Aug 20, 2014
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May 2014 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.

Too Much Corn, Not Enough Soybeans?

May 30, 2014

 Brugler

Market Watch with Alan Brugler

May 30, 2014

Too Much Corn, Too Few Soybeans?

While the market has been known to change its collective mind (fairly rapidly at times) the consensus coming back from the Memorial Day holiday was that we have too much corn coming this fall, but might not have enough soybeans.  How else do you explain a 2.6% drop in corn prices vs. a 1.5% drop in soybeans? This comes despite what is likely still a multi-million acre cut in US corn plantings for 2014 from 2013, and record large US soybean acreage. With the current weather pattern providing extra heat units to catch up from a late spring, and extra moisture in the Plains and WCB to ease drought conditions, forecasters are comfortable calling for record corn yields and record bean yields. Of course, they did the same thing last year, and in 2012 as the drought was unfolding for that matter.  The situation is much more complex, of course. Chinese import demand for soybeans is seen continuing to grow in 2014/15, perhaps to 2/3 of all global trade in beans.  The beans need to be there. Global corn ending stocks are seen reaching the highest level since 2000, although to be fair the stocks/use ratio is still likely to be tighter than the 2008/09 period.  Soybean stocks/use globally could be the second loosest in history, but the market currently isn’t trading as if those bushels are safely in the bin. 

Corn was down 2.56% this week, extending the 1.1% loss from the prior week . Ethanol stocks ballooned 500,000 barrels last week, mostly on the East Coast.  Daily production (and corn use) was up 2,000 bpd from the prior week. Weekly export sales were solid for old crop at 621,300 MT, but still sluggish at 90,900 MT for new crop.  Export commitments are 95% of the USDA forecast for the year, in line with the 94% average.  Unshipped sales are more than 4.2 MMT larger than average for this date. China continues to unwind old crop commitments, cancelling another 115,000 MT this week. They are beginning to auction off reserve corn. China sold 1.8 MMT of 3.5 MMT of reserve corn offered this week.  Some Northeast China areas are short on cash corn because so much of the corn was sold to the Chinese government under the support program.  Significant imports are not likely as they work off these Government stockpiles. Per the CFTC, the spec funds exited 5,550 longs but more importantly added 23,703 new short positions in corn during the week ending May 27, dropping their net long to 178,319 contract.

Soybean futures were 22 cents lower this week after a 50 cent bounce the previous week. Meal gave back 0.48% after being up 4.66% the week before. Soy oil plunged 4.66% , however, putting a lot of downward pressure on product value of the beans. USDA reported weekly exports sales of 881,000 MT, with a stronger than expected 60,300 MT of old crop. Old crop export commitments were 103% of the USDA full year forecast, ahead of the typical 100% pace for this date. The Commitment of Traders report on Friday afternoon showed the spec funds covering short positions. They trimmed 5,798 shorts and added 321 longs in the week ending May 27, boosting their net long position from     120,919 contracts to 127,037 lots..

Wheat futures were down again this week. KC was off 2.9%, while MPLS lost 2.6% and Chicago was down 3.9%. Rain makes grain.  It was too late to do much except add a little test weight in the southern HRW areas. Further north where the wheat is not yet headed should see more significant improvement in yield potential. An Illinois SRW tour projected yield there at 64.68 bpa vs. 61.6 bpa last year. SRW conditions overall are still worse than last year in the 18 major states. Weekly export bookings rose slightly to 531,500 MT of new crop, but we saw old crop cancellations/rollovers to 2014/15 delivery of 52,400 MT. The Commitment of Traders report showed the large spec funds more aggressively shorting Chicago futures. They were still net long 19,715 contracts of futures and options on May 27, but added 5,153 new shorts for the week and only 432 new longs.  

