Jul 29, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


Market Watch

RSS By: Alan Brugler, AgWeb.com

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

Waiting for a Connecting Flight

Oct 05, 2012

Brugler 

Market Watch with Alan Brugler

October 5, 2012

 Waiting For A Connecting Flight 

Market activity this week kind of reminded us of waiting at an airport for a connecting flight. You are part way to the objective and just waiting for something to happen. While you are waiting, there can be some commotion (like a whole flight of people being told that their gate has changed) and both gold and crude oil saw some volatility this week, and the Dow Jones Industrial Average set a 5 year high early on Friday. The second flight for grain people is scheduled to take off on October 11, with the USDA crop production and WASDE supply/demand reports. We already have some weather information from the September 28 stocks reports, which told us how new crop beginning stocks will be changed, but there is a storm front coming in. That would be the incorporation of the FSA acreage data coupled with likely revisions in average yield estimates. The farmer portion of the yield estimate is likely to go up based on anecdotal information, but the USDA objective yield plots shouldn’t have changed a whole lot and they are part of the calculation which will dampen the overall effect. Let’s hope there isn’t too much fog!

Corn futures are back to where they were two weeks ago, failing to build upon the limit up move following the USDA Grain Stocks report, but also giving very little of the money back due to end user pricing on dips. Weekly export sales were better than the prior week, as low prices tend to cure low prices by stirring up buying interest. That also wasn’t saying much because the prior week sales had so many cancelations that they were just barely above zero. Ethanol weekly production dropped sharply this week, to the lowest average since the weekly reporting series began in 2010. Ethanol stocks were drawn down as consumption exceeded production. That was followed by a rally in gasoline which should stimulate additional ethanol use.

Soybeans dropped 3.1% for the week, despite a strong day on Thursday. Weekly export sales were way above trade estimates, with China buying 1.025 million metric tonnes. They clearly liked beans with a 15 handle in front of them rather than a 16 or 17.  US export sales for the year remain heavily front end loaded, with 82% of the USDA projected shipments for the year already on the sales book. Shipments as measured by the Export Inspections surged 41.7 million bushels and are now 31 million ahead of year ago after 27 days of activity. Brazilian planting is picking up steam, with dryness concerns in the northeastern portion of the growing area. Dryness during the equivalent of early April isn’t usually a problem for producers, who are focused on planting. Dry weather in fact tends to mean larger acreage.

The three wheat markets were all lower, by 4.2 to 5.3%. Those were big losses compared to the 1.1% drop in corn, and made wheat a trifle more competitive in feed rations if you have a weak enough basis. Poor weekly export sales are the main problem. Egypt continues to buy wheat, but still not US origin wheat. The latest sources were the EU and Argentina, with US offerings a little too high with freight costs included. US sales commitments are running behind, with only 40% of expected exports on the books. That commitment level would typically be 60% by now. There should be a window for increase US sales as Russian supplies have dried up and EU wheat becomes more expensive, but it will be a narrow window if Australia has anything close to a normal crop.

Nearby cotton futures gained nearly 1%, but the October contract being tracked had very little trading activity.  Weekly export sales were 241,000 running bales of upland and 7,000 RB of Pima. Export commitments are tracking right about where USDA expects them to be, with 50% of the year’s sales on the books. The average for this date is 49%. China is a problem, as their stocks rebuilding program in 2011/12 was a little too successful. They are staring at a multi-year high in stocks and a multi-year drop in consumption/exports of finished goods. If there is a silver lining it is the ownership of the stocks by their government. Chinese taxpayers can store cotton a long time if need be, but they probably won’t want to import ours if it means continuing to pay to store theirs. 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

09/14/12

09/21/12

09/28/12

10/05/12

Change

% Change

Dec

Corn

$7.82

$7.48

$7.56

$7.48

($0.08)

-1.09%

Dec

CBOT Wheat

$9.24

$8.97

$9.03

$8.58

($0.45)

-4.99%

Dec

KCBT Wheat

$9.48

$9.26

$9.28

$8.78

($0.49)

-5.31%

Dec

MGEX Wheat

$9.78

$9.58

$9.59

$9.18

($0.40)

-4.20%

Nov

Soybeans

$17.39

$16.22

$16.01

$15.52

($0.50)

-3.09%

Oct

Soybean Meal

$523.50

$484.50

$487.00

$474.70

($12.30)

-2.53%

Oct

Soybean Oil

$56.97

$54.45

$52.18

$50.76

($1.42)

-2.72%

Oct

Live Cattle

$127.05

$125.53

$122.08

$123.05

$0.97

0.80%

Sep

Feeder Cattle

$146.63

$147.23

$143.80

$144.83

$1.03

0.71%

Oct

Lean Hogs

$74.03

$75.80

$77.18

$81.33

$4.15

5.38%

Oct

Cotton

$75.39

$72.00

$69.15

$69.80

$0.65

0.94%

Dec

Oats

$3.96

$3.76

$3.71

$3.67

($0.03)

-0.88%

Nov

Rice

$15.28

$15.24

$15.48

$15.11

($0.37)

-2.39%

 

Cattle futures gained 97 cents for the week after losing $3.45 the previous week. The cash cattle market was mostly $1 higher, and October futures tracked the increase in value. Wholesale beef prices were a mixed bag, with choice cutouts up 0.5% for the week but select product down 1.2% on a Friday/Friday basis. Estimated beef production for the week was down 5.4% from the same week in 2011, and tonnage for 2012 YTD is now 2.1% below last year. Weekly export sales at 15,800 MT were up 61% from the previous week. Shipments were even better at 17,100 MT. Cumulative sales are now running above year ago, based on the weekly reporting system. Official Census exports will vary. 

Hog futures jumped nearly 5.4% this week, a 4th week of strong gains. Estimated pork production for the week was up slightly from the previous week, but down 0.1% from the same week in 2011. That ended a string of weeks with 4% and 5% year over year rises in production. Pork production YTD is up 2.4%. The pork carcass cutout value rose to the highest level since August 24. IT was up 4.7% for the week, supporting cash hog prices and steady daily increase in the CME Lean Hog Index.

Market Watch:

Monday is first notice day for October cattle futures deliveries. Futures markets will be open. Government offices will be closed for the Columbus Day holiday (and Thanksgiving in Canada), so the usual Monday reports like Export Inspections and Crop Progress will be released on Tuesday. Tuesday will also be the last trading day for October cotton. The main USDA will reports for this coming week will be on Thursday morning, with the USDA Crop Production and Supply/Demand reports. USDA Weekly Export Sales will be delayed until Friday morning due to the Monday holiday.

 

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

Log In or Sign Up to comment

COMMENTS

No comments have been posted, be the first one to comment.

Hot Links & Cool Tools

    •  
    •  
    •  
    •  
    •  
    •  

facebook twitter youtube View More>>
 
 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions