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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.

Been Down So Long It Looks Like Up to Me

Apr 16, 2010

Market Watch with Alan Brugler
April 16, 2010
Been Down So Long It Looks Like Up to Me
Nearby May corn futures rallied 19 cents per bushel this week, a gain of more than 5.3%. The rally put a spring in the step of producers across the country, particularly those holding a lot of old crop corn. You’d have thought that prices were back at $4. It’s more a case of relief, confirmation that riding out the early April sell off was the right thing to do. Weekly export sales were up over the 1.1 MMT mark, suggesting that overseas customers were finding value. On the bear side, Midwest weather was favorable for rapid early season planting progress. Early planting is typically associated with above trendline yields, although it can also be a source of bullish momentum if there is a late April or early May freeze event.
This was also a week where the Dow Jones average broke the 11,000 mark to the upside. The Dow held the “round number” despite a big sell off on Friday after the SEC charged Goldman Sachs with civil fraud. Gold and crude oil were down sharply on various contorted theories that Goldman and related parties would be forced to liquidate long positions in those commodities. Grains and livestock avoided the panic selling. Goldman will obviously fight the charges.
All three wheat markets were higher, by 3 to 5%. Chicago was the strongest, mostly because it has a large speculative short position and periodically those bears get nervous enough to cash out portions of their positions. USDA did tighten up projected US and world ending stocks for wheat in the April 9 WASDE report. Meanwhile, winter wheat crop condition ratings remain the best since 2007.
Soybeans also participated in the bullish grain week. Prices shot up 33 cents per bushel, aided greatly by a $15.60/ton rally in soybean meal. Meal in turn was boosted by the rise in the feed grains, and by unwinding of oil/meal spreads. Soy oil was higher in China, but the weakness in energy futures weighed on the BO market. The China-Argentina dispute over hexane levels in Argentine soy oil continued to rattle around, with conflicting reports about the status. Most new crop soy oil has yet to leave Argentina. China has said that it is allowing previous purchases to be unloaded, but Argentine trade sources indicate that Chinese interest in buying new cargoes is significantly lighter than it had been. US weekly export sales were 158,000 MT of old crop (including fresh Chinese business) and 293,200 MT for new crop. Nearly all of the latter is destined to go to China.
Cattle futures traded above $100 on Monday, but failed to close the chart gap on the weekly continuation chart. They sold off as cash cattle prices retreated. Show lists ballooned this week both because of the $100 trade the week before and also because finished cattle numbers should begin to rise as we head into May (based on in-weights and normal rates of gain). The greener cattle for the most part will be carried over into this coming week.  Choice boxed beef did continue to advance, up another 1% for the week as February export sales data confirmed increasing world interest, at least back in February.
Hog futures were up 3% for the week. The pork carcass cutout rose more than $5.83/cwt. this past week, more than a 7% hike. That stirred up the cash hog markets, and in turn caused futures to reverse from a Monday low to post new life of contract highs on Friday. Weekly pork production was estimated to be up 0.8% from the previous week.
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
Market Watch
% Change
CBOT Wheat
KCBT Wheat
MGEX Wheat
Soybean Meal
Soybean Oil
Live Cattle
Feeder Cattle
Lean Hogs
Cotton futures staged a huge 5.55% rally this week, getting back most of what it lost last week. Weekly export sales of 281,200 RB were within the range of trade estimates, but continue to show solid world demand. Retail sales data was mostly positive, while employment and other items were more of a mixed bag. Based on Friday night’s CFTC report, traders were just plain exiting the cotton market. Open interest for cotton dropped about 11 thousand contracts from Tuesday to Tuesday.
Market Watch: The May cotton options expired on Friday. Market participants will begin the week adjusting positions for those who were surprised by exercises. Grain traders will be looking at the weekly export inspections report to see how well shipments are holding up, and will be very interested in the corn planting progress shown by USDA on Monday night in the Crop Progress reports. Trade guesses are anywhere from 14 to 22%, with our experience being that the trade often overestimates weekly planting progress in April. US producers can plant 40% of the crop in a single week, but with last freeze dates still 3 weeks away or more, most won’t go full bore this early. Census Crush and Cotton Consumption reports are due on Thursday morning, along with the weekly USDA Export Sales report. USDA’s monthly Cold Storage report is also due on Thursday. The Cattle on Feed report is scheduled for release on Friday afternoon. The May grain options will expire on April 23.
There is a risk of loss in futures and options trading. 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, or of any particular risk management technique. 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 subscription and consulting services.
                                                                                                                                      Copyright 2010 Brugler Marketing & Management, LLC
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