Cotton futures were down 0.43% this week, a welcome halt in their freefall.  Speculative longs have been exiting, cutting another 11,740 contracts from their net long this week, bringing the CFTC total down to 35,664 as of May 27.  Export sales commitments are running 103% of the USDA forecast for the year. They would typically be 104% by now, due to business typically carried over to the following marketing year. US weekly export sales were much slower than the prior week’s 518,400 running bales. Upland sales totaled only 61,000 RB of old crop and 114,300 RB of new crop. Pima sales totaled 6,200 RB.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/09/14

05/16/14

05/23/14

05/30/14

Change

% Change

July

Corn

$5.07

$4.84

$4.78

$4.66

($0.12)

-2.56%

July

CBOT Wheat

$7.22

$6.74

$6.53

$6.27

($0.25)

-3.87%

July

KCBT Wheat

$8.28

$7.68

$7.45

$7.23

($0.22)

-2.92%

July

MGEX Wheat

$7.95

$7.40

$7.25

$7.07

($0.19)

-2.59%

July

Soybeans

$14.87

$14.65

$15.16

$14.93

($0.22)

-1.47%

July

Soybean Meal

$487.30

$480.20

$502.60

$500.20

($2.40)

-0.48%

July

Soybean Oil

$41.18

$40.75

$40.38

$38.50

($1.88)

-4.66%

June

Live Cattle

$138.05

$137.90

$136.30

$137.80

$1.50

1.10%

Aug

Feeder Cattle

$191.38

$193.33

$194.15

$198.13

$3.97

2.05%

Jun

Lean Hogs

$120.18

$125.25

$123.73

$120.48

($3.25)

-2.63%

July

Cotton

$92.36

$89.82

$86.64

$86.27

($0.37)

-0.43%

July

Oats

$3.53

$3.37

$3.46

$3.71

$0.26

7.38%

July

Rice

$15.43

$15.40

$15.25

$14.99

($0.26)

-1.71%

 

Cattle futures were up 1.1% this week. Cash cattle trade was mostly steady at $144, with the north at $232.  Futures were supported all week by their discount to the cash cattle market.  Estimated weekly slaughter of 537,000 head was not comparable to last week or year ago due to the holiday. Beef production YTD is 5.9% below last year, with slaughter down 6.4%.  Average carcass weight is about even with year ago.  USDA reported weekly beef export sales were not expanding seasonally., coming in at a pedestrian 12,700 MT.  Wholesale beef prices were higher this week, with choice boxed beef up 0.3% and select boxes up 0.5%. 

June Hog futures were down 2.6% this week. They are still at a premium to the CME Index. Weekly FI slaughter was projected at 1.75 million head for the holiday shortened week, down from 1.973 million head last week and 1.873 million a year ago. Slaughter YTD is down 4.2% but pork production is only down 0.9% due to higher carcass weights. Carcass weights are up an average of 9 pounds per hog vs last year!  Weights are pulling back slightly as temps have heated up. The pork carcass cutout value was up 95 cents for the week, a0.83% advance. All of that came on Friday, when the pork belly primal erased a week of reported losses by rising $11.36/cwt.  Picnics were actually the big gainer for the week, up 4.6%.  Weekly pork export sales were down 22% from last week at 9,100 MT.

Market Watch

The calendar has turned to June.  It will be a light report week, with the usual USDA Export Inspections and Crop Progress reports on Monday, ethanol production on Wednesday and weekly USDA Export Sales on Thursday morning. Friday will mark the expiration of June live cattle options.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

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.                  

Copyright 2014 Brugler Marketing & Management, LLC

Watch Out for Weather

May 23, 2014

 Brugler

Market Watch with Alan Brugler

May 23, 2014

Watch Out for Weather 

For many years, I have emphasized my view of weather forecasts, which is "You can get any weather forecast you want to pay for". You can always find a weather guru whose model is saying the opposite of someone else’s, particularly if you are looking more than a week out. The data has gotten better over the years, but the interpretation is still pretty variable. Even if the forecasts agree, traders will disagree on which time frame is important, i.e. it is dry this week but will rain next week or the 30 day is wet, etc. 

To further make my case, the correlations between weather events spread over 326 million US crop acres and final national yield and production are fairly weak. We know that drought does drag down yields, and high temps during pollination can hurt corn yield if adequate moisture isn’t present. Applying that to corn planted over a 2 month maturity period (and some of which consists of  drought tolerant hybrids) lends further uncertainty.

My message from the above is simple. We’re into the growing season, and weather news will predominate. One of the cardinal rules of trading is that "if you trade the news you lose". Try to tune out the daily hype, watch for broad trends, and let the price charts tell you what the market really knows about the situation.

