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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.

Dog Bites

Aug 05, 2011

Brugler

Market Watch and Dec Corn Tech Talk with Alan Brugler

August 5, 2011

Dog Bites

 

The Dogs of the Dow refers to a strategy for buying the most beaten up members of the Dow Industrials, expecting them to outperform in the future and revert to the mean. At points this week it seemed like the entire world equity market was a big collection of dogs. The market went from worrying about a bond default in the Debt Ceiling debate to dumping stocks and pouring that money into those very same and now presumed safer Treasuries. Commodity prices tried to run away, but some ended up being bitten by the pervasive selling interest. Perhaps it was more of a bear bite than a dog bite?

 

Corn futures rallied 27 ½ cents for the week, a 4.13% gain that was totally accounted for by the limit up move on Tuesday. Crop condition ratings are running below the 5 year average, and a number of firms have released yield estimates in the 150-158 bushel per acre range. The lowest estimate came from a weather firm on Tuesday and provided the ammunition for the rally. The highest came from Informa, but was itself a reduction from that firm’s previous estimates. Weekly ethanol production was up slightly, but is still running well below the rates from last winter due to a lack of old crop corn availability in some areas. USDA showed continued weakness in export sales bookings.

 

Soybeans lost 22 ¾ cents for the week, or 1.68%. Values for both meal and oil were lower, limiting the price processors could pay for the beans. A Reuters survey of 10 analysts put the average U.S. 2011 bean yield estimate at 42.9 BPA. Informa Economic cut their 2011 soybean production forecast to 3.139 billion bushels from 3.203 in July dropping estimated yield to 42.5 from 43.1 in their prior report. USDA is at 43.4 bushels, or at least that is where they were in July.

 

Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/15/11

07/22/11

07/29/11

08/05/11

Change

% Change

Sep

Corn

7.0125

$6.90

$6.66

$6.93

0.2750

4.13%

Sep

CBOT Wheat

6.9475

$6.92

$6.73

$6.79

0.0650

0.97%

Sep

KCBT Wheat

7.645

$7.80

$7.67

$7.80

0.1325

1.73%

Sep

MGEX Wheat

8.2375

$8.39

$8.31

$8.28

0.0325

0.39%

Sep

Soybeans

13.8575

$13.80

$13.54

$13.32

0.2275

1.68%

Sep

Soybean Meal

360.3

$363.00

$351.60

$345.20

6.4000

1.82%

Sep

Soybean Oil

57.35

$56.51

$55.65

$54.90

0.7500

1.35%

Aug

Live Cattle

110.6

$110.55

$112.63

$114.13

1.5000

1.33%

Aug

Feeder Cattle

135.7

$136.40

$137.05

$133.70

3.3500

2.44%

Aug

Lean Hogs

98.95

$100.83

$102.78

$104.93

2.1500

2.09%

Oct

Cotton

101.46

$99.14

$102.08

$101.48

0.6000

0.59%

Sep

Oats

3.55

$3.53

$3.46

$3.35

0.1025

2.97%

Sep

Rice

16.995

$16.74

$16.12

$16.28

0.1650

1.02%

 


Wheat prices were lower in MPLS due mostly to early harvest pressure. While the wheat tour noted a drop in likely ND yields, the early crop coming in from South Dakota is supposed to be pretty good. The other two exchanges were higher, aided by spread trading and the rally in corn. Russia continues to undercut the prices of other global wheat origins, thanks to both new crop wheat availability and attempts to buy back market share lost during last year’s export embargo. The sales prices have been creeping up, but are still below US or EU offers. Egypt bought more wheat from Russia and Romania this week. US weekly export sales exceeded trade estimates at a combined 504,903 MT, but failed to support prices. USDA has re-surveyed acreage in MT, SD, ND and MN, and any surprises found will be included in Thursday morning’s report.


Cotton Futures were down only about a half of a percent.  Export sales continue to be very weak, with net bookings of only 12,000 running bales in the week ending July 28. However, the market focus tipped a little toward the disaster in Texas and the potential for USDA to sharply reduce projected US cotton production in the Thursday crop report. ICAC still sees a buildup in world ending stocks.

 

Cattle futures were up 1.3% for the week, thanks to a $1.47 bounce on Friday. That accounted for all but 3 cents of the gain for the week. Estimated beef production for the week was down 0.6% from the previous week, due to a 1.2% drop in the number of cattle slaughtered. Wholesale prices were down 0.9% for the week, with choice boxes quoted at $172.64 going home on Friday.


Lean Hog futures were up 2.1% for the week. Estimated pork production for the week was down 2.2% from the prior week, on 1.7% fewer hogs. The translation? A drop in average weights. Pork production YTD is still about 1% above last year, but the strong export market has removed that extra supply from the reach of US consumers. The pork carcass cutout value reached a new all time record high this week at $108.31. Pork carcass cutout value was up 3.79% on a Thursday/Thursday basis.


Market Watch: This week we’ll again be watching the crop condition ratings intently. Generally, expectations are for little change or some improvement due to rains in the northern 2/3 of the corn and soybean growing area. Accumulations have been on the light side over the past 30 days, however. The main USDA reports of the week will be released on Thursday morning, with Crop Production and the WASDE supply and demand estimates. Friday will mark the last trading day for August hogs, soybeans, soybean meal and soybean oil.


Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service.  Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 


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.  Call 402-697-3623 for information on our individualized subscription and consulting services.

 

 Copyright 2011 Brugler Marketing & Management, LLC

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