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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.

Heating Up

Jul 08, 2011

brulogomed 

Market Watch with Alan Brugler

July 8, 2011

Heating Up

 

It’s the middle of July, you have a late planted corn and soybean crop, and the weather models are calling for a high pressure ridge to set up over the Southeast for the next two weeks or more. Temps east of the Rockies are projected to be above normal or much above normal for the period. That is not a setup for going home short for the weekend, and grains popped higher on Friday as bears headed for the sidelines.

Corn futures were up 4.92% this past week. There were zero deliveries against July futures, as corn basis is sufficiently strong to make it more attractive to own the cash corn than to deliver it against futures. Commercial longs are standing strong because taking delivery against September could drag out into new crop harvest, where prices are currently much lower. It is better to have the corn now. On the other hand, the 24 cent inverse is making elevators reluctant to hold cash corn and roll to the September. Many are back to backing any corn they are buying, or strictly buying it against September. USDA reported the largest weekly export sales total in 3 months on Friday, as low prices in the last half of June did their work of curing low prices. Large sales are also expected to be reported next week, including 540,000 MT of old crop corn sold to China.  Bulls also noted that spot ethanol margins have improved dramatically, and ethanol stocks are the tightest they have been all year.

Soybeans were also about 30 cents higher for the week, aided by higher values for both soybean meal and soybean oil. The smaller soybean acreage shown by USDA in the June 30 report is also supportive because high average yield is required and the weather forecasts have plenty of heat in them. Crop condition ratings improved slightly last week. USDA weekly export sales through June 30 were 434,700 MT, on the lower end of estimates. However, China was the buyer of 372,000 MT of old crop beans and that was news. Chinese soy oil prices have also risen back toward the upper end of their 6 month range, with some trade talk that price controls on veg oil will be eased in August.

Wheat prices advanced at all three exchanges, with old crop July sharply (11.29%) higher in Chicago. Deliveries vs. July futures there were limited because of the excellent returns to be had by storing the wheat and hedging it for later delivery. KC saw heavy deliveries against its July contract on Thursday, followed by a jump in basis bids for higher protein wheat. Low priced Russian wheat is making an impact on the market. Egypt bought 180,000 MT of Russian wheat after being made an offer so attractive that they couldn’t refuse. Tunisia had already purchased Russian wheat, and the Ukrainians have also been selling some. The US wheat crop is a mixed bag, with SRW yields reported to be pretty good, but spring wheat acreage and yield a mystery. The spring wheat crop is only 13% headed, compared to 52% on average.

July cotton futures expired with a dramatic drop of 1920 points on Friday, once again reminding us why you don’t want to still be in contracts that are close to expiration. The damage didn’t extend to the more liquid December futures, however. Net change for the week was -4.29% on the now front month October. Export business still isn’t good, with USDA once again showing net cancellations for old crop. New crop business did pick up in the week ending June 30, however, with USDA recording 425.6K running bales of new sales commitments. Not coincidentally, December futures had dropped 27 cents per pound between June 3 and this week’s low. That was the lowest new crop futures price seen since February.

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. 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. 

 

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

06/17/11

06/24/11

07/01/11

07/08/11

Change

% Change

July

Corn

7.0025

6.7

6.4075

6.7225

0.3150

4.92%

July

CBOT Wheat

6.7225

6.3575

5.845

6.505

0.6600

11.29%

July

KCBT Wheat

8.045

7.485

7.03

7.0775

0.0475

0.68%

July

MGEX Wheat

8.9725

8.26

8.31

8.5

0.1900

2.29%

July

Soybeans

13.33

13.2025

13.2225

13.52

0.2975

2.25%

July

Soybean Meal

349

339.9

340.9

346.3

5.4000

1.58%

July

Soybean Oil

55.92

55.22

55.16

56.2

1.0400

1.89%

Aug

Live Cattle

110.2

113.5

112.85

114.65

1.8000

1.60%

Aug

Feeder Cattle

132.65

138.6

140.475

143.6

3.1250

2.22%

July

Lean Hogs

95.65

96

95.5

95.875

0.3750

0.39%

Oct

Cotton

129.61

126.92

121.81

116.58

5.2300

4.29%

July

Oats

3.515

3.355

3.395

3.455

0.0600

1.77%

July

Rice

13.965

13.45

13.99

15.32

1.3300

9.51%

 

Cattle futures continued regained their footing after pulling back the week before. The net change was +1.6% for the week. Rising wholesale beef values allowed packers to pay up for cattle, with the choice boxed beef up .71% for the week on the Thursday/Thursday basis. Weekly USDA export sales for beef on Friday morning were a bit disappointing at only 13,800 MT, but cumulative sales for the year to date are 382,251.

 

Lean Hog futures have been trading in a fairly tight range over the past month. July futures have been at a stubborn discount to the CME Lean Hog Index, expecting cash hogs to be under pressure. To a degree that has been true, but wholesale pork prices have been seeing some solid buying interest as we head into BLT season. The carcass cutout value was up .49% on a Thursday/Thursday basis.

 

Market Watch: The main news driver for the week will be the USDA monthly crop production and supply/demand reports, which will be released on Tuesday morning.  USDA has telegraphed some of the content via the June 30 reports, but there is great debate in the industry about which categories USDA chooses to adjust to meet the known quarterly stocks figures. The corn use adjustment was also very severe, raising questions about whether the 4th quarter will be assumed to have a similar cutback.

We’ll have the regular USDA reports on export inspections and crop condition ratings on Monday.  NOPA monthly soybean crush numbers are expected on Thursday morning, along with USDA weekly export sales data. The July grain futures contracts also expire on Thursday.

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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