Corn was down 1.1% this week. Ethanol stocks shrank 300,000 barrels last week, and daily production was up for a bull friendly combination. Weekly export sales were solid for old crop at 507,900 MT, but disappointing at only 62,500 MT for new crop.  China continues to unwind old crop commitments, cancelling another 60,100 MT this week. They are beginning to auction off reserve corn bought in previously to support local prices. China sold 988,000 MT out of 1.2 MMT of reserve corn offered this week.  Prices were "better than expected".  Some Northeast China areas are short on cash corn because so much of the corn was sold to the Chinese government under the support program.  US Planting progress got behind the 5 year average pace at 73% vs. the 76% average, but is expected to catch up by next Tuesday’s report. The Commitment of Traders report on Friday night showed that the large speculator funds cut 47,472 contracts from their net long position in the week ending May 20, reducing it to 207,572 contracts.  

Soybean futures were 50 cents higher this week after losing 22 cents the prior week.  Meal was up a sharp 4.66%, or $22.40/ton.  Exports continue to absorb a lot of production and some crush plant draw areas are getting tight on bean supplies. USDA reported weekly exports sales of 615,600 MT, with a stronger than expected 164,400 MT of old crop. Old crop export commitments are 103% of the USDA full year forecast, ahead of the typical 99% pace for this date. The Commitment of Traders report on Friday afternoon showed the spec funds exiting another  10,844 soybean longs during the week, dropping their net long to 120,919 contracts as of May 20.

Wheat futures were down again this week. KC was off 3%, while MPLS lost 2% and Chicago was down 3.2%. Weekly export bookings rose slightly to 352,000 MT from 252,000 MT the prior week. Old crop sales were 142,200 MT. Drought conditions moderated slightly as the week progressed, thanks to rainfall of up to 2 inches in stressed areas of the Panhandle.  Texas may see up to 4 inches of additional rain over the next 5 days, but too late to help the wheat crop. It is more likely to interfere with harvest. Estimates of marketing year exports out of the EU were revised upward to more than 30 MMT, a new all time record. The Commitment of Traders report showed the large spec funds trimming their KC HRW long by 2,597 contracts in the week ending May 20. They were net long 24,436 contracts in Chicago and 31,926 contracts in KC on that date.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/02/14

05/09/14

05/16/14

05/23/14

Change

% Change

July

Corn

$4.99

$5.07

$4.84

$4.78

($0.05)

-1.14%

July

CBOT Wheat

$7.16

$7.22

$6.74

$6.53

($0.22)

-3.23%

July

KCBT Wheat

$8.21

$8.28

$7.68

$7.45

($0.23)

-2.96%

July

MGEX Wheat

$7.75

$7.95

$7.40

$7.25

($0.15)

-1.96%

July

Soybeans

$14.70

$14.87

$14.65

$15.16

$0.50

3.45%

July

Soybean Meal

$480.40

$487.30

$480.20

$502.60

$22.40

4.66%

July

Soybean Oil

$41.51

$41.18

$40.75

$40.38

($0.37)

-0.91%

June

Live Cattle

$138.40

$138.05

$137.90

$136.30

($1.60)

-1.16%

Aug

Feeder Cattle

$190.33

$191.38

$193.33

$194.15

$0.82

0.43%

Jun

Lean Hogs

$122.23

$120.18

$125.25

$123.73

($1.52)

-1.22%

July

Cotton

$94.32

$92.36

$89.82

$86.64

($3.18)

-3.54%

July

Oats

$3.50

$3.53

$3.37

$3.46

$0.09

2.52%

July

Rice

$15.49

$15.43

$15.40

$15.25

($0.15)

-1.01%

 

Cotton futures were down 3.54% this week. Speculative longs have been exiting, cutting 9,640 contracts from their net long this week, bringing the CFTC total down to 47,404 as of May 20.  Export sales commitments are running 99% of the USDA forecast for the year. They would typically be 102% by now, due to business typically carried over to the following marketing year. China continues to make efforts to use up more of its burgeoning stockpile, at the expense of imports.  US weekly export sales were actually pretty good by recent standards at 518,400 running bales, and China bought 269,300 RB. Rain in Texas is being welcomed, with one bearish brokerage type calling it a "million bale rain".

