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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.

Selling Grain and Buying Meat

Jun 13, 2014

 Brugler

Market Watch with Alan Brugler

June 13, 2014

Selling Grain and Buying Meat

 

It was a solid week for the meats, with both live cattle and feeders going parabolic, and gaining another $1.60 and $2.30 during today’s session.  Lean hogs also posted a solid week, finishing strong with July gaining more than a dollar today.  The grains were more of a selling story.  The big money has been looking at bearish weather, and they received some bearish fundamental data in the wheat market on Wednesday.  The wheat bulls got their lower production figure, but the statisticians were out in front of them slashing the usage numbers enough to come up with a net increase in the ending stocks projection, which fed the bears again.  Apparently the selloff on Wednesday and Thursday took the grain markets low enough for them to bounce back earlier today, and close mostly higher on the session, but the Chicago wheat struggled to stay above yesterday’s close.  Most grain farmers do not want to sell at these prices, but some of them may need to sell a little more if they want to buy meat at the grocery store this Summer!

 

Corn was down 2.51% this week. Ethanol stocks increased slightly and production was 6K barrels per day larger than last week.  Daily production (and corn use) was up but outrunning consumption.  Weekly export sales were solid for old crop at 409,700 MT, and new crop sales jumped up to 105,500 MT from just 19,600 MT the previous week; the lower prices must have looked attractive!  As of June 6th, China halted DDG imports from the US, citing possible traces of an unapproved GMO corn variety in the mix.  The CFTC Commitment of Traders report this afternoon showed managed money decreasing their net long position in corn by 27,724 contracts as of June 10, giving them a net long position of 146,436 contracts.  The WASDE report was a yawner for corn with more the significant grain stocks report coming at the end of the month. Brazilian corn production was projected slightly higher than it was last month.

 

Soybean futures were 30 cents lower this week, extending a 36 cent loss from the prior week, and losing another 2.08% since last Friday. USDA reported new weekly exports sales of old crop totaling 86,700 MT.  If the bookings keep coming, and the beans keep getting shipped, one must conclude that the US crop was larger than reported, or that crushers are very comfortable with imported supplies and are letting the export beans go past them.  New crop sales were 403,300 MT; the tenth largest weekly new crop booking so far in the 40 weeks of this marketing year.  As of the close on June 10, CFTC shows managed money accounts decreasing their net long position for soybeans from the previous week by 24,007 contracts bringing their overall net long position down to 80,143 contracts.  The USDA tightened old crop ending stocks by 5mbu that came from increased crush.  That carried into the new crop balance sheet, but the domestic data was largely unchanged.  

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/23/14

05/30/14

06/06/14

06/13/14

Change

% Change

July

Corn

$4.78

$4.66

$4.59

$4.48

($0.12)

-2.51%

July

CBOT Wheat

$6.53

$6.27

$6.18

$5.85

($0.33)

-5.34%

July

KCBT Wheat

$7.45

$7.23

$7.36

$7.11

($0.24)

-3.30%

July

MGEX Wheat

$7.25

$7.07

$7.09

$6.82

($0.27)

-3.81%

July

Soybeans

$15.16

$14.93

$14.57

$14.27

($0.30)

-2.08%

July

Soybean Meal

$502.60

$500.20

$487.60

$467.20

($20.40)

-4.18%

July

Soybean Oil

$40.38

$38.50

$39.01

$39.73

$0.72

1.85%

June

Live Cattle

$136.30

$137.80

$140.13

$147.60

$7.47

5.33%

Aug

Feeder Cattle

$194.15

$198.13

$200.52

$208.15

$7.63

3.81%

July

Lean Hogs

$123.73

$120.48

$124.98

$127.00

$2.02

1.62%

July

Cotton

$86.64

$86.27

$84.78

$86.95

$2.17

2.56%

July

Oats

$3.46

$3.71

$3.57

$3.47

($0.09)

-2.66%

July

Rice

$15.25

$14.99

$14.18

$14.51

$0.33

2.36%

 

