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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.

The Bulls are Panting A Bit

Aug 27, 2010

 brulogomed

 Market Watch with Alan Brugler
August 27, 2010
 
The Bulls Are Panting A Bit
 
Corn futures got back to the early August highs this week, but closed UNCH for the week. At $4.40 ¾, December corn hit the highest reading since January 12. An early week sell off was short lived, as field reports from TN and IL showed quite a bit of yield variability and a lot of fields that were below year ago. USDA also showed weekly export sales that were larger than expected by the trade. The B.A. exchange in Argentina indicated that corn production there could be 9% larger in 2011 due to crop rotations and higher world prices.
 
Wheat was a mixed affair. Minneapolis spring wheat futures were up 7 cents net for the week. KC and Chicago were down 5 cents and 17 cents respectively on continued liquidation of long positions. The IGC lowered projected Russian wheat production to 44 MMT, with other sources as low as 41 MMT. Russian prime minister Putin insisted that Russia had found additional on farm wheat stocks and will not be an importer of feed grains, but the trade has been skeptical. Weekly export sales were very strong, and the U.S. has booked 480 million bushels vs. only 306 million at this time a year ago. Since soft red winter wheat supplies are small because of the lack of 2010 production, the hard wheat classes are seeing quite a bit of success in the export market.
 
Soybeans reversed direction from the prior week and closed 1.26% higher. Both soy oil and soy meal were up on the week. Despite the UNCH status of the corn, soybean meal rallied $6.00 per ton. Weekly export sales were on the upper end of the range for the week to help support the beans. Traders also began to have second thoughts about U.S. yields, with moisture stress developing during the key pod filling phase in several Corn Belt states. Root development was limited by high water tables this spring and summer, and plants in areas that have turned dry are struggling.
 
Cotton futures traded at the highest level since 2008. US export sales continue to be above trade expectations each week, and projected world ending stocks still look like they are going to shrink. The flooding in Pakistan is just the latest bull story in the world market. Here in the U.S., some extreme southern areas have harvested, with ginning and classing reported in south Texas. However, most of those early bales are already spoken for.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
08/06/10
08/13/10
08/20/10
08/27/10
Change
% Change
Sep
Corn
$4.05
$4.12
$4.21
$4.21
0.00
0.06%
Sep
CBOT Wheat
$7.26
$7.03
$6.79
$6.63
0.17
2.43%
Sep
KCBT Wheat
$7.20
$7.24
$7.06
$7.00
0.05
0.74%
Sep
MGEX Wheat
$7.23
$7.15
$7.00
$7.07
0.07
1.00%
Sep
Soybeans
$10.39
$10.44
$10.09
$10.22
0.13
1.26%
Sep
Soybean Meal
$302.60
$302.70
$300.80
$307.80
7.00
2.33%
Sep
Soybean Oil
$41.53
$42.52
$39.52
$40.20
0.68
1.72%
Aug
Live Cattle
$92.77
$94.32
$99.60
$98.05
1.55
1.56%
Sep
Feeder Cattle
$112.25
$111.30
$116.65
$116.27
0.38
0.33%
Oct
Lean Hogs
$74.08
$74.65
$77.20
$74.82
2.38
3.08%
Oct
Cotton
$84.40
$87.49
$87.15
$89.03
1.88
2.16%
Sep
Oats
$2.80
$2.74
$2.72
$2.66
0.07
2.39%
Sep
Rice
$10.61
$11.00
$10.91
$11.22
0.31
2.80%

 
Hogs lost most than 3% for the week, the poorest performance among our ag commodities for the week. Futures are anticipating a very sharp decline in pork cutout values and cash hog prices as we head into September and October. October futures are already reflecting a drop that is 2/3 of the annual average move from a high to a low in hogs. And the market has less than 2 months to do it. Cutout prices are beginning to soften now that retailers have their Labor Day features secured. The bearish presumption is that hog marketings will pick up after the holiday and the supply side will start to be burdensome and extend the weakness in the products.
 
Cattle futures lost 1.56% for the week. The bulk of the cash trade was at $99.50, but some Friday deals were as low as $96. As with hogs, the expectation is that prices might back off a little into the holiday period, and weakness in the Choice beef quotes on Friday did little to change that line of thinking. The Cattle on Feed report from the previous week was also a modest bearish influence. Ready numbers will continue to decline into October, but will be more than 100% of year ago for both September and October if feedlots are able to maintain normal rates of gain.  
 
Market Watch: We’re coming into month end position squaring, and we finish the week heading into a 3-day weekend. That often means more money sloshing around in unpredictable directions. The Crop Progress report on Monday night will be of interest, mostly in the crop ratings and the harvest progress for corn. Tuesday will be the last trading day for August cattle, and first notice day for September grain futures contracts.  Thursday will feature USA weekly export sales, plus several general economic reports like jobless claims, factory orders and productivity. By Friday, trading volume should be slipping as traders head out for the long weekend.
 
Looking for professional help with your marketing decisions? Consider subscribing to our daily Ag Marketing Professional service or Special Research Reports. Call our office for details at 402-697-3623, or visit 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 more extensive paid subscription and consulting services.
 
   Copyright 2010 Brugler Marketing & Management, LLC
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