Cattle futures were down 1.2% this week. Cash cattle trade was mostly $1-2 lower this week at $144, with the north at $230-234.  Futures were supported all week by their discount to the cash cattle market but sold off on Friday because of the weaker cash cattle trade. Estimated weekly slaughter of 599,000 head is up from 591,000 the prior week but well below 653,000 last year. Beef production YTD is 5.7% below last year. Production this week was 7.8% smaller than the same week in 2013. Average carcass weight is about 4# above last year, helping to offset an 8.3% drop in the slaughter run.  The USDA Cold Storage report confirmed that beef supplies in the cooler were down 21% from year ago due to the cumulative effect of low slaughter numbers. Wholesale prices were strong this week, with Choice boxed beef up 2.7% and Select up 1.9% on a Friday/Friday basis. 

June Hog futures were down 1.22% this week after a 4.2% pop the prior week. Weekly FI slaughter was projected at 1.973 million head, down from 1.999 million head last week and 2.072 million a year ago. That meant weekly slaughter was down 4.8% from last year, but due to higher carcass weights the pork production was actually up 0.3%!  Carcass weights are up an average of 12 pounds per hog vs last year!  The pork carcass cutout value was up 87 cents for the week. Weekly pork export sales were up from the prior week’s 8,000 MT @ 11,600 MT.  The Cold Storage report showed total pork in the coolers on April 30 was down 16.7% from last year, although up slightly from March.

Market Watch

The markets are closed on Monday for the Memorial Day holiday in the US. There may be a little position adjusting on Tuesday from surprise positions inherited via the June grain options expiration on Friday the 23rd.  USDA weekly Export Inspections and Crop Progress reports will be released a day late (on Tuesday) due to the Monday holiday. Weekly Export Sales data will also be delayed until Friday morning.  The usual Wednesday EIA energy report is also expected to be delayed until Thursday. Friday will also mark month end, with asset allocation traders likely cashing out the monthly winners and buying losers all week. One major index fund will also be rolling longs out of July futures at the end of the week.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

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.                  

Copyright 2014 Brugler Marketing & Management, LLC

Beware the Ides of May

May 16, 2014

 Brugler

Market Watch with Alan Brugler

May 16, 2014

The Ides of May

 

You may be familiar with the Ides of March, from Shakespeare, but it appears grain bulls should have been warned about the ides of May. Futures took a pretty good hit on Thursday and Friday, extending more routine losses seen earlier in the week and going considerable chart damage.  The cash was leaving for a weekend parking spot, with equities also seeing major selling on Wednesday and Thursday before a little short covering bounce on Friday afternoon.

Corn was down a sharp 4.6% this week. Ethanol stocks grew 200,000 barrels last week due to the largest imports of the year and a rise in domestic production driven by excellent plant margins. Weekly export sales were disappointing at only 390,300 MT for combined old and new crop bookings. Planting progress got ahead of the 5 year average pace at 59% and is expected to be close to 70% this week despite some rain interruptions. The Commitment of Traders report on Friday night showed that the large speculator funds cut 11,435 contracts from their net long position in the week ending May 13.  

Soybean futures were 22 cents lower for the week after gaining 20 cents the prior week.  Meal was down 1.5% to apply some pressure to product value. Soy oil was also lower after NOPA showed larger than expected soy oil stocks on Thursday. USDA reported weekly exports sales of 398,300 MT, with a stronger than expected 73,600 MT of old crop. Old crop export commitments are 103% of the USDA full year forecast, ahead of the typical 98% pace for this date. Outstanding sales are only 2.3 MMT. The Commitment of Traders report on Friday afternoon showed the spec funds exiting another 6,281 soybean longs during the week, dropping their net long to 131,763 contracts as of May 13.  

