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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.

Midday USDA

Jan 11, 2013

Brugler

Market Watch with Alan Brugler

January 11, 2013

 Midday USDA 

USDA changed their release times for grain reports in 2013, releasing them this morning at 11 am CST instead of the traditional 7:30 am. That gave the trade only 3 hours to play with the numbers before the weekend. There has been some thought in the trade that releasing during trading hours (which began last spring due to an extension of those hours by the CBOT) has muted the limit move mentality by allowing the market to work out all of its concerns in real time. Friday was a win for those arguing that way, as none of the major grains finished with a limit move. 

Corn futures shot up 4.9% this week, ending a string of losing weeks. The USDA report on Friday accounted for part of the gain, but short covering had already been moving prices higher. March was up all five trading days of the week. The Friday reports were significant. USDA found only 8.03 billion bushels of corn stocks on December 1. They also found little in the way of additional production, bumping up average yield to 123.4 bpa while trimming harvested acres to 87.4 million. They were very aggressive in cutting projected exports, knocking off 200 million bushels due to lack of sales, but ending stocks are still seen shrinking to 602 million bushels.

The soybean market posted a 2.6% gain for the week, but that was in the soon to expire January contract. March wasn’t as robust. The USDA reports on Friday were very neutral, bumping up projected ending stocks to 135 million bushels while adding to both production and crush use. Brazil’s production estimate was raised 1.5 MMT, but Argentina was trimmed 1 MMT. The Dec 1 soybean stocks were slightly smaller than the average trade guess at 1.966 billion bushels, but not by enough to cause major USDA adjustments. The biggest cause for concern was the lack of a bullish response to large export sales announced by the USDA under the daily reporting system on Thursday. It is still a bear market when bull news fails to make it move higher. What we are looking for is bear news that fails to make it go down. At that point, things are fully priced.

CBT Wheat was the strongest of the three exchanges, up 1% for the week. The gain of 8 cents all occurred on Friday. KC was up 4 cents and MPLS was up a nickel. The Friday gain came about because USDA reduced projected US ending stocks to 716 million bushels. The Dec 1 stocks number was only 1.66 billion bushels, requiring an upward revision in feed use estimates to explain what happened to the missing bushels. World wheat ending stocks were almost UNCH at 195.78 MMT vs. 195.77 MMT last month. July futures got a boost at all three exchanges from smaller than expected winter wheat plantings. HRW acreage is actually smaller than last year at 29.1 million. That had KC July up 10 ½ cents on Friday. There are an extra 1.3 million acres of SRW (Chicago) compared to last year. That could eat into corn and soybean acreage potential in the better watered part of the Corn Belt.

Cotton prices were up 0.95% this past week. USDA cut its harvested acreage estimate, while raising estimated average yield to 866 pounds. That is the highest average yield estimate since 2007, when the US average was 879 pounds. This is the second highest average yield since the modern USDA records began in 1960. US ending stocks declined to 4.8 million bales from 5.4 million in the December estimate, as USDA hiked projected exports 400,000 bales while trimming the production by 250,000 bales. World ending stocks increased anyway to a record surplus of 81.72 million bales. That represents 77% of this year’s total use, or a 281 day supply. Of the 81.72 million bales, USDA thinks China will be holding 40.61 million, which is more than this year’s consumption (35.5 million) for them.  It would be drawn down quickly if Chinese consumption returned to 2010/11 levels of 46 million bales annually. China only produces 30-34 million bales annually.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/21/12

12/28/12

01/04/13

01/11/13

Change

% Change

Mar

Corn

$7.02

$6.94

$6.80

$7.09

$0.29

4.19%

Mar

CBOT Wheat

$7.92

$7.79

$7.47

$7.55

$0.08

1.00%

Mar

KCBT Wheat

$8.42

$8.26

$8.06

$8.11

$0.04

0.53%

Mar

MGEX Wheat

$8.82

$8.68

$8.43

$8.47

$0.05

0.56%

Jan

Soybeans

$14.31

$14.24

$13.89

$14.25

$0.36

2.57%

Jan

Soybean Meal

$433.80

$427.70

$398.20

$403.10

$4.90

1.23%

Jan

Soybean Oil

$48.71

$48.94

$49.42

$48.88

($0.54)

-1.09%

Feb

Live Cattle

$133.58

$133.58

$132.95

$130.60

($2.35)

-1.77%

Jan

Feeder Cattle

$152.15

$152.03

$153.18

$149.88

($3.30)

-2.15%

Feb

Lean Hogs

$86.98

$86.38

$86.23

$84.20

($2.03)

-2.35%

Mar

Cotton

$76.22

$74.66

$74.91

$75.62

$0.71

0.95%

Mar

Oats

$3.65

$3.49

$3.33

$3.47

$0.14

4.21%

Jan

Rice

$15.21

$14.96

$15.03

$15.04

$0.00

0.03%

 

Cattle futures were down 1.77% for the week.  Weekly beef production jumped 20% from the holiday depressed week before. It was still 0.8% smaller than last year for the same week. Estimated carcass weight was 22 pounds higher than a year ago, as cheaper corn and fairly mild weather allowed decent performance. Wholesale prices for the week showed a 2 cent increase for Choice beef and a $1.27 gain for Select. The spread between the two continues to narrow seasonally. The higher carcass weights tell you that we’re getting more choice cattle in the supply, and may be backing up cattle just a bit.

Hogs were down 2.35% this week. Estimated weekly slaughter was 2.284 million head, up from 1.969 million head the previous week. Pork production was up 15.9% from the previous week, and up 1.8% from the same week in 2012. Average weights are still running 2 pounds below year ago, helping to limit the tonnage a little bit. The pork carcass cutout value rose 44 cents for the week, a gain of 0.53%.

Market Watch: Things will slow down a little this coming week, now that the much anticipated USDA reports are out, and the index fund re-balancing period is coming to an end. There will still be news, however. NOPA is expected to release a monthly soybean crush report on Monday, with some sources expecting that the December crush was record or near record large. The January futures contracts for rice and the soybean complex expire on Monday. We’ll also get the regular Export Inspections report. Weekly Export Sales will come out on Thursday morning. Friday marks the expiration of a number of equity options, and the start of a 3 day weekend. The markets are closed on January 21 for the ML King holiday in the United States.

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 2013 Brugler Marketing & Management, LLC

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