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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.

Instability

May 20, 2011

 brulogomed

Market Watch with Alan Brugler

May 20, 2011

Instability

 

Corn was sharply higher this week, ending a two week correction with a gain of $0.77. The bull story is still planting delays. Progress should be in the 78-80% range in Monday’s report, but sources are now suggesting that anywhere from 800,000 to 1.9 million acres of intended corn will not be planted because of flooding and/or delays that are severe enough to make soybeans a better alternative. One firm in Chicago is calling for nearly 4 million acres of prevented plant claims, more than double last year. Dry-land corn in drought stricken areas of Southern Texas is short and tasseling and many acres will most likely be shredded if rains don’t come soon. 

 

Soybeans gained 51 cents per bushel for the week.  Rising Chinese prices for veg oils supported the bean market there. While USDA showed almost no new crop export bookings in the weekly export sales report on Thursday morning, they did announce a new crop sale to China under the daily reporting system. The NOPA crush earlier this week was 121.3 mb but didn’t include 1 crusher which reduced the total. The COPA crush was the highest it has ever been 4.812 Marketing YTD. Soybean planting this week showed 22%, behind average.

 

Wheat futures were up almost $1 per bushel at one point.  For the week, MPLS was up more than 11%, due to continued slow planting progress for spring wheat. KC gained 7.3%, and Chicago was up 10.8%.  Drought in Europe boosted MATIF futures above their February highs at mid-week, with various analysts calling for French production to be down anywhere from 5 to 11%. Germany is also affected, but is seen as having better chances of rain relief. The US futures are cheap compared to the EU, leaving room for the rally. US wheat condition ratings continued to deteriorate, with southern HRW now too mature to be helped by rain. Some SRW wheat has excellent potential, while other areas have suffered from nitrogen leaching. Early harvest has begun in Georgia, and also in Texas.

Cotton futures finished the week higher, up 10.46 cents or 7.21%. USDA reported net negative weekly export sales for old crop cotton for the eighth week in a row. That Thursday morning report confirms that mills are having difficulty passing on historically high cotton prices to the yarn and retail textile level. Cancellations and/or deferrals to new crop 2011/12 delivery slots continue to run larger than new sales. New crop cotton got a little bit of support from flooding that took out some cotton ground adjacent to the Mississippi River and its tributaries. Bulls were disappointed by planting progress in Texas, which is close to average. Dryness is not an acceptable reason for a prevented planting insurance claim, so the crop needs to be planted. If it later dies due to drought, that is covered.

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

04/29/11

05/06/11

05/13/11

05/20/11

Change

% Change

July

Corn

7.565

6.8625

6.82

7.595

0.77

11.36%

July

CBOT Wheat

8.0125

7.595

7.2775

8.065

0.79

10.82%

July

KCBT Wheat

9.02

8.74

8.695

9.3325

0.64

7.33%

July

MGEX Wheat

9.48

9.0375

9.0025

9.9975

1.00

11.05%

July

Soybeans

13.94

13.26

13.295

13.8025

0.51

3.82%

July

Soybean Meal

363.6

349.5

345.4

360.6

15.20

4.40%

July

Soybean Oil

58.58

55.69

56.14

57.46

1.32

2.35%

June

Live Cattle

113.35

109.85

109

104.975

4.03

3.69%

May

Feeder Cattle

131.9

129.125

128.7

125.45

3.25

2.53%

June

Lean Hogs

95.225

92.375

94.55

91.975

2.58

2.72%

July

Cotton

158.02

145.56

145.15

155.61

10.46

7.21%

May

Oats

3.525

3.39

3.445

3.64

0.20

5.66%

May

Rice

14.015

14.35

13.985

15.1

1.12

7.97%

 

Cattle futures were down a sharp 3.69% for the week. Long liquidation continues to be a problem, with open interest down 32,000 contracts in the last four weeks. The Board weakness led to cash cattle weakness this past week, as hedgers took advantage of a $3 positive basis and sold their cash cattle into weakness. Wholesale beef on a Thursday/Thursday basis for choice boxed beef was up $1.01.  The USDA weekly red meat production report on Friday showed production for the week totaled 918.9 million pounds, up 1.1% from last week and down 1.2 % from last year. Friday afternoon’s USDA Cattle on Feed report showed May 1 On Feed at 107.4 % of year ago. Placements were at the highest level since 1996 at 109.9 and Marketings were at 97.31%. The placement number was the 5.3 % higher than the average trade guess. Drought in Texas and Oklahoma as well as northern Mexico has moved cattle to feedlots ahead of schedule.

 

Hogs were down 2.72% on the week. The Friday afternoon USDA Cold Storage report showed the number of pork bellies in storage was 107% of last year at this time and rose 1% from the prior month. Total pork in Cold Storage was 545.8 million lbs, 113% of last year and down 5% from last month. The pork carcass cutout value was up 1.61 for the week after setting new all time highs on Monday.

 

 

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. 

 

Market Watch:  Livestock traders will start the week reacting to the Cattle on Feed and Cold Storage reports. The cash markets will also be influenced by pre-Memorial Day activity and the level of producer activity in the field. Grain traders will have to deal with new futures positions inherited with the expiration of the June options on Friday. USDA’s Crop Progress report on Monday afternoon will receive some attention, as the trade tries to price in crop planting delays. The main government reports for the week will be on Thursday, with Census Crush and Cotton Consumption numbers released, along with the weekly USDA Export Sales report. By Friday, trading volume and the pit population are expected to be light, as market participants stretch the 3-day Memorial Day weekend into 4 days. Month end position squaring and asset allocation adjustments will become more of a factor as we head into the weekend.

 

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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