 

Commodity

 

 

 

 

Weekly

Weekly

Month

04/25/14

05/02/14

05/09/14

05/16/14

Change

% Change

July

Corn

$5.12

$4.99

$5.07

$4.84

($0.24)

-4.64%

July

CBOT Wheat

$7.08

$7.16

$7.22

$6.74

($0.48)

-6.61%

July

KCBT Wheat

$7.79

$8.21

$8.28

$7.68

($0.60)

-7.28%

July

MGEX Wheat

$7.49

$7.75

$7.95

$7.40

($0.55)

-6.92%

July

Soybeans

$14.94

$14.70

$14.87

$14.65

($0.22)

-1.48%

July

Soybean Meal

$481.40

$480.40

$487.30

$480.20

($7.10)

-1.46%

July

Soybean Oil

$43.15

$41.51

$41.18

$40.75

($0.43)

-1.04%

June

Live Cattle

$136.77

$138.40

$138.05

$137.90

($0.15)

-0.11%

Aug

Feeder Cattle

$184.63

$190.33

$191.38

$193.33

$1.95

1.02%

Jun

Lean Hogs

$124.53

$122.23

$120.18

$125.25

$5.08

4.22%

July

Cotton

$92.35

$94.32

$92.36

$89.82

($2.54)

-2.75%

July

Oats

$3.58

$3.50

$3.53

$3.37

($0.16)

-4.53%

July

Rice

$15.45

$15.49

$15.43

$15.40

($0.03)

-0.19%

 

Wheat futures were down sharply this week. KC was off 7.3%, while MPLS lost 6.9% and Chicago was down 6.6%. Weekly export bookings dropped sharply, to only 252,000 MT. Old crop sales were only 54,900 MT, which you might expect since they need to be shipped by May 31.  Drought conditions intensified in the Panhandle area, but parts of Kansas and Nebraska got some rain relief and SRW condition ratings continued to improve. Remember that a falling market doesn’t necessarily mean bigger production; it can just mean an opinion that the rationing job has been accomplished and consumption will fit the reduced supply. The Commitment of Traders report showed the large spec funds trimming their HC HRW long by 2,353 contracts in the week ending May 13.

Cotton futures were down 2.75% this week. Speculative longs have been exiting, cutting 7,334 contracts from their net long this week, bringing the CFTC total to 57,044 as of May 13.  Export sales commitments are running 99% of the USDA forecast for the year. They would typically be 102% by now, due to business typically carried over to the following marketing year. China continues to make efforts to use up more of its burgeoning stockpile, at the expense of imports.

Cattle futures were down 0.11% this week. Cash cattle trade was slow to develop, with a few cattle trading $1lower on Friday at $145 but most trade waiting for the Cattle on Feed report. Futures were supported all week by their discount to the cash cattle market. We are not in a delivery period, which limited any need for convergence.  Estimated weekly slaughter of 591,000 head was down from 600,000 last week and 654,000 a year ago. Beef production YTD is 5.6% below last year. Production this week was 8.5% smaller than the same week in 2013. Average carcass weight is about 10# above last year, helping to offset a 9.6% drop in the slaughter run. Wholesale prices lost 0.25% in the Choice and were up 1.39% in the Select on a Thursday/Thursday basis. The average retail beef price for April set a new record high at $5.87/pound. On Friday afternoon, USDA reported that the number of cattle on Feed on May 1 was 99% of year ago. April placements were a little light at 95.1% and April marketings were about as expected at 98% of April 2013.

June Hog futures were up 4.2% this week following a drop last week. May futures expired weakly at $114.67. Weekly FI slaughter was projected at 1.999 million head vs. 2.016 last week and 2.037 million a year ago. That meant weekly slaughter was down 1.9% from last year, but due to higher carcass weights the pork production was actually up 3.0%!  Carcass weights are up an average of 9 pounds per hog.  Weekly pork export sales were down 17% from the prior week at only 8,000 MT.

Market Watch

Cattle traders will begin the week reacting to the COF report results from Friday night. USDA will give us the usual updated Export Inspections and Crop Progress reports on Monday, with traders expecting US corn planting to be over 70% complete by Sunday, and up to 90% done in some Corn Belt states.  USDA weekly Export Sales will be out on Thursday morning, with the monthly Cold Storage report scheduled for Thursday afternoon.  Thursday is also the last trading day for May Feeder Cattle. Friday will market the expiration of June serial options for grain futures.  Friday will also be the beginning of a 3-day holiday weekend, with markets closed for Memorial Day on May 26.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

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.                  

