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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.

Blazing Hot!

Jul 20, 2012

 

Brugler

Market Watch with Alan Brugler

July 22, 2012

Blazing Hot

Well over one thousand US counties have already been declared eligible for disaster loans because of the drought. It is hot, and it is dry. Many US states are looking at the highest average temperature for July ever or the second highest. It is always hot in the summertime, but this heat is bad for crops and bad for livestock. About the only winners are electric utilities and ice cream vendors!

Corn was 84 cents higher for the week, dwarfing the 13 cent gain from the previous week. Condition ratings are expected to decline on next week’s crop progress report. Yield estimates have been declining steadily, as weekly rain amounts of .25" or .50" aren’t enough when corn is using1-2" per week. The blistering heat in the red states is expected to continue throughout August, and is also correlated with losses of up to 25% of initial potential yield depending on how hot and for how long. The crop is definitely being hurried to maturity with maximum GDD accumulations. The Brugler500 crop condition index dropped to 281, the lowest for this week since the 252 rating in 1988. The market is doing its best to slow down use to fit the new supply reality. Ethanol production slowed to the lowest level since 2010, and export sales have slowed to a crawl. One side effect of reduced ethanol production is higher DDG and soybean meal prices due to the reduction in DDG availability.

 Soybeans were up another 10.2% for the week. Chinese buying is still out there, but may be slowing down as US prices get close to or above Chinese values after adding freight, tariffs and other costs. China bought 174,400 MT of old crop US beans, and no official new crop. US export commitments (shipments plus open contracts) fully cover the USDA export estimate for the year at 104% of final projection. Some sources are projecting U.S. soybean production at 80-83 MMT.  Up to one third of the Brazilian crop may already be forward sold, with planting not due to begin until after Labor Day. The Brugler500 index for soybean crop conditions dropped to 298 from 309. Ratings are now the lowest since 1988.

The three wheat markets finished the week 73 to 96 cents higher. Winter wheat harvest was 80% complete as of Sunday. Weekly export sales for the week ending July 5th were 589,200 MT, a better than expected figure even if cumulative commitments still lag year ago. Cumulative exports are 295 million bushels vs. 352 million at this point last year. Total export commitments YTD are 25% of the USDA’s recently raised forecast for the year. They typically would be 29% by now.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

06/28/12

07/06/12

07/13/12

07/20/12

Change

% Change

Sep

Corn

$6.29

$6.95

$7.41

$8.25

$0.84

11.34%

Sep

CBOT Wheat

$7.57

$8.06

$8.48

$9.43

$0.96

11.27%

Sep

KCBT Wheat

$7.56

$8.09

$8.51

$9.41

$0.90

10.58%

Sep

MGEX Wheat

$8.45

$9.06

$9.59

$10.32

$0.73

7.56%

Aug

Soybeans

$14.82

$15.86

$15.95

$17.58

$1.63

10.21%

Aug

Soybean Meal

$429.50

$461.50

$480.80

$543.00

$62.20

12.94%

Aug

Soybean Oil

$52.39

$53.44

$53.70

$54.36

$0.66

1.23%

Aug

Live Cattle

$120.45

$119.20

$117.20

$117.95

$0.75

0.64%

Aug

Feeder Cattle

$151.45

$146.53

$139.00

$136.10

($2.90)

-2.09%

Aug

Lean Hogs

$94.78

$93.30

$90.40

$93.70

$3.30

3.65%

Oct

Cotton

$71.57

$70.53

$71.76

$72.06

$0.30

0.42%

Sep

Oats

$3.38

$3.62

$3.73

$3.87

$0.15

3.89%

Sep

Rice

$14.49

$15.06

$15.29

$15.54

$0.25

1.64%

 Nearby cotton futures were up 0.4% for the week. The good news is that cotton appears to be less affected by the US drought than it was last year. Crop condition ratings are holding up fairly well. Export sales were also net negative for quite a while last summer and fall. With two weeks left in the marketing year, merchants were still able to sell 41,600 RB of old crop upland cotton for export. New crop sales weren’t so exciting; at 34,100 RB with all year to get it shipped.

Cattle futures eked out a 75 cent net gain for the week. Wholesale beef prices were under pressure all week ending at $179.31 for choice boxes, down 2.5% from the previous week. On Friday afternoon, USDA unleashed a barrage of livestock reports. The Cattle report showed a larger than expected decline in the US cattle herd, down 2.2% from last July. Beef cow numbers were also down 2.9% and calf numbers under 500 lbs. were down 2.6% from year ago. Cattle are becoming scarcer. The Cattle on Feed report showed more cattle in the lot than a year ago, up 2.5% year/year. However, June placements were only 98.2% of last year and June marketings were down 6.5% from June 2011. Beef production YTD is down 2.3% from last year.

Lean Hog futures shot up 3.65% for the week. Pork production is slowing. Weekly production was down 0.4% from the previous week. Year to date production is now only 1.7% larger than last year. It had been up more than 2% a few weeks ago. Estimated hog weights are thought to be 2 pounds lower than last week, a function of both the heat and sharply escalating feed prices. Pork cutout prices were firmer for a change, up 1.9% for the week. Rib quotes were up 10.7% on a Friday/Friday basis, underpinning the rest.

Market Watch:

The market will begin this week again focusing on the weather forecasts, particularly looking for any dip in the temps or increase in precip that might boost yield potential for corn and soybeans. Livestock traders will start the week reacting to the raft of reports released this past Friday afternoon, including Cattle Inventory, Cattle on Feed, Cold Storage and Livestock slaughter. Grain traders will again expect a drop in weekly crop condition ratings in the Monday evening Crop Progress report from USDA. Friday will mark the expiration of the August options for grains, financials and nat gas.

The Brugler Marketing Summer Seminar will be held July 26-27 at the Hilton Garden Inn in Omaha. The Dayton, Ohio Seminar is July 30-31. The public is invited attend, but pre-registration is required. Go to the Seminar links on the Brugler Web site for an agenda and online registration. The site is https://www.bruglermarketing.com.

There is a risk of loss in futures and options trading. Such trading is not appropriate for all individuals and entities. Past performance is not necessarily indicative of future results.

Copyright 2012, Brugler Marketing & Management LLC.

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