.15

$1.95

-0.20

-9.41%

September Rice

$12.89

$13.02

$12.97

$13.40

0.43

3.32%

 

Cattle futures lost $1.86 for the week, or 2.15%. Packers were able to put a little money on the cutouts, while at the same time buying cash cattle at steady money or even a dollar lower in some cases. That helped the packers, but didn’t give the futures a reason to rally. There was also a fair amount of position squaring ahead of Friday night’s Cattle on Feed report and the semi-annual Inventory report. The COF report showed June placements only 91.6% of year ago, and July 1 On Feed at 94.73 of last year. The Inventory report showed another 1% decline in the size of the herd as we head into the next cattle cycle low. The calf crop was 98.6% of year ago, vs. trade estimates of 98.8%. That is not a substantial miss.

 

Hogs had a tough week, losing $5.62/hundred for the week.  The surging pork carcass cutout prices fell apart at mid-week on weakness in loins and other cuts. Technical weakness was also a problem, with several indicators all pointing in the southerly direction at the beginning of the week. Packers like their work better now, as the downtime did improve wholesale prices and margins. Some Saturday kills are planned, and there is no known scheduled downtime for this week.

 

 Market Watch:  As we head into the end of July, month end profit taking and asset allocation adjustments come into play. The rise to new highs for the year in the stock market will cause some cash to be diverted, and shorts also have some big gains in corn, wheat, etc. that may need pruning. Monday night’s crop condition ratings are expected to be a little lower for corn and soybeans, since that is the seasonal tendency and there are a couple dry pockets out there. The trade will be very interested in the extent of any such decline. Any fall out from the July 24th options expirations and exercises will play out on Sunday night and Monday. Friday will be first notice day for August soybean complex deliveries.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.

 

© 2009 Brugler Marketing & Management, LLC

Moving in Opposite Directions

Jul 17, 2009

           

 

Market Watch with Alan Brugler

July 17, 2009

 

Moving in Opposite Directions

 

Chicago grain prices were mostly lower for the week. On the other hand, the CME livestock contracts traded within the same exchange were up by 1.5 to 3.5%. Operating losses amoung unhedged livestock feeders have been well documented and are approaching the two year mark in hog operations. If you were to script a way for the livestock sector to recover quickly, simultaneously higher meat prices and lower feed prices would be the happy ending. For the past two weeks, that’s what we’ve been seeing. Ethanol plants have also seen improvement in margins, with the gains diluted a bit by weakness in the byproduct values.

 

The soybean complex saw a major collapse of the bull spreads. July futures lost 54 cents before expiring on Tuesday evening.  August beans were down 35 cents despite gaining 33 ½ on Friday.  That means they had been down 68 ½ cents as of Thursday evening. Soybean meal was under pressure from the margin troubles in the livestock sector, and nearby futures closed Friday $115.90/ton below their June peak. That’s a 26% decline in 5 weeks! Soy oil was higher on sell the rumor, buy the fact logic. NOPA reported much larger than anticipated July 1 soy oil stocks, over 2.9 billion pounds. So naturally futures were higher on 4 of the 5 trading days for the week! That rally hurt meal via unwinding of spreads, but supported soybean value.

 

That lack of a moral victory for corn a week ago proved to be a warning. The early week rally was muted, and prices were hammered on Wednesday and Thursday after failing to close an overhead price chart gap. By the end of the week, corn was down 6 cents per bushel. The WASDE report on July 10 showed larger old crop stocks than some had expected, pressuring old crop cash bids pretty much all week. Benign US weather, i.e. moderate temps during pollination, also reinforced notions that USDA would raise projected national average yield in the August crop report. That kept a lid on new crop futures. Weekly export sales were solid at more than 1.1 MMT, as lower prices attract buyers and a weaker dollar also encourages more activity.

 

Wheat futures slowed their descent, and both KC and MPLS futures finished with gains for the week. Chicago was involved in more spread trading, and posted a net loss of 4 cents per bushel. Total export commitments for the year are 49% smaller than last year, a huge handicap if you want to be bullish. They are also light as a % of USDA’s forecast for the year at 21%. The average commitment as of this date is 29% of the USDA forecast. Bulls were mostly getting help from unwinding of spreads, where wheat had been the favored short leg. To unwind corn/wheat or soy/wheat, you have to buy back the wheat.

 

Cotton futures were up another 2.83% for the week. Deferred new crop contracts like the December 2010 are trading over 70 cents/pound on expectations of a cotton stocks drawdown and an eventual upturn in consumer textile demand. There was little evidence of that demand in the weekly numbers coming out of Wall Street. A weak US dollar did help commodities like cotton that weren’t being actively liquidated.