Copyright 2014 Brugler Marketing & Management, LLC

A Whole New World

May 09, 2014

 Brugler

Market Watch with Alan Brugler

May 9, 2014

A Whole New World

 

On Friday morning, USDA took its first official (World Outlook Board) shot at 2014/15 world grain and oilseed estimates. With literally a whole new world of numbers to consider, there were plenty of questions about assumptions. Our research shows that it takes roughly 3 full years for USDA world numbers to "settle" from their first release here in May. The broad picture is for rising global stocks of corn, soybeans and cotton over the next year, while wheat production losses roughly counter production gains and global ending stocks are seen growing less than 1 MMT.

Corn was up 2.2% this week despite the Friday sell off. That offset most of the 2.56% loss from the prior week. Ethanol stocks dropped 100,000 barrels last week, thanks to zero imports and slightly lower production. The Commitment of Traders report on Friday night showed that the large speculator funds added 2,088 contracts to their net long position in the week ending May 6.  The main news for the week came from the USDA reports on Friday. USDA projected 2014 productoinn of 13.935 billion bushels, keeping their "weather adjusted trend yield" forecast at a record 165.3 bpa. World stocks numbers were increased sharply for both old and new crop, with the former up about 10 MMT (Brazilian production was hiked 3 MMT) and the latter @ 181.73 MMT vs. trade estimates of only 161.2 MMT.

Soybean futures were up 20 cents for the week, thanks to a 26 3/4 cent gain in the thin and soon to expire May contract on Friday. Meal was up 1.37%, but soy oil was down another 0.75%. Trade guesses for USDA weekly export sales were in the zero to 100,000 MT range for old crop, and net sales of 40,800 MT were regarded as bullish on Thursday. USDA hiked the old crop export estimate to 1.6 billion bushels on Friday, reflecting this strong old crop demand. To make room in the balance sheet, they bumped up likely imports to 90 million bushels. The Commitment of Traders report on Friday afternoon showed the spec funds exiting 30,832 soybean longs during the week, dropping their net long to 138.044 contracts as of June 6.  

Wheat futures were up more than 4% in Minneapolis, gained 0.9% in Chicago, but lost 1.5% in ostensible bull leader KC.  The worsening of drought conditions in TX and KS this week was a supportive factor. USDA agree with the Wheat Quality Tour, putting likely Kansas production at 260.4 million bushels. On Friday, USDA estimated US winter wheat production would drop to 1.403 billion bushels, with all wheat production at 1.963 billion bushels.

Cotton futures were down 2.08% this week. Speculative longs added 2,477 contracts to their net position in the last reporting week, bringing the CFTC total to 64,378 as of May 6.  The National Cotton Council (NCC) earlier this month lowered its projection for US cotton production to 15.25 million bales, citing dry weather in Texas. USDA agreed on Friday, cutting its own figure to 14.5 million bales. USDA also cut projected old crop exports by 300,000 bales, bumping ending stocks back up to 2.8 million bales. New crop ending stocks are seen hitting 3.9 million bales.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

04/18/14

04/25/14

05/02/14

05/09/14

Change

% Change

May

Corn

$4.95

$5.07

$4.94

$5.05

$0.11

2.23%

May

CBOT Wheat

$6.91

$7.00

$7.08

$7.14

$0.06

0.88%

May

KCBT Wheat

$7.58

$7.76

$8.32

$8.19

($0.13)

-1.53%

May

MGEX Wheat

$7.33

$7.46

$7.63

$7.95

$0.32

4.16%

May

Soybeans

$15.14

$14.98

$14.81

$15.01

$0.20

1.37%

May

Soybean Meal

$488.30

$490.60

$491.20

$497.50

$6.30

1.28%

May

Soybean Oil

$43.41

$42.92

$41.29

$40.98

($0.31)

-0.75%

June

Live Cattle

$134.37

$136.77

$138.40

$138.05

($0.35)

-0.25%

Aug

Feeder Cattle

$181.40

$184.63

$190.33

$191.38

$1.05

0.55%

Jun

Lean Hogs

$124.83

$124.53

$122.23

$120.18

($2.05)

-1.68%

July

Cotton

$92.34

$92.35

$94.32

$92.36

($1.96)

