Apr 20, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin

CornCollegeBanner home


February 2010 Archive for Market Watch

RSS By: Alan Brugler, AgWeb.com

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

Corn and Wheat Have A Bullish Episode

Feb 26, 2010
 

Market Watch with Alan Brugler
February 26, 2010
 
Corn and Wheat Have A Bullish Episode
 
It’s been a while since we’ve been able to say this, but corn was the bull leader this week with a 5% gain. That outstripped pretty fancy rallies in hogs and cotton, which were also up more than 4%. If oats knows where corn goes (an old saying that isn’t supported by correlation studies) they aren’t looking at the same month. Oats turned in the weakest performance among the tracked commodities.
 
Corn rallied despite less than stellar export sales interest. Export sales have slowed since the January crop report, which is somewhat puzzling given the lower corn prices. However, we also have to take note of the cheapness of world feed wheat (even being imported into Delaware because it was cheaper than Midwest corn plus rail freight) and the rising crop estimates for Argentina that will allow countries like Japan to diversify their sourcing. That said, other parts of the corn equation were more bullish. Ethanol margins continue to be positive, and the spread with gasoline permits more voluntary blend use. Livestock feeding margins have also improved, although there is scant evidence of expansion other than perhaps a little slow down in cow and sow slaughter.
 
Wheat futures were higher at all three exchanges for the third week in a row. Chicago futures were up 17 cents for the week. The US still does not appear to be competitive in the world export market overall, but is able to sell into specialized hard wheat niches in particular. A developing story is the buildup of carry in the market. This appears to have made March contract deliveries less attractive, and holding the physical commodity more attractive. It doesn’t cut the ending stocks or increase exports, but could support the futures price to a degree.
 
Soybeans had a more muted performance than did the feed grains, with a drop in soybean meal offsetting gains in soy oil and limiting the product value gain. Weekly export inspections are still running 4-5 million bushels above last year, despite the availability of Brazilian beans. Cumulative shipments YTD are 1.058 billion bushels through February 18. It wasn’t many years ago when that was considered to be a good export year. This time it has taken only 6 months. Meal export interest is slowing, however, due to a softening in South American basis. Census also reported record large January soybean meal stocks, so something must be done to clear the inventory.
 
Hogs were also higher for the third week in a row. All of the pork primal cuts except ribs and butts were higher for the week. The carcass value of the hog as measured by USDA was up 3.5% for the week. US pork production for the week was 0.3% below the prior week, and is down 7.2% since January 1 when compared to 2009.
 
Cattle lost 2.66% for the week, at least in the February futures. Those expired with a whimper on Friday. Estimated beef production for the week was up 2.1% from last week. For the year, tonnage is down 1.5%. Estimated carcass weights are down 19 pounds from last year’s 794# average for the last week of February. Wholesale prices retreated a little on Friday after a big week, with choice down 43 cents at $149.96. They were still up more than 2% for the week, and select boxes were up more than 3% on the week.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
Market Watch
 
 
 
 
Weekly
Weekly
02/05/10
02/12/10
02/19/10
02/26/10
Change
% Change
March Corn
$3.52
$3.62
$3.60
$3.78
0.18
5.00%
March CBOT Wheat
$4.73
$4.87
$4.90
$5.07
0.17
3.42%
March KCBT Wheat
$4.85
$4.95
$4.98
$5.11
0.13
2.56%
March MGEX Wheat
$5.03
$5.05
$5.09
$5.17
0.08
1.62%
March Soybeans
$9.14
$9.45
$9.45
$9.51
0.06
0.63%
March Soybean Meal
$271.00
$280.00
$276.40
$273.20
-3.20
-1.16%
March Soybean Oil
$37.00
$37.84
$38.52
$39.29
0.77
2.00%
February Live Cattle
$87.25
$89.37
$92.77
$90.30
-2.47
-2.66%
March Feeder Cattle
$98.33
$99.92
$102.55
$101.05
-1.50
-1.46%
April Lean Hogs
$66.72
$68.20
$69.65
$72.80
3.15
4.52%
March Cotton
$66.62
$74.39
$78.79
$82.61
3.82
4.85%
March Oats
$2.26
$2.37
$2.30
$2.21
-0.09
-3.91%
March Rice
$14.09
$14.26
$13.63
$13.43
-0.20
-1.47%
 
Cotton futures surged 3.82 cents per pound, up 4.85% for the week. Weekly export sales were light, as expected for the week when the Chinese markets were closed. USDA also opened up an import quota period under the farm bill rules. Neither of the above would be considered bullish. However, world demand continues to show small incremental improvements. World stocks are tight, and wet conditions in the south are hindering early field work. US ending stocks are projected to be the tightest since 1999. Thus, the market is sensitive to planting intentions. March futures also got a boost from a developing short squeeze, with one commercial stopping all deliveries to date against the contract.
 
Market Watch: We turn the calendar, the month with the USDA Grain Stocks and Planting Intentions reports at the end of it. The old saying has it that March “blows in like a lion and goes out like a lamb”. That’s not always true in terms of prices, due to those reports! For this week, we have the usual gyrations from deliveries against March futures contracts, and the usual weekly USDA Export Inspections and Export Sales reports on Monday and Thursday respectively. March Live Cattle and Pork Belly options expire on Friday. USDA will also be surveying for harvest results in six states, to compensate or verify all of the un-harvested acres included in the January crop report.
 
There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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

Fuzzy White Bull

Feb 19, 2010
 

Market Watch with Alan Brugler
February 19, 2010
 
Fuzzy White Bull
 
March cotton was the clear bull leader (or boll leader if you will pardon the pun) for the second week in a row. Traders ignore the rally in the US dollar, and focused on tight projected 2009/10 ending stocks in the US, along with tightening world forecasts and some recovery in world demand. The weekly Export Sales report showed new upland and pima bookings of 373,400 running bales. At the Outlook Forum, USDA projected a rise to 10.5 million acres in 2010 for the US. Due to tight world supplies, cotton exports are seen rising to 12.6 million bales, with global cotton consumption also expanding by 2.6% as the world economy improves.
 
Corn gave back 2 of the 10 cents per bushel that it gained the previous week. Prices were up smartly on Tuesday after the President’s Day holiday, but retreated on Wednesday and Thursday due to skepticism about export prospects in a strong dollar environment. On Friday, USDA reported 974,600 MT of weekly export sales. At the Outlook Forum, USDA projected an 89 million acre US crop for 2010.
 
Wheat futures were higher at all three exchanges for the second week in a row. Chicago lost a penny to KC and MPLS in the nearby contracts. Wheat export sales were on the upper end of the trade estimates on Friday. Bookings for the week ending February 11 were 463,400 MT. The US lost the Egyptian buying tender again, with Egypt buying Russian and French wheat at prices below what the US can offer at current freight rates and FOB prices.
 
Soybean futures started off in promising fashion on Tuesday, but spent the rest of the week giving it back. They were net UNCH for the week. Weekly export sales slowed, with the world loading up on cheap Brazilian beans fresh out of the field and only buying enough US beans to ensure no disruptions in supply if there are strikes or weather problems in South America. Old crop sales were 203,600 MT, with a sparse 300 metric tonnes of 2010/11 beans sold to Japan. Export shipments were still going strong at 1.119 MMT.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
Market Watch
 
 
 
 
Weekly
Weekly
01/29/10
02/05/10
02/12/10
02/19/10
Change
% Change
March Corn
$3.57
$3.52
$3.62
$3.60
-0.02
-0.41%
March CBOT Wheat
$4.74
$4.73
$4.87
$4.90
0.03
0.67%
March KCBT Wheat
$4.87
$4.85
$4.95
$4.98
0.04
0.76%
March MGEX Wheat
$5.01
$5.03
$5.05
$5.09
0.04
0.79%
March Soybeans
$9.14
$9.14
$9.45
$9.45
0.00
0.00%
March Soybean Meal
$273.80
$271.00
$280.00
$276.40
-3.60
-1.29%
March Soybean Oil
$36.15
$37.00
$37.84
$38.52
0.68
1.80%
February Live Cattle
$85.80
$87.25
$89.37
$92.77
3.40
3.80%
March Feeder Cattle
$98.88
$98.33
$99.92
$102.55
2.63
2.63%
April Lean Hogs
$68.60
$66.72
$68.20
$69.65
1.45
2.13%
March Cotton
$69.03
$66.62
$74.39
$78.79
4.40
5.91%
March Oats
$2.28
$2.26
$2.37
$2.30
-0.07
-2.85%
March Rice
$14.20
$14.09
$14.26
$13.63
-0.63
-4.42%
 