 

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

Market Watch

 

 

 

 

Weekly

Weekly

 

06/26/09

07/02/09

07/10/09

07/17/09

Change

% Change

September Corn

$3.92

$3.46

$3.28

$3.22

-0.06

-1.83%

September CBOT Wheat

$5.63

$5.29

$5.19

$5.15

-0.04

-0.77%

September KCBT Wheat

$6.00

$5.64

$5.48

$5.67

0.19

3.47%

September MGEX Wheat

$6.67

$6.23

$6.03

$6.16

0.14

2.24%

August Soybeans

$11.28

$11.54

$10.45

$10.10

-0.35

-3.37%

August Soy Meal

$371.00

$382.20

$344.80

$317.50

-27.30

-7.92%

August Soy Oil

$36.24

$35.34

$32.73

$34.82

2.09

6.39%

August Live Cattle

$82.40

$84.88

$83.48

$86.38

2.90

3.47%

August Feeder Cattle

$98.98

$103.45

$102.93

$104.60

1.68

1.63%

August Lean Hogs

$57.70

$61.15

$63.60

$64.67

1.07

1.68%

October Cotton

$54.89

$59.00

$60.39

$62.10

1.71

2.83%

September Oats

$2.19

$2.25

$2.12

$2.15

0.03

1.53%

September Rice

$12.23

$12.89

$13.02

$12.97

-0.05

-0.38%

 

Cattle futures were up 3.47% for the week. Wholesale beef prices remained under pressure all week due to heavy packer offerings, and in fact were down another 10 to 20 cents on Friday. The market, however, is looking ahead to tighter ready cattle numbers as we head into August. Beef production year to date is down 4.1% from last year, and this past week was 9% below the same week in 2008 based on preliminary numbers.

 

Hogs were able to post their fourth consecutive higher weekly close in the August contract. Pork production YTD is down 3.3%, and the estimate for the past week is -6.6% thanks in part to some plants being dark on Monday. The lean pork cutout has been absolutely on fire, rising to $65.63 on Friday. The carcass value has risen $11.86 since July 1, a 22% increase. That jump in meat value is boosting future cash hog price potential, and is reflected in the premium being traded by the futures.

 

Market Watch:  With the July USDA crop reports out of the way, market attention returns to yield estimation in its various flavors. USDA crop condition ratings on Monday night will receive some attention, as will maturity measures (like % silking in corn and % blooming in soybeans).  Besides the Monday night report, the other major USDA reports are Cattle Inventory and Cattle on Feed, with both to be released on Friday July 24th. Census is due to release the monthly Crush and Cotton Consumption reports on Thursday morning. Options traders will also be busy, with August grain options expiring on Friday afternoon.  

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.

 

© 2009 Brugler Marketing & Management, LLC

Soybeans Take Their Turn

Jul 10, 2009

           

 

Market Watch Summary with Alan Brugler

July 10, 2009

 

Soybeans Take Their Turn

 

The soybean complex had been avoiding the price pressure in the feed grains market over the past couple weeks, as tight old crop stocks are well known, and it’s still 6-8 weeks until meaningful quantities of new crop will be available in the U.S. However, there is usually a tipping point where the trade collectively decides that we’ll make it, that enough rationing has been done to stretch supplies into the new crop availability. Soybeans acted that way, losing 9.73% for the week, although that may also be a function of the coming expiration of the July contract and traders’ interest in cashing out. Weakness in bean values was also likely fueled by the 10% drop in nearby soybean meal prices and the 6.8% loss in soy oil.  Each had their own story, with meal historically expensive vs. corn and wheat at the beginning of the week, and biodiesel ingredient soy oil torpedoed by sliding prices for crude oil and heating oil.

 

Corn came within a fraction of a cent of a moral victory, which would have been a higher weekly close. The market withstood quite a bit of negative news on Friday, including USDA’s 200 million bushels in cuts for old crop feed use and ethanol use and a 460 million bushel increase in projected 2009/10 ending stocks. The trade also largely ignored a projected increase of 13.71 million metric tonnes in 2010 world corn ending stocks. Of course, 11.68 MMT of that increase came from the United States!

