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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.

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

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