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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.

Hot or Dry - You Pick

Jun 08, 2012

Market Watch with Alan Brugler

June 8, 2012

Hot or Dry - You Pick!

 

How do we know it is a weather market? When lousy export sales reports fail to break it, or when a strong dollar index rally ahead of the weekend is ignored. Weather forecasts are abundant, and you can always find weather guy A to disagree with weather girl B. The agreement is that above normal temps have been the case, and continue to persist into mid-June. With pollination of corn working its way north into Illinois this week, there is more concern being expressed. Areas south of I-80 also have missed a lot of  the May and early June rainfall, so those who discount the heat are still nervous about the soil moisture.

What does go down does come back up. Corn rallied 7.8% this past week, after losing 4.7% the prior week and 9% the week before that. Weekly export sales were again poor at only 399,000 MT. China continues to buy small quantities, but increased competition from Brazilian new crop has hurt sales out of the Gulf. On a bullish note, wheat futures are high enough to remove themselves from feed ration consideration unless local basis is extremely weak. The big story of the week was the continued above normal temperatures and the developing dryness in the Corn Belt, with evaporation losses larger than replacement moisture. Nebraska convened its drought advisory group for the first time since 2006. A private weather and satellite sensing firm indicated that conditions already point to a US average yield below 158 bushels per acre in its proprietary model.

Soybeans rallied 6.2% this week, aided by an 8.6% rise in soybean meal. Weekly soybean export sales were smaller than expected for the reporting week ending May 31. Chinese buying is still there, with old crop purchases announced under the daily reporting system. US export commitments (shipments plus open contracts) fully cover the USDA export estimate for the year. While it is difficult to hurt soybean yields in June, there are widespread complaints about poor stands. Without the plants it is harder to recover bushels later in the year. USDA crop condition ratings were so-so for the first report of the year.  

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/18/12

05/25/12

06/01/12

06/08/12

Change

% Change

July

Corn

$6.36

$5.79

$5.55

$5.98

$0.44

7.84%

July

CBOT Wheat

$6.95

$6.80

$6.15

$6.30

$0.15

2.48%

July

KCBT Wheat

$7.05

$7.00

$6.42

$6.56

$0.14

2.18%

July

MGEX Wheat

$7.92

$7.86

$7.40

$7.69

$0.30

4.02%

July

Soybeans

$14.05

$13.82

$13.43

$14.26

$0.84

6.24%

July

Soybean Meal

$417.90

$409.30

$395.80

$429.80

$34.00

8.59%

July

Soybean Oil

$50.32

$50.12

$48.71

$49.46

$0.75

1.54%

Jun

Live Cattle

$119.53

$117.65

$117.70

$119.88

$2.18

1.85%

Aug

Feeder Cattle

$160.70

$158.50

$157.38

$159.38

$2.00

1.27%

June

Lean Hogs

$87.43

$85.20

$90.73

$93.03

$2.30

2.54%

July

Cotton

$77.99

$73.62

$68.55

$72.90

$4.35

6.35%

July

Oats

$3.40

$2.96

$2.82

$3.03

$0.21

7.54%

July

Rice

$15.18

$14.51

$14.06

$14.05

($0.00)

-0.04%

 

The three wheat markets were all higher for the week, despite being lower on Friday. The weekly export sales report was disappointing at only 165,700 MT. Sales of 1,295,600 MT were carried over from the 2011/12 marketing year, which ended May 31st. Crop condition ratings declined, with the Brugler500 index at 340 vs. 342 last week. Both HRW and SRW states were lower. Spring wheat is in much better shape, with an index of 391 for the first report of the year. Hot and dry weekend weather were expected to knock that number back a little bit in this Monday’s report.

Nearby cotton futures rebounded with a vengeance. July was up 6.35% for the week, with two limit up days in the middle. Export sales continue to be robust. USDA reported net weekly export sales for upland cotton for the week ending May 31 were 199,200 RB for both marketing years. Pima sales totaled 6,600 for both marketing years. Total export commitments are above 110% of the USDA export figure for the year. There are two months left in the 2011/12 cotton marketing year. The Goldman Roll did take a little off the top on Friday.

Cattle futures were up 1.8% for the week. Wholesale beef prices slowed down, but are still only about $5 from all time highs in the choice. For the week, choice boxed beef was up 0.06%, while select dropped 1.46%. Estimated beef production for the week was 2.6% smaller than the same week in 2011. YTD production is down 2.8%, while cumulative beef export sales are running above year ago. Cash cattle traded mostly at $122, with Nebraska at $124 live, and $195-197 in the dressed trade.

 Lean Hog futures added another $2.30/cwt to the big advance from the previous week. Pork production was up 9.4% from the holiday shortened prior week, and up 1.7% from the same post-Memorial Day week in 2011. Cumulative pork production for the year is 2.1% larger than last year on 1.7% more hogs. The cash hogs were down on Friday, but very choppy for the week as a whole. They deserved to be up, with packers extracting 2.9% more value for the pork carcass cutout this week.

Market Watch:

The main USDA information this coming week will be the Crop Production and Crop Progress reports to be issued on Tuesday morning at 7:30 am CDT.  We’ll also have the regular Export Inspections and Crop Progress reports on Monday, with traders expecting some deterioration in ratings due to hot and dry conditions. USDA will release weekly Export Sales on Thursday morning. NOPA is also expected to release its monthly Crush report on Thursday morning. Thursday will also mark the expiration of the June lean hog futures contract. On Friday, July cotton options will expire, along with July sugar and a raft of stock market index options.

 

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. Visit our web site at https://www.bruglermarketing.com for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

 Copyright 2012 Brugler Marketing & Management, LLC

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