 

Wheat futures prices continue to take the express train from price level A to price level B down in the bargain basement. USDA confirmed improved production prospects on Friday, with a 96 million bushel increase in U.S. All Wheat production.  The export forecast was raised 25 million bushels due to a slightly tighter world ending stocks situation, but projected US ending stocks are still expected to climb to 706 million bushels. The solution to the decline is finding more buyers, whether that comes from the feed sector, exports, or speculators and hedge funds. The latter group has been rather disinterested since the Congressional report on speculation in the wheat market. US export sales HAVE improved with the lower price levels but not yet enough to make the bears nervous.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

Market Watch

 

 

 

 

Weekly

Weekly

 

06/19/09

06/26/09

07/02/09

07/10/09

Change

% Change

July Corn

$3.99

$3.84

$3.46

$3.46

0.00

-0.06%

July CBOT Wheat

$5.55

$5.34

$5.00

$4.92

-0.09

-1.53%

July KCBT Wheat

$6.15

$5.90

$5.55

$5.40

-0.15

-2.40%

July MGEX Wheat

$6.99

$6.67

$6.18

$6.03

-0.15

-2.22%

July Soybeans

$11.79

$12.01

$12.43

$11.28

-1.15

-9.73%

July Soy Meal

$390.00

$405.00

$411.20

$372.30

-38.90

-9.97%

July Soy Oil

$36.53

$36.08

$35.18

$32.70

-2.48

-6.79%

August Live Cattle

$82.13

$82.40

$84.87

$83.47

-1.40

-1.70%

Aug Feeder Cattle

$98.10

$98.97

$103.45

$102.92

-0.53

-0.54%

July Lean Hogs

$61.43

$56.70

$59.97

$60.15

0.18

0.29%

October Cotton

$54.25

$54.89

$59.00

$60.39

1.39

2.56%

July Oats

$2.12

$2.09

$2.16

$2.04

-0.12

-5.42%

July Rice

$12.30

$12.13

$12.78

$12.90

0.13

1.02%

 

Cotton futures were actually the winners of the “bull of the week” award, with October rising 2.56% for the week. This wasn’t due to any perceived improvement in consumer demand for textiles, and USDA left projected mill use UNCH in Friday’s WASDE report.  The old crop ending stocks estimate was reduced from 6.6 to 6.0 million bales, however. For 2009/10 crop, USDA reflected the June 30 acreage increase, but left the harvested acreage and production estimates UNCH because of anticipated higher abandonment. This was a bullish surprise to the trade, and all but 9 points of the gain for the week came after USDA’s report was released on Friday morning.

 

Cattle futures were down 1.7% for the week. Wholesale prices remained under pressure after the July 4th holiday, with exports just not able to take up the slack from a soft domestic market. Weakness continues in the upper end of the market. Cash cattle traded $.50 to $1.50 lower than last week, at $81.50-$82.00. Ready numbers are expected to decline as we move through July and into August, but the consumption side is still a little iffy.

 

Hogs were able to post their second consecutive higher weekly close.  Admittedly it was by only 18 cents. July futures expire on Wednesday, and prices are in the process of converging with the CME Lean Hog Index used to settle the contract. Wholesale pork prices were volatile, with ham and pork belly quotes sharply higher on Thursday. With futures still above the Index, further strength in the products would appear to be needed to justify current futures price levels.

 

Market Watch:  The markets will begin the week trying to shake off the after effects of Friday’s Crop Production and WASDE reports from USDA. Then focus will shift to Monday evening’s Crop Condition ratings, with traders on watch for anything other than the usual seasonal drift downward. On Tuesday, NOPA will release its monthly Soybean Crush report. Tuesday is also the last trading day for July grain and oilseed futures contracts. Wednesday marks the expiration of the July hog contract. USDA Weekly Export Sales on Thursday will be monitored for any evidence that the slide in prices is buying additional export business. Friday will mark USDA’s monthly Milk Production report and give hints as to whether the CWT program is having any visible impact on supplies.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.

 

© 2009 Brugler Marketing & Management, LLC

Train Wreck in Corn

Jul 02, 2009

           

 

Market Watch Summary with Alan Brugler

July 2, 2009

 

Train Wreck in Corn

 

Corn futures had the dubious distinction of posting the largest weekly decline among the tracked commodities, at 9.64%. Last week we talked about the bullish train in soybeans, but this week it was the corn that jumped the tracks. Nearby July futures are down 80 cents per bushel in three weeks, with half of that occurring this past week. As you likely know by now, the initial weakness was driven by concerns about livestock demand losses due to poor profitability, but this week’s decline was fueled by a larger than expected Planted Acreage number from USDA on Tuesday morning. At 87 million acres, and about 80 million harvested, the crop appears to be large enough to cover anticipated demand from all sectors while also allowing a rebuilding of stocks.

 

It is still a long time until the corn is in the bin, and there are debates about whether the final acreage will be this large (some was still being planted as the surveys were being taken) and larger questions about yields on late planted corn. The crop condition ratings at the moment suggest above trendline yields, but yields are most closely correlated to late July conditions, not late June. And, there is a developing El Nino weather pattern that can result in unusual weather patterns this fall. Not to be overlooked, this price weakness is a welcome relief for margin stressed livestock farms.