Hogs were higher for the second week in a row, climbing out of the hole with the assistance of higher pork prices and solid export demand. All of the pork primal cuts except ribs were higher for the week. The carcass value of the hog as measured by USDA was up 4.2%% for the week, rising faster than the 2.13% gain in the April futures. Pork production for the year to date is down 7.9%, with this week’s estimated production down 3% from the same week in 2009.
 
Cattle futures advanced sharply this week, up $3.40 per hundred to add to last week’s $2.12 per hundred gain.  Beef production YTD is down an estimated 1.7%. When combined with a little better consumer interest that allows wholesale prices to rally. Choice boxed beef on Friday was quoted at $146.71, up 4% for the week. The Friday night USDA Cattle on Feed report showed continued shrinkage in the US feedlot population. On Feed numbers for February 1 were 97.35% of last year, and slightly above the average trade estimate. Placements during January were much larger than generally expected, but offset by active marketings during the month.
 
Market Watch: Livestock traders will start the week reacting to the Friday night Cattle on Feed report, and then take a glance at the Cold Storage report scheduled for release on Monday night. Corn traders may have a little position adjusting to do, with the “pin” of the 360 strike price on the expiration of the March options on Friday. Monday will also feature the regular weekly Grain Inspections report. On Thursday, Census will release the monthly Crush report, and also the Cotton Consumption report. Friday will be FND (First Notice Day) for March grain futures delivery notices. It will also be the last trading day for February cattle.

LOOKING FOR MORE INFORMATION? ATTEND THE BRUGLER MARKETING WINTER SEMINARS IN OMAHA, NE or DAYTON, OH. The Omaha meeting is Feb 23-24, and Dayton will be held March 1-2. Call the number below for details or visit the Brugler website at www.bruglermktg.com
 
There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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
 

Up!

Feb 12, 2010
 
     
Market Watch with Alan Brugler
February 12, 2010
 
Up!
 
All of the commodities tracked in our ag table below were higher this week than they were on the previous Friday. That in itself is quite an accomplishment, reminiscent of 2008 in terms of uniform direction if not in the size of the moves!
 
March cotton was the clear winner for bull market of the week. Cotton got a major assist from USDA on Tuesday morning, when USDA increased it’s expected exports for the year by another million bales and dropped projected 2009/10 ending stocks to 3.3 million bales. The move was exaggerated by the steep price drop in the weeks ahead of the report.
 
Soybeans had a solid advance of 3.45% for the week, neatly supported by corresponding gains of 3.32% in the meal and 2.27% in the soybean oil. It’s easier to have soybeans rally when the value of the products created from the beans is also going up. USDA helped support the rally by dropping projected US ending stocks to 210 million bushels. Old crop use continues to be very aggressive by both crushers and exporters. Harvest is progressing ahead of schedule in Brazil, but much of the crop there is not yet mature. USDA did raise the projected production by 1 MMT. Argentine production was left at 53 MMT.
 
Wheat futures were higher at all three exchanges. Chicago continued to gain on Kansas City. While the board spread still shows a premium to KC that may not be the case in some cash markets. Hard red wheat is deliverable against Chicago futures should values drop enough vs. Chicago to make it feasible to do so. That is more likely to happen after the variable storage rates go into effect. USDA made only a 5 million bushel adjustment to the ending stocks on Tuesday, bumping them up to 981 million bushels.
 
