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RSS By: Alan Brugler, AgWeb.com

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

Over The River and Through the Woods

Dec 07, 2012

 

Brugler

Market Watch with Alan Brugler

December 7, 2012

 

Over The River and Through the Woods

 

A popular old Christmas song talks about riding a sleigh over the river and through the woods to Grandmother’s house. There is enough white and drifted snow to allow the sleigh, a carriage on runners to slide along on one horsepower. The whole thing would be a little foreign to US farmers in the Plains and western Corn Belt this year. The rivers are dried up or very shallow (see barge freight) and the satellite maps show almost no snow cover to run the thing on. It is too early to talk drought for summer 2013 crops, but the situation is definitely supporting prices because of the uncertainty. New crop Dec corn futures are only 4% below their life of contract high set back in the heart of the summer drought market. KC July wheat came within 4 cents of the LOC high on November 29, and is certainly within striking distance.

Corn futures were down more than 2% this week, with most of the loss on Friday, but beginning with yet another poor weekly export sales report on Thursday. Net weekly export sales were less than 50 thousand MT, due to most of the reported buyers just confirming purchases of sales already recorded to "unknown destinations". In other words, there was negligible new business, and there were some cancellations. Last week we said "Weekly export sales for this coming week could also be light, as they will include the Thanksgiving weekend." That was indeed the case, but we were looking for at least 2 full vessels to be sold and that didn’t happen.  Weekly ethanol production was up to 835,000 bpd , which was a 22-week high. Imports flooded in at a rate of 92,000 barrels per day, adding to total supply. Consumption was so-so, and ethanol stocks rose by 1.04 million barrels.

The soy complex was as strong as the corn market was weak. Nearby January beans were up 2.33% for the week, aided by a 1.83% rise in soybean meal values. Soy oil lagged due to profit taking and some aggressive deliveries made by crushers against the December futures contract. Weekly soybean meal sales were strong for the second week in a row. Soybean export bookings for the week ending November 30 were much larger than trade expectations, over 1.1 MMT. Total commitments are now 78% of the USDA forecast for the full year made in November. The marketing year runs until August 31. Soybean oil export commitments are now 109% of the USDA forecast for the year, so USDA is expected to increase projected exports in the December WASDE report. CONAB issued what was seen as a bearish Brazilian production estimate for 2013 of 82.6 MMT. The November USDA figure was 81 MMT.

KC wheat futures were fractionally higher. The ongoing drought in the central US is a threat to US production in 2013, but also on the other side of unknown winter snowfalls. It is supportive but not definitive.  Old crop consumption is the main price driver, with exports the most visible component. The weekly export sales report showed net export sales were 353,100 MT, with 511,000 MT needed each week to reach the USDA forecast. Japan purchased a larger than expected 196,383 MT of western white, northern spring, and hard red winter wheat for bulk shipment under the weekly MOA tender.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

11/16/12

11/23/12

11/30/12

12/07/12

Change

% Change

Dec

Corn

$7.27

$7.46

$7.48

$7.33

($0.15)

-2.04%

Dec

CBOT Wheat

$8.38

$8.48

$8.45

$8.44

($0.00)

-0.06%

Dec

KCBT Wheat

$8.76

$8.78

$8.97

$8.97

$0.00

0.03%

Dec

MGEX Wheat

$9.10

$9.14

$9.19

$9.18

($0.01)

-0.08%

Jan

Soybeans

$13.83

$14.19

$14.39

$14.72

$0.34

2.33%

Dec

Soybean Meal

$424.60

$428.60

$442.40

$450.50

$8.10

1.83%

Dec

Soybean Oil

$47.05

$49.04

$49.41

$50.82

$1.41

2.85%

Dec

Live Cattle

$126.15

$128.95

$126.73

$125.88

($0.85)

-0.67%

Jan

Feeder Cattle

$145.60

$147.88

$145.63

$148.78

$3.15

2.16%

Dec

Lean Hogs

$80.33

$82.48

$84.08

$82.30

($1.78)

-2.11%

Mar

Cotton

$72.64

$71.43

$73.91

$73.79

($0.12)

-0.16%

Dec

Oats

$3.65

$3.69

$3.61

$3.75

$0.14

3.88%

Jan

Rice

$14.85

$15.04

$15.27

$15.27

($0.00)

-0.03%

 

Cotton prices were down 0.16% in the actively traded March contract. December expired, seeing steady transfer of warehouse cert stocks from Dreyfus/Term Commodities to two other firms throughout the delivery process. Weekly export sales were strong at 415,700 running bales for 2012/13 of upland cotton, up 38 percent from the previous week. China was the largest purchaser, with a reported increase of 254,600 running bales. Net American Pima sales were 27,300 RB for the 2012/13 marketing year. The ICAC is expecting global mill use to increase by 3 percent to 24.2 million tons or 111.15 million bales, with a modest reduction from record world ending stocks in the current marketing year.

Cattle futures were down 85 cents for the week. Weekly beef export sales for the week ending November 30 were improved, at 14,000 MT. However, we’re into larger cattle supplies between now and yearend. The consumer will be focused on ham and turkey, less so on beef. Weekly estimated slaughter was 639,000 head including Saturday. That would be 4,000 head above the previous week, but still 7,000 below year ago. Wholesale prices were lower this past week.  Choice boxes were down 1.1% for the week while Select boxes were down 1% on a Friday/Friday basis. Weekly beef production was 1.3% larger than the same week in 2011, but total YTD production has still been 1.5% smaller and broadly price supportive. Cash cattle trade on Friday started to happen $1-2 lower than last week, but volume was still light as feedlots were asking $126. The few confirmed trades were at $124.

Hogs were down 2.1% this week, erasing a similar percentage gain from the previous week. Estimated weekly slaughter was 2.364 million head, up 1.3% from the same week in 2011. Weekly pork production was down 1.3% from the post-holiday week, but was up 0.2% from the same week a year ago. Estimated carcass weights are down 2# from last year, having risen less rapidly than usual out of the fall low. Pork production YTD has still been 2.0% larger than last year. The pork carcass cutout rose 0.27% from last week. Strength in picnics and bellies was countered by weakness in pork loins.

 
Market Watch:

Cattle traders will begin the week adjusting to any surprise positions occurring from the expiration of the December options on Friday. Monday will also be first notice day for physical deliveries against December cattle futures positions. The main USDA reports for the week will be on Tuesday, including Crop Production and the WASDE Supply/Demand report. The Fed Open Market Committee is also expected to meet. The regular weekly USDA Export Sales report will be out on Thursday morning.  NOPA is expected to release an updated monthly soybean crush report on Friday. Friday will also be the last trading day for December grain futures contracts and December Lean Hogs.

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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