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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.

March Madness 2011 Edition

Mar 25, 2011

 brulogomed

Market Watch with Alan Brugler
March 25, 2011
March Madness
 
The NCAA basketball tournament has the nickname March Madness but those soon to be 8 remaining teams don’t have a corner on unexpected outcomes or big plays. Cotton futures continued to trade in mostly limit move increments from day to day. Grains and livestock were just manic-depressive, swinging from one extreme to the other under a torrent of destabilizing world news. Gold futures posted new all time highs of $1448.60 on Thursday, as they continue to serve as a haven for the panicked masses.
 
Corn posted a second higher weekly close, up 6 cents despite losing 13 cents on Friday because of pre-weekend profit taking. USDA confirmed a 1 MMT sale of old crop corn to unknown destinations on Friday morning, which was widely assumed to be the Chinese business rumored early in the week. USDA also confirmed a 250,000 MT sale of new crop. The trade “bought the rumor and sold the fact”, preferring to head to the sidelines for the weekend in the face of Middle East uncertainties, and a less than finished reactor situation in Japan. The planting intentions report on Thursday is generally expected to show 91-93 million acres, but which end of the range is critically important to potential supply. The combination of states with increases can also influence potential national yield.
 
The soybean complex was mixed. Soybean futures were down 4 cents per bushel, weighed down by a 2.9% drop in soybean meal futures. Soy oil was up 1.9%, buoyed by tighter than expected Census soy oil stocks that implied more biodiesel use. Global use is also rising, with Argentina and Brazil confirming rising domestic use. Palm oil futures hit a multi-month low on expected production increases in Malaysia and also a planned drop in Indonesia’s export taxes for April. Prices snapped back on Friday, with Chinese futures up for both soy oil and palm oil.
 
Wheat bulls found their footing after a multi-week slide, and built gains of 1.4 to 1.6% to close higher for the second week in a row. Japan returned to the market for more wheat, and a number of other countries also scheduled tenders to take advantage of the price decline since February. That demand came at a time the weather forecasts were either too cold, too wet or too dry for US wheat. It depended on which state you were looking at! The International Grains Council raised projected old crop world production to 649 MMT, and expects 2011 production to reach 673 MMT due primarily to a rebound in the FSU.
 
Cotton futures were up a sharp 2.7% for the week. Old crop was definitely stronger than new crop, which has the benefit of optimism about 2011 production. Old crop stocks are tight, weekly export sales were larger than anticipated, and annualized mill use in the Census report was also larger than USDA has been using. Bulls also noted that there are a number of mills with unfixed call purchases tied to the May futures contract. Gains were limited a little bit by indications of greater resistance to rising yarn prices and textile price hikes. Trade guesses for US planting intentions run from 12.8 to 13.3 million acres.
  
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
03/04/11
03/11/11
03/18/11
03/25/11
Change
% Change
May
Corn
$7.28
$6.64
$6.84
$6.90
0.06
0.88%
May
CBOT Wheat
$8.32
$7.19
$7.23
$7.33
0.10
1.42%
May
KCBT Wheat
$9.29
$8.23
$8.43
$8.55
0.12
1.39%
May
MGEX Wheat
$9.65
$8.59
$8.68
$8.81
0.14
1.56%
May
Soybeans
$14.14
$13.35
$13.63
$13.58
0.04
0.31%
May
Soybean Meal
$369.70
$350.00
$367.90
$357.20
10.70
2.91%
May
Soybean Oil
$59.48
$55.90
$55.77
$56.84
1.07
1.92%
Apr
Live Cattle
$114.05
$117.13
$111.65
$118.60
6.95
6.22%
Mar
Feeder Cattle
$129.95
$131.55
$128.00
$131.90
3.90
3.05%
April
Lean Hogs
$88.48
$88.15
$88.33
$92.48
4.15
4.70%
May
Cotton
$212.80
$204.94
$199.12
$204.49
5.37
2.70%
May
Oats
$3.90
$3.51
$3.52
$3.49
0.03
0.85%
May
Rice
$14.19
$13.01
$13.64
$14.30
0.66
4.84%

 
Cattle futures were the biggest loser the prior week, and the biggest gainer this week, jumping 6.2% and taking out the high from two weeks earlier. Cash cattle traded at $190-191 in Nebraska, but cash trade in KS was mostly $115. The futures prices are back to where they were when cash hit $118 two weeks ago. Wholesale prices were lower, with choice boxes down $1.59 or 0.8% for the week on a Friday/Friday basis.
 
Hog futures were up $4.15 per hundred, or 4.7% for the week. Hogs continued their short covering rally ahead of the USDA report, with June futures up $2.52 on Friday alone. Pork cutout value was up 1.05% for the week on a Friday/Friday basis, with ribs showing a big gain. The USDA report itself was fundamentally bearish, showing more market hogs and more sows than expected. The all hog and kept for market numbers were above the largest of the pre-report estimates, as shown in the table below:
 

 
USDA Actual
Trade Avg. Guess
Range of Estimates
All Hogs & Pigs -3/1
100.6
100.0
99.7-100.2
Kept for Breeding
100.5
99.8
99.3-100.5
Kept for Marketing
100.6
99.9
99.7-100.2
Dec-Feb Farrowings
99.4
99.2
98.6-99.6
Dec-Feb Pig Crop
101.4
100.9
100.2-101.7

 The report also confirmed a continued rise in productivity, with 9.8 pigs per litter.
 
Market Watch:  This week will mark the end of the month and the end of the quarter, and end with April Fools Day! Not to belabor the point, but USDA will issue Planting Intentions and Grains Stocks numbers on Thursday morning that have fooled a lot of folks in recent years. We’ll start the week with folks adjusting positions they inherited due to exercise of in-the-money April grain options on Friday. In addition to the Thursday reports, USDA will also release the regular Export Inspections report on Monday and weekly Export Sales report on Thursday morning. March feeder cattle options and futures will expire on Thursday. Friday will mark the expiration of the April Live Cattle options.
 
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.  
 
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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