Corn futures closed 10 cents higher for the week. Tighter ending stocks were part of the reason, with USDA cutting projected old crop stocks to 1.719 billion bushels from 1.764 billion in the January report. Stronger ethanol consumption of corn is seen for the year, although gasoline demand is seasonally low in February and discretionary blending has been minimal. Livestock use is still a question mark, with broiler chick placements running below year ago for at least the last four weeks.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
Market Watch
 
 
 
 
Weekly
Weekly
01/22/10
01/29/10
02/05/10
02/12/10
Change
% Change
March Corn
$3.65
$3.57
$3.52
$3.62
0.10
2.84%
March CBOT Wheat
$4.99
$4.74
$4.73
$4.87
0.13
2.80%
March KCBT Wheat
$5.02
$4.87
$4.85
$4.95
0.10
2.06%
March MGEX Wheat
$5.13
$5.01
$5.03
$5.05
0.02
0.40%
March Soybeans
$9.52
$9.14
$9.14
$9.45
0.32
3.45%
March Soybean Meal
$286.40
$273.80
$271.00
$280.00
9.00
3.32%
March Soybean Oil
$36.71
$36.15
$37.00
$37.84
0.84
2.27%
February Live Cattle
$86.62
$85.80
$87.25
$89.37
2.12
2.43%
March Feeder Cattle
$99.60
$98.88
$98.33
$99.92
1.60
1.62%
February Lean Hogs
$69.85
$66.50
$66.70
$67.45
0.75
1.12%
March Cotton
$71.07
$69.03
$66.62
$74.39
7.77
11.66%
March Oats
$2.33
$2.28
$2.26
$2.37
0.11
4.64%
March Rice
$14.17
$14.20
$14.09
$14.26
0.17
1.24%
 
Hogs saw the February contract expiring on Friday, up 75 cents from the previous week. The pork cutout was down 26 cents on Friday to $68.05 and off $1.07 from the previous week. That was a 1.5% drop, but cash hogs were able to fight against it because packers needed the numbers. Technically, prices bounced from support the prior week, and ran into moving average resistance on Thursday and Friday that slowed the price advance.
 
Cattle futures also advanced this week, up $2.12 per hundred to $89.37. That 2.43% gain was fueled by lighter carcass weights and their supportive effect on wholesale prices. Feedlots continue to struggle with feed efficiency and rates of gain in trying weather conditions. A wide swath of feedlot country is still under snow cover, and that will likely be followed by mud after the weather warms up. Some cash cattle trade was recorded at $89 in the south on Friday. It had been preceded by $140 trade in the north on Thursday and a few deals at $141 on Friday.
 
Market Watch: The US commodity markets are closed on Monday for the President’s Day holiday. Chinese markets are also closed for the Chinese New Year’s. NOPA soybean crush for January is expected to be released on Tuesday morning, Feb 16. USDA weekly export inspections are also scheduled for that date as long as staffers have had enough work days to compile the data. Federal offices were closed several days this past week due to heavy snowfall along the East Coast. USDA’s Cattle on Feed report is scheduled for Friday the 19th, along with weekly Export Sales and monthly Milk Production. Friday will also be the expiration day for March grain options.

 
 
There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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

Livestock Margins Improve

Feb 05, 2010

 

Market Watch with Alan Brugler

February 5, 2010

 

Livestock Margins Improve

 

To compound the bearish attitudes triggered by the January USDA report data, the US dollar has been rallying rather smartly against the euro and some other developed world currencies. That increase in the dollar continued this week, with a failed debt auction in Portugal and a sharp increase in the CDS premiums for Greek government debt driving a sharp drop in the euro because of perceived default risk. The effect on the ag commodities was rather uneven, however, due to other competing themes such as the slide in crude oil and the EPA’s announcement of the RFS2 standards for biofuels.

 

Consistent with our headline, both cattle and hog futures were higher for the week, while the main input costs (corn and soybean meal and feeder cattle) were all lower. That meant a nice improvement in feeding margins, at least in the front end. Cattle crush margins also moved into the black for the March crush, the first time in months that it has been possible to lock in feeders, corn and the selling price at profitable futures prices simultaneously. Cattle futures rose on higher cash cattle prices, with cash trading in Nebraska at $136-137 on Thursday.

 

Hogs were also higher for the week despite mid-week weakness in the pork cutout. In the end, the products same back, losing only 4 cents in the cutout for the week despite weakness in loins, picnics and bellies. Traders were worried about pricing pressure from poultry, with Russia refusing entry to US chicken processed with chlorine rinses and China announcing a stiff tariff on imports of US poultry as a retaliatory measure for the earlier US hike in the tariff on Chinese tires.

