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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.

Monster Crops Assumed

Sep 04, 2009

 

Market Watch Summary with Alan Brugler

September 4, 2009

 

Monster Crops Assumed

 

 

There may be a lot of immature corn and soybeans out there, but the markets were clearly reaching some comfort level about crop size this past week. The weather forecasts had no threatening temps out through mid-September. Taking their cue from the record spring wheat yields and the resulting plunge in Minneapolis wheat prices, traders were aggressively selling corn and beans, while end users for the most part sat on their hands. Monster crops are seen as being in the offing, with a Memphis based private firm suggesting that USDA would show a corn crop larger than 13 billion bushels in this coming Friday’s report. Yield estimates are mostly in the 161-163 range (all would be a US record), but the private firm suggested that final yields in January could be as large as 168 bushels per acre. This is all corn the market doesn’t need based on known fundamentals, although it would certainly make an increase in the ethanol blend percentage a lot easier decision for the EPA.

 

Soybean yield estimates were also creeping higher this week, running between 42.6 and 44 bushels per acre. In most cases, that put the crop estimate around 3.3 billion bushels. Export business has been excellent, with well over 500 million bushels already on the books for new crop shipment. There is a saying that inverses are infinite, but sometimes they can disappear in a heartbeat. September soybeans and soybean meal saw their huge premiums evaporate as scattered new crop harvest began in IL, NE, LA, and other states. September beans were down nearly 16% in one week. Soybean meal was down 14%. Crushers and exporters wanted more beans than they were getting, but the new crop availability erased the scarcity premium. A major soy meal buyer also passed at its weekly tender, leaving the potential sellers with some high priced inventory to dump in the market. USDA indicated that 87 million bushels of old crop purchases had not been shipped as of the 27th, which also took a little of the starch out of the old crop bull argument. The marketing year ended on the 31st.

 

Wheat futures have already been a train wreck, but lost another 4 to 7% of their value this week. The spring wheat crop, having avoided yield limiting summer heat, is huge but also deficient in protein. Since high protein is why you raise spring wheat, the discounts for not making the numbers are huge. In North Dakota, 11% protein wheat was being discounted $3/bushel from the posted price for typical 14% protein wheat. Besides quality issues, world trade is a problem. Egypt bought some US SRW this week, and Japan has been buying DNS and white, but the overall commitments (shipments plus outstanding sales) are down 41% from last year at this time. There is just too much wheat in too many other countries to compete with the US.IGC put projected world production at 662 MMT.

 

Cotton futures rallied 2.18% for the week. Total upland cotton export commitments are down 32% from last year at this time, at 3.039 million bales. That’s a fairly normal 32% of projected USDA exports for the year, however, and in fact matches the 5 year average. The bullish news was that weekly sales were over 300 thousand running bales, and that China was back as the largest buyer.

 

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

Market Watch

 

 

 

 

Weekly

Weekly

 

08/14/09

08/21/09

08/28/09

09/04/09

Change

% Change

September Corn

$3.19

$3.22

$3.21

$3.01

-0.21

-6.39%

September CBOT Wheat

$4.82

$4.60

$4.67

$4.44

-0.23

-4.93%

September KCBT Wheat

$5.09

$4.94

$5.00

$4.77

-0.23

-4.60%

September MGEX Wheat

$5.49

$5.32

$5.22

$4.84

-0.38

-7.29%

September Soybeans

$10.23

$10.23

$11.36

$9.61

-1.75

-15.39%

September Soy Meal

$319.40

$333.00

$387.00

$332.20

-54.80

-14.16%

September Soy Oil

$37.18

$36.33

$36.07

$33.65

-2.42

-6.71%

October Live Cattle

$88.55

$88.60

$86.70

$86.65

-0.05

-0.06%

September Feeder Cattle

$100.20

$100.70

$98.15

$98.95

0.80

0.82%

October Lean Hogs

$44.65

$47.85

$48.07

$50.50

2.43

5.06%

October Cotton

$59.21

$56.45

$56.30

$57.53

1.23

2.18%

September Oats

$2.01

$2.05

$2.11

$1.96

-0.15

-7.12%

September Rice

$13.30

$13.13

$13.51

$13.93

0.42

3.07%

 

Cattle futures fought to a near draw for the week, losing 5 cents per hundred or .06%. Wholesale interest was slack, with holiday pipelines already filled the week before. Thus, the prices drifted lower. There was a pickup in buying interest on Thursday for choice, with 105 loads reported.  Cash cattle trade for the week ranged from steady money to $2 lower.

 

Hogs extended and accelerated their rally from the previous week, gaining more than 5%. Rib and ham prices retreated from where they were last week, and the pork cutout was lower for the week at $54.04. However, long time bears in the hogs are taking profits, and that buying is fueling the rally. The CME Lean Hog index also rose back above $50, with the packers trying to get hogs lined up to offset their Monday downtime and to meet the orders that drove the product rally from the two weeks before.

 

Market Watch:  Monday will be a market holiday. Electronic trading will resume on Monday evening. With the three day weekend and the selloff in the grains ahead of it, traders will be keenly interested in any shift to colder than normal temps in the extended forecasts that occurs over the weekend. If it doesn’t happen and things still look benign, weather premiums will continue to leak out of the market. However, there are also USDA Crop Production and Supply/Demand reports on Friday morning that will keep the bears from getting too comfortable due to the potential for a surprise. The normal USDA crop progress and Export Inspections reports will be delayed until Tuesday because Labor Day.  Weekly Export Sales will be delayed until Friday.  Friday will also be the last trading day for October cotton options.

 

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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COMMENTS (17 Comments)

Anonymous
Usually on poorer crops markets dont really take off. Than it takes a long time of speculation as to how bad it is and it takes the combines to roll and official verification of poorer crop before prices go up. Just my own personal view of bullish and bearish crops.
11:26 PM Sep 10th
 
Anonymous
If they lied and forecasted aweful crops would the market go higher? All I have heard is how bad the soybean crop is...yet prices break. This must also be a conspiracy.
7:53 AM Sep 9th
 

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