-2.08%

May

Oats

$4.04

$4.03

$4.08

$4.09

$0.02

0.43%

May

Rice

$15.36

$15.42

$15.50

$15.30

($0.20)

-1.29%

 

Cattle futures were down 0.25% this week. Cash cattle trade was slow to develop, with a few cattle trading $1-2 lower on Friday. Some $236-238 trades were reported in Nebraska. Estimated weekly slaughter of 597,000 head was down from 608,000 last week and 629,000 a year ago. Beef production YTD is 6.0% below last year. Production this week was 3.7% smaller than the same week in 2013. Average carcass weight is about 12# above last year. Wholesale prices lost 2.2% this week in the Choice and were down 3.8% in the Select.

June Hog futures were down 1.68% this week following a 1.8% drop last week. The pork carcass cutout lost 1.97% this week after being down 1.86% the prior week. Weekly FI slaughter was projected at 2.016 million head vs. 2.019 last week and 2.084 million a year ago. That meant weekly slaughter was down 3.3% from last year, but due to higher carcass weights the pork production was actually up 1.1%!  With USDA projecting pork exports for the year will be 3.8% higher producers have to pick up their pace or US consumers have to buy less. Average carcass weights are up 9 pounds from year ago.

Market Watch

USDA will give us the usual updated Export Inspections and Crop Progress reports on Monday, with traders expecting US corn planting to be over 50% complete by Sunday, and up to 80% done in some Corn Belt states.  May hog futures will expire on Wednesday, as will May grain and oilseed contracts. USDA will issue updated weekly Export Sales numbers on Thursday morning.  NOPA is also expected to release its monthly NOPA crush report on Thursday. USDA is schedule to publish the monthly Cattle on Feed report on Friday afternoon at 2 pm CDT.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

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.                  

Copyright 2014 Brugler Marketing & Management, LLC

Asset Allocation

May 02, 2014

 Brugler

Market Watch with Alan Brugler

May 2, 2014

Asset Allocation

An underappreciated aspect of normal commodity and equity markets is the asset allocation trades. Some risk management practices say to regularly reduce the size of your winners (take money off the table) and look for undervalued assets to buy. This is because markets are generally mean reverting and you will give back those gains if you wait long enough. Often the asset allocation adjustments happen on a monthly or quarterly cycle. Monthly adjustments can be just prior to month end, or at the beginning of the following month. As an example, a fund with 1000 bean contracts gained 83 1/4 cents in July futures during April. That was a $4.1622 million gain. If we assume the overall fund size was static except for the beans, and was initially $200,000,000 (it would really be much larger to be trading that many beans), the % of their portfolio in beans went from 35.7% to 37.0% just from the gain in the beans. To keep the risk exposure to beans the same, they had to sell some of the beans, either at the end of April or the first part of May. We saw that selling, and mirror image buying in cheap commodities, on May 1-2. The question for Monday is whether they are done yet.

Corn lost 2.56% this week, neatly offsetting the 2.5% gain from last week. The USDA weekly export sales report was at 951,700 MT.  That was about the middle of the trade estimates, but new crop sales were a poor 13,800 MT. Old crop commitments are 99% of the USDA total for the year compared to 93% last year and the 5 year average of 88%. Ethanol stocks rose to the highest level of the year, despite ethanol imports dropping back to zero. The Commitment of Traders report on Friday night showed that the large speculator funds added 27,756 contracts to their net long position in the week ending April 29.  

 

Soybean futures lost 57 cents on Thursday, which put a huge dent in the performance for the week. They were down 17 cents for the week. Meal was up 0.12%, but soy oil was crushed (pardon the pun) with a 3.8% loss after May delivery notices were much larger than expected. Trade guesses for USDA weekly export sales were in the zero to 550,000 MT range. USDA put the actual figure at 62,500 MT (including 78,900 MT for 14/15 and net cancellations of 16,400 old crop). Total soybean commitments as a % of total exports are at 104% compared to 100% last year and the 5 year average of 97%.

The Commitment of Traders report on Friday showed the spec funds adding to their soybean net long position by 3,725 contracts in the previous reporting week.