 

Cotton won the contest for worst price performance, losing 3.49% for the week despite booking the strongest weekly export sales of the year the week before, at higher prices. The stronger dollar doesn’t affect sales to China, because the Yuan is pegged to the dollar. It does threaten sales to Europe, which saw the euro sinking and concerns about economic growth. Traders are looking for USDA to slightly increase projected exports in Tuesday’s report, dropping ending stocks below last month’s 4.3 million bale projection.

 

Soybeans were down a single penny per bushel for the week despite increased production estimates for South America from several sources and an average trade estimate for world ending stocks above 60 MMT in 2010/11. Soybean oil was firm on the potential for biodiesel demand yet in 2010 following the EPA announcement of the combined 2009-2010 mandate for 1.15 billion gallons. It’s not clear who is going to manufacture the fuel yet, since Congress hasn’t moved to reinstate the blend credit that expired on December 31. However, Brazil has also hiked biodiesel use for 2010 and the spread traders like the long oil/short meal idea. Speaking of short meal, the March meal contract was down 1% for the week. The drop in corn and the large meal supplies made available from a record crush pace mean pressure to cut prices and move inventory.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:

 

Market Watch

 

 

 

 

Weekly

Weekly

01/15/10

01/22/10

01/29/10

02/05/10

Change

% Change

March Corn

$3.72

$3.65

$3.57

$3.52

-0.05

-1.40%

March CBOT Wheat

$5.10

$4.99

$4.74

$4.73

-0.01

-0.16%

March KCBT Wheat

$5.12

$5.02

$4.87

$4.85

-0.03

-0.51%

March MGEX Wheat

$5.21

$5.13

$5.01

$5.03

0.02

0.35%

March Soybeans

$9.74

$9.52

$9.14

$9.14

-0.01

-0.05%

March Soybean Meal

$291.70

$286.40

$273.80

$271.00

-2.80

-1.02%

March Soybean Oil

$37.53

$36.71

$36.15

$37.00

0.85

2.35%

February Live Cattle

$87.35

$86.62

$85.80

$87.25

1.45

1.69%

March Feeder Cattle

$98.65

$99.60

$98.88

$98.33

-0.55

-0.56%

February Lean Hogs

$69.97

$69.85

$66.50

$66.70

0.20

0.30%

March Cotton

$72.08

$71.07

$69.03

$66.62

-2.41

-3.49%

March Oats

$2.31

$2.33

$2.28

$2.26

-0.02

-0.77%

March Rice

$13.98

$14.17

$14.20

$14.09

-0.11

-0.81%

 

Corn prices continued to grind lower, losing another 5 cents for the week. Export commitments are still 17% above year ago at this time, but rising Argentine and Brazilian corn crop estimates threaten to eat into US fourth quarter export sales if those crops make it past frost and other harvest risks and get into the export pipeline. On the other hand, the EPA mandate keeps the 12 billion gallon requirement for corn based ethanol use in 2010, and US prices are still sufficiently below Brazilian values to make US produced ethanol attractive in the world export market. On the other hand, the slide in crude oil and gasoline prices this week pinched the spread with ethanol and made discretionary blending less attractive.

 

Wheat futures posted small losses of 1 and 3 cents in Chicago and KC respectively, while MPLS March futures were actually up 2 cents for the week. The latter got a boost from Stats Canada, which reported that December 31 wheat stocks in Canada were smaller than the trade had expected. Since most of the Canadian production is spring wheat, the Minneapolis spring wheat contract benefitted from the paper reduction in competition. Obviously it wasn’t a big benefit, since the world is still staring at a 9 year high in projected wheat stocks/use ratio.

 

Market Watch:  The main event this week is USDA’s WASDE (World Agricultural Supply Demand Estimate) report on Tuesday morning. The main interest will be in USDA adjustments to corn and soybean ending stocks, if any, and underlying changes in the world S&D estimates. Obviously there will also be keen interest in the value of the US dollar and whether the European situation stabilizes. The routine reports will include Export Inspections on Monday and Export Sales on Thursday. Friday will be the last trading day for February hogs. February cattle options and March cotton options expired this past Friday, and could mean a few folks have “surprise” positions to adjust on Monday.

 

There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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

Log In or Sign Up to comment

COMMENTS

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