 

Wheat futures were down 5.34% in Chicago this week.  KC was down 3.30% for the week and MPLS was down 3.81%.  You could blame it on the rain, but the WASDE report was the more likely culprit. USDA increased old crop ending stocks 10 million bushels to 593 MB.  New crop production figures were smaller overall than in the previous report, but ending stocks increased due to large cuts in projected food use, feed use and exports for 2014/15.  The 5.2% margin for error for total production in the Crop Production report should keep the market guessing until more of the crop is actually harvested.  Weekly export bookings for the 2014/15 marketing year totaled 570,100 MT, a total of 1,550,500 MT was carried over from 2013/14 sales. Commitments for the first week of the marketing year as a % of total projected exports for the year are 26%, and the five year average is 20%.  As of the close last Tuesday, managed money accounts sold 28,172 contracts in CBT wheat for the week, switching them to a net short position of -27,135 contracts.  They are still net long 24,657 contracts in KC.

 

Cotton futures were up 2.56% this week, gaining $2.17 in the front month.  The weekly Commitment of Traders report showed managed money accounts decreasing their net long position in cotton by 8,759 contracts bringing their overall net long on June 10 to 22,552 contracts.  Export sales commitments are running 104% of the USDA forecast for the year. They would typically be 108% by now, due to business typically carried over to the following marketing year.  The mid-week WASDE report put world stocks for 2014/15 at a record high 102.7 million bales(MB), slightly higher than the 101.7 MB figure last month.  US Stocks for 13/14 came in at 2.70 M Bales, down from 2.80 M bales projected last month.  New crop stocks were hiked to a burdensome 4.3 million bales, however, with USDA boosting expected harvested acres by 300,000.

 

Cattle futures gained $7.47 this week, up 5.33%, adding to a 1.7% gain from last week.  Feeders were more than $7.63 higher on the week, amounting to a gain of  3.81%.  Futures were supported all week by their discount to the cash cattle market.  Cash cattle trade was mostly reported $3.00 higher than last week with cattle changing hands at $147 up to $150.  Trading in the Texas Panhandle was $2.00 higher than last week, but less active than in the WCB and Northern Plains this week.  Dressed sales reported were mostly $4.00 to $6.00 higher from $235 to $238.  Estimated weekly slaughter of 605,000 was off 9K head from last week and down 39K head from the same week in 2013. Year to date slaughter is running 6.3% behind last year.  USDA reported weekly beef export sales slowed to 6,700 MT this week, after posting a total of 16,700 last week.  Wholesale beef prices were higher this week, with choice boxed beef gaining about $1.01 and select boxes increased $2.91.  The weekly Commitment of Traders report showed managed money accounts adding 822 contracts to their net long position in cattle bringing their overall net long on June 10 to 126,109 contracts. 

 

June Hog futures were 1.62% higher this week, notching a $2.17 gain since last Friday.  The June hogs contract expired today at $115.80, with the CME index down at $113.69 (as of Wednesday).  Weekly FI slaughter was estimated at 1.915 million head, vs. 1.950 million head a year ago.  Slaughter YTD is down 4.1%.  The pork carcass cutout value was up nearly 1% for the week even after a $1.77 loss on Friday, closing at $121.68.  Ribs gained 6.35% from Firday to Friday.  Weekly pork export sales were off 35% from last week at 8,500 MT. The weekly Commitment of Traders report showed managed money accounts decreasing their net long position in cattle by 1,576 contracts bringing their overall net long on June 10 to 53,851 contracts. 

 

-

Market Watch

 

We start the week with NOPA crush numbers on Monday, along with the usual export inspections report in the morning and the crop progress reports after the close.  The EIA report on Wednesday will provide an update as to how the lower corn prices influenced the ethanol production last week.  Thursday brings the weekly export sales report and updates to the drought monitor.  The trade will be watching closely to see if the break in grain prices this week brought some international business to the US market.  We finish the week with the anxiously awaited Cattle on Feed report after the close on Friday.

 

 http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

 

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