 

Wheat futures were higher again this week, up 1.07 to 7.25% across the various classes. The KC HRW contract was the bull leader. The worsening of drought conditions in TX and KS this week was a supportive factor, confirmed by the Wheat Quality Tour and its estimate that Kansas average yield would be only 33.2 bushels per acre. That is down from 41.1 last year despite similar Kansas crop condition ratings (Brugler500 index of 272). The Oklahoma yield estimate was only 18.5 bpa. USDA put weekly export sales on the low end of estimates at 434,500 MT (including 219,600 MT for 14/15). Total commitments are 98% of total projected exports compared to 101% last year and the 5 year average of 102%.

Cotton futures were up 1.3% this week on top of 3.1% last week. USDA reported slower weekly export sales for Cotton at 86,500 RB, including 80,300 RB of upland and 6,200 RB of pima. Total US cotton export commitments are at 89% of the USDA annual number, compared to 88% last year and the 5 year average of 88%. Speculative longs added 4,653 contracts to their net position in the last reporting week, bringing the CFTC total to 61,901.  The National Cotton Council (NCC) lowered its projection for US cotton production to 15.25 million bales, citing dry weather in Texas.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

04/11/14

04/18/14

04/25/14

05/02/14

Change

% Change

May

Corn

$4.99

$4.95

$5.07

$4.94

($0.13)

-2.56%

May

CBOT Wheat

$6.60

$6.91

$7.00

$7.08

$0.07

1.07%

May

KCBT Wheat

$7.20

$7.58

$7.76

$8.32

$0.56

7.25%

May

MGEX Wheat

$7.02

$7.33

$7.46

$7.63

$0.17

2.31%

May

Soybeans

$14.63

$15.14

$14.98

$14.81

($0.17)

-1.15%

May

Soybean Meal

$472.90

$488.30

$490.60

$491.20

$0.60

0.12%

May

Soybean Oil

$42.10

$43.41

$42.92

$41.29

($1.63)

-3.80%

June

Live Cattle

$135.78

$134.37

$136.77

$138.40

$1.63

1.19%

Aug

Feeder Cattle

$182.47

$181.40

$184.63

$190.33

$5.70

3.09%

Jun

Lean Hogs

$121.23

$124.83

$124.53

$122.23

($2.30)

-1.85%

May

Cotton

$89.02

$90.17

$92.95

$94.19

$1.24

1.33%

May

Oats

$4.04

$4.04

$4.03

$4.08

$0.05

1.24%

May

Rice

$15.66

$15.36

$15.42

$15.50

$0.08

0.52%

 

Cattle futures were up 1.2% this week. Cash cattle trade was slow to develop, but trading did start to develop at $147 and up. Some $238 trades were reported in Nebraska. Estimated weekly slaughter of 608,000 was above last week but still 14,000 head below the same week in 2013.  Beef production YTD is 5.5% below last year. Production this week was 0.5% smaller than the same week in 2013. Average carcass weight is about 14# above last year. Wholesale prices lost 1.9% this week in both the Choice and Select boxed beef. USDA weekly beef export sales backed off to 11,400 MT from 18, 000 MT the previous week.

 

June Hog futures were down 1.8% this week. The pork carcass cutout lost 1.86%% this week. The product value is down $19.77/cwt since April 3. Weekly FI slaughter was projected at 2.019 million head vs. 2.091 million a year ago. That meant weekly slaughter was down 3.4% from last year, but due to higher carcass weights the pork production was actually up 0.7%! Average carcass weights are up 8 pounds from year ago. USDA weekly export sales for pork dropped hard, from 15,100 MT two weeks ago to 9,800 MT on Thursday.

 

Market Watch

 

We start out the week with Children’s Day in Japan. This is not an excuse for the rest of the market to act like children! USDA will give us the weekly Export Inspections report on Monday morning, and the much anticipated Crop Progress report on Monday night.  Wednesday will mark the last trading day for May cotton futures. Thursday we have USDA Export Sales at 7:30 am CDT.  The main USDA report event of the week will be Friday, with the monthly Crop Production and WASDE supply/demand reports. The latter will include the first ‘official’ estimates for US 2014/15 production and use, as well as global estimates. These are still computer models. There will be no survey based NASS yield or production numbers until August.

 

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

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.                  

Copyright 2014 Brugler Marketing & Management, LLC

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