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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.

Redemption of the Bulls

Jan 25, 2013


Brugler

Market Watch with Alan Brugler

January 25, 2013

Redemption of the Bulls

Last week we talked about the collapse of the cattle futures market following the Cargill plant closing announcement. We suggested that the number of cattle had not changed, and the market would firm up once the soon to be homeless cattle found another place to go. That happened quickly, at least in the opinion of the futures market. Futures shorts were faced with a potentially bullish USDA Cattle on Feed report on Friday, and bought back positions in enough quantity to drive futures higher. Longs with patience got some of their money back, and short hedgers rolled down their put positions and banked some of the gains.

Corn futures lost a little less than 1% this week after climbing 48 cents per bushel in the two previous weeks. Old crop corn stocks are tight, and first quarter use was stout due to reduced DDG production and some new crop grain that was pulled into the consumption pipeline back in July and August. Weekly export sales through January 10 were the strongest since April 2012 @ 393,300 MT.  USDA put the actual figure for the week ending the 17th at only 189,800 MT including new crop. A switch from unknown to China cut the net sales, but there were other cancellations as well. The EIA weekly ethanol report on Thursday was supportive, with ethanol stocks falling 20.083 MB and production rising by 8,000 BPD from the previous week.

The soybean market picked up another 12 cents per bushel after rising 4.08% the previous week. US export sales were again strong @ 978,300 MT. New crop bookings were larger than old crop sales. Most of the US old crop is already committed, even if not yet purchased from the producer. Weather in South America remains generally benign, but there has been a drying out trend in a few major production areas over the past two weeks. The main story is the resumption of Chinese buying, and their increased interest in US new crop 2013/14 soybeans. Soybean meal was up .48% for the week, and soy oil also advanced. The reduced US ethanol production has constricted supplies of DDG and corn oil, supporting their substitutes in the soy complex.

Wheat was lower on all three exchanges. The CBOT had been the strongest of the three, and lost the most when the profit taking began. USDA reported weekly export sales for the week ending January 17 totaled 647,500 MT, including 75,000 MT for 2013/14 delivery. This was again larger than the trade expected. The main buyers were Japan and Nigeria. KC futures still show little or no concern about winterkill or drought, taking a wait and see attitude. In the longer term, the drought maps still cover most of the Plains HRW area, and the NOAA 90-day forecast calls for above normal temps throughout the central US, with below normal precip across the South.

Cotton prices were up 2.5% past week, extending the bull run. The tighter US ending stocks forecast at 4.8 million bales is supportive, but the main story is active world buying of US cotton despite projected record large world cotton surplus stocks by the end of the marketing year on July 31. China continues to be an active importer. US weekly export sales totaled 264,100 RB, a little slower than the previous week but still larger than expected given the global surpluses.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

01/04/13

01/11/13

01/18/13

01/25/13

Change

% Change

Mar

Corn

$6.80

$7.09

$7.28

$7.21

($0.07)

-0.93%

Mar

CBOT Wheat

$7.47

$7.55

$7.91

$7.77

($0.15)

-1.86%

Mar

KCBT Wheat

$8.06

$8.11

$8.44

$8.29

($0.15)

-1.75%

Mar

MGEX Wheat

$8.43

$8.47

$8.74

$8.64

($0.10)

-1.09%

Mar

Soybeans

$13.67

$13.73

$14.29

$14.41

$0.12

0.82%

Mar

Soybean Meal

$399.00

$404.30

$414.40

$416.40

$2.00

0.48%

Mar

Soybean Oil

$49.90

$49.24

$51.68

$52.10

$0.42

0.81%

Feb

Live Cattle

$132.95

$130.60

$124.95

$126.30

$1.35

1.08%

Jan

Feeder Cattle

$153.18

$149.88

$143.90

$144.70

$0.80

0.56%

Feb

Lean Hogs

$86.23

$84.20

$85.35

$86.83

$1.47

1.73%

Mar

Cotton

$74.91

$75.62

$78.55

$80.52

$1.97

2.51%

Mar

Oats

$3.33

$3.47

$3.56

$3.63

$0.07

2.11%

Mar

Rice

$15.29

$15.22

$15.16

$15.48

$0.32

2.11%

 

Cattle futures rallied 1.08% this past week after a 4.33% plunge the week before. Prices just got too cheap on the Cargill plant closing announcement. Weekly beef production was 1.5% larger than last week, but up 6.2% from the same week in 2012. Packers were into some bigger numbers, at lower average cash prices. Average carcass weights are still an estimated 16 pounds per animal higher than last year at this time. Wholesale prices were down $2.40/cwt for Choice boxes, a 1.3% slide. Select was also down, but a more orderly 0.4%.  US weekly beef export sales through January 17 were 14,200 MT. Friday’s USDA Cattle on Feed report was bull friendly. December placements were smaller than expected at 99.4% of year ago, and December marketings were above the trade guesses at 98.3%. The bottom line is January 1 inventory that is only 94.4% of a year ago.

Hogs were up 1.7% for the week after a 1.4% gain the prior week. Estimated weekly slaughter was 2.159 million head, down from 2.222 million head the previous week. That is a 2.8% drop in numbers. Pork production was down 2.6% from the previous week, but up 0.1% from the same week in 2012. Average weights are now estimated to be equal with year ago. The pork carcass cutout value rose $1.48 for the week, a gain of 1.8%. Cash hog prices were weaker on Friday in the west, but firmer in the ECB. The average WCB direct sale was $85.64, down $1.74. The ECB average was $83.03, and 38 cents higher on the day.

Market Watch: Cattle traders will begin the week dealing with the aftermath of the USDA Cattle on Feed report from Friday night. The Fed Open Market Committee meets Tuesday and Wednesday, but is not yet expected to raise interest rates. January feeder cattle futures and options expire on Thursday.  The main USDA reports will be the Export Inspections on Monday and the Export Sales on Thursday morning, along with the annual Cattle Inventory report on Friday afternoon. On Friday, we also turn the calendar to February and begin calculating the monthly average prices used in the crop revenue insurance calculations for 2013 production. Friday will also mark the expiration of the February live cattle options. Saturday will be Groundhog Day!

 

Brugler Marketing has a lot more information available than that contained in these free weekly columns. For a full two day educational experience and our complete 2013 outlook for global ag markets, attend one of the two Brugler Marketing Winter Seminars. Our Dayton, OH seminar is January 29-30 at the Holiday Inn Northwest, and Omaha, NE will be held February 4-5 at the Regency Lodge. For details and online registration, visit our web site at https://www.bruglermarketing.com.

 

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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