 

Wheat futures showed no evidence of bullishness. Prices ground lower by another 5 to 7% at the three exchanges. While Egypt did buy 60,000 MT of SRW from the US (which will show up in next week’s Export Sales report) it was a drop in the bucket. Overall sales are still lagging, and at least one large private analyst is calling for USDA to raised projected HRW production on the 10th. Part of the selling pressure clearly came from the USDA acreage report, which showed more durum and spring wheat plantings than traders had thought possible given the wet spring in the major spring wheat growing states.

 

Soybean futures were the bullish exception for the week, albeit mostly in the old crop July futures. There were zero delivery notices vs. July, as the cash market was strong enough that nobody wanted to risk losing control of the bushels, even for a couple weeks. USDA found 12 million more bushels of old crop in storage on June 1 than the trade had expected, but that is about 10 days worth of exports in the summertime and doesn’t by itself change the bullish old crop tone. New crop is a different matter. While there are some who are extremely bullish about 2010 soybean price prospects, they are assuming growth in world demand that may or may not occur at this price level. What we do know is that USDA hiked the acreage estimate to 77.4 million, a record high. If yield prospects hold up, a record crop is likely. The world will want a lot of those beans in the first half of the marketing year, before fresh South American supplies are available in February. Brazilian seed firms report strong demand for soybeans and anticipate larger 2009/10 acreage.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

             

Market Watch

 

 

 

 

Weekly

Weekly

 

06/12/09

06/19/09

06/26/09

07/02/09

Change

% Change

July Corn

$4.26

$3.99

$3.84

$3.46

-0.39

-9.64%

July CBOT Wheat

$5.85

$5.55

$5.34

$5.00

-0.34

-6.12%

July KCBT Wheat

$6.37

$6.15

$5.90

$5.55

-0.35

-5.65%

July MGEX Wheat

$7.33

$6.99

$6.67

$6.18

-0.49

-7.05%

July Soybeans

$12.46

$11.79

$12.01

$12.43

0.42

3.56%

July Soy Meal

$422.70

$390.00

$405.00

$411.20

6.20

1.59%

July Soy Oil

$37.16

$36.53

$36.08

$35.18

-0.90

-2.46%

August Live Cattle

$81.60

$82.13

$82.40

$84.87

2.47

3.01%

Aug Feeder Cattle

$97.57

$98.10

$98.97

$103.45

4.48

4.57%

July Lean Hogs

$59.80

$61.43

$56.70

$59.97

3.27

5.32%

July Cotton

$56.10

$51.56

$52.54

$56.80

4.26

8.26%

July Oats

$2.39

$2.12

$2.09

$2.16

0.06

2.95%

July Rice

$12.93

$12.30

$12.13

$12.78

0.65

5.24%

 

             

Cotton futures were the bull leader this week. The market had been pushed down hard, and snapped back on a mix of improved export sales, delays in the Indian monsoon, an El Nino threat to the next Australian crop, and some good old fashioned speculator buying and short covering. USDA told us that all cotton acreage will be 9.054 million, based on the June survey. Some high yielding Texas acreage appears to be vacant statistically, but not when you drive around those districts. It may take another month or two (or the FSA data) to determine whether that ground ended up in cotton.

 

Cattle futures rose $2.47 for the week in the August contract, which is maintaining a premium to where the June went off the board on Tuesday. The net gain for the week was 3.01%. There was some cash cattle trade reported on Thursday at $83, up $1 from the previous week. This is a victory for the feedlots, given the weakness being reported in the product value. That said, those cattle could be cheap if beef prices rally sharply next week as retailers restock following the long holiday weekend.  Wholesale prices were still slipping on Thursday, with choice quotes at $137.89.

 

Hogs had a solid advance in the futures which wasn’t matched in the cash market. It is a futures market, and may be anticipating tighter numbers in August and/or improved demand as Russia re-opens imports from some US plants. Shorts also have to take profits occasionally.  The lean pork cutout was up and down, mostly down for the week. On Thursday, the carcass quote bounced back to $55, aided by a long awaited rebound in the ham quote from the $35 where it has been stuck to $41.96.

 

Market Watch:  The trade will be coming off of a three day week end, the infamous July 4th weekend that can sometimes signal tops and bottoms in markets, but other times is just an excuse for some volatility! USDA’s Crop Condition ratings on Monday night will get some attention, particularly whether the ratings continue to improve at a time of year when they usually begin to decline. July cotton futures will expire on Thursday. The major USDA reports for the week will be issued on Friday morning, including Crop Production and the WASDE supply and demand report. Some of the main changes are already known, such as US wheat ending stocks and increased US corn acres and soybean acres.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.

 

© 2009 Brugler Marketing & Management, LLC

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