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July 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.

Still Steamy

Jul 30, 2010
 

Market Watch with Alan Brugler
July 30, 2010
 
Still Steamy
 
Corn was down 24 cents one week and up 22 cents the next. We didn’t quite close where we were two weeks ago, but it felt like a pretty strong week. The net change was 5.79%, enough to gladden the heart of any spec fund manager staring at .25% yields on government debt as an alternative investment. Weekly export sales weren’t great, at less than a million metric tonnes. However, the story is world feed use, coupled with much above normal temps in the Corn Belt and considerable doubt about how that will impact the average U.S. corn yield. The feed use angle has to do with the Russian drought, which is impacting pastures and feed crops such as barley as well as it is the well publicized wheat.
 
Wheat, once again posted the largest percentage gains overall in our table. Continued weather problems in the FSU and Europe are still fueling the rally in wheat. Now that the spec funds have painfully bought back all of their short positions in wheat, some have “got religion” and are aggressively buying the market in an attempt to make back the money they lost. World buyers are also having flashbacks to 2007 and 2008, when hoarding behaviors by net exporter countries made food staples like wheat and rice very expensive and hard to buy. On paper the world stocks of wheat are still much above 2007 levels, but once burned is twice shy as they used to say. The French wheat futures contracts for November posted new life of contract highs this week. The EU is authorizing exports, but at a slower pace than last year.
 
Soybeans weren’t about to be left out of the rally in the other grains, and in fact they really can’t be left out of a feed grain rally for very long. Soybean meal is a substitute, and has often followed the corn and wheat. With crush plants taking downtime in August and Census meal stocks down sharply from the spring peak, supplies have snugged up. There were no deliveries vs. August futures on first notice day, and August meal gained $11/ton for the week. Soy oil was also up almost 2%. USDA weekly export sales for soybeans were very strong at 1.48 MMT.
 

 

Cotton was up a stout 2.54% for the week, following all of the other field crops higher. Crop condition ratings are still quite high, but the big crop story is already built into the price. Investment demand for commodities such as cotton is a wild card. Cert stocks have dwindled to around 50 thousand bales, the lowest level since 2004. Open in interest in the October contract is quite small because shorts don’t want to be there when they can’t get receipts to deliver
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
07/09/10
07/16/10
07/23/10
07/30/10
Change
% Change
Sep
Corn
$3.84
$3.95
$3.71
$3.93
0.22
5.79%
Sep
CBOT Wheat
$5.38
$5.87
$5.96
$6.62
0.65
10.94%
Sep
KCBT Wheat
$5.53
$5.99
$6.15
$6.75
0.60
9.67%
Sep
MGEX Wheat
$5.63
$6.12
$6.29
$6.88
0.59
9.43%
Aug
Soybeans
$9.93
$10.20
$10.17
$10.53
0.36
3.49%
Aug
Soybean Meal
$300.90
$307.80
$299.90
$310.90
11.00
3.67%
Aug
Soybean Oil
$37.50
$38.31
$39.07
$39.83
0.76
1.95%
Aug
Live Cattle
$90.20
$92.27
$93.42
$92.65
0.77
0.82%
Aug
Feeder Cattle
$113.25
$113.10
$115.17
$113.72
1.45
1.26%
Aug
Lean Hogs
$80.03
$81.70
$83.23
$85.82
2.60
3.12%
Oct
Cotton
$78.15
$79.96
$80.32
$82.36
2.04
2.54%
Sep
Oats
$2.65
$2.68
$2.55
$2.71
0.16
6.38%
Sep
Rice
$9.99
$9.86
$10.28
$10.55
0.28
2.68%
 
Cattle futures were down 77 cents for the week. Beef demand turned soft, with only light inquiries and equally light packer offerings. The choice cutouts were down 1.2% for the week. Cash cattle traded $2 lower than the previous week, both out of concern for the product demand and because hedgers had a very favorable basis for lifting hedges with a net gain. The Cattle on Feed and Cattle Inventory reports had been fresh news at the beginning of the week, but by Friday they were old news and had had little impact on the market other than failing to provide any new bullishness.
 
Hogs were up smartly for the week, gaining 3.1%. Unlike the beef, the pork primal cuts were stronger, including a jump of just under $10 in the pork bellies on Wednesday following bullish weekly out movement numbers from the warehouses reported on Tuesday night. Hog numbers will be on the light side for another month, based on typical production and marketing patterns. BLT demand is the star at the moment, but will give way to ham interest by October. On a Thursday/Thursday basis, the pork cutout was up 4.5%. Pork bellies were up 11.1%.
 
Market Watch: The calendar turns to August, the month when soybean yields are “made” or “not made”. The focus will remain on crop weather and ratings, lacking other inputs until USDA releases their first survey based production forecast for the year on August 12. August soybeans and products are in delivery, with little expected for either meal or beans. This week’s USDA reports are the usual Export Inspections on Monday morning, Crop Progress on Monday afternoon, and weekly Export Sales on Thursday morning. Friday will mark the last trading day for August cattle options.
 
Looking for professional help with your marketing decisions? Consider subscribing to our daily Ag Marketing Professional service or Special Research Reports. Western Corn Belt and Plains readers are also invited to attend our Summer Seminar in Omaha, NE Aug 2-3. Call our office for details at 402-697-3623, or visit 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

The Heat Continues but the Market Cools

Jul 23, 2010

Corn finished the week 24 cents lower, down 5.95% from last Friday. Elevators and terminals began to back off bids with farmer selling into the rally. Elevators are looking for better quality corn to blend. Concerns this week focused on the extended heat in the FSU and Europe that has threatened the grain crop to the point where the rumor mill is speculating on an export tax in Russia. Corn exports were strong this week at a combined total of 1.155 MMT with new crop sales nearly equal to old crop. China demand has come back into the market after being absent the past four years and YTD China purchases total 1.1947 MMT.


Wheat, once again posted the largest percentage gains overall in our table. Continued weather problems in the FSU and Europe helped to fuel the rally in wheat but promises of Delta rains compliments of Tropical Storm Bonnie limited prices gains in the U.S. today. Some of this week’s price advance can also be credited to the falling dollar. The DTN National SRW basis is 57cents under the CBOT September contract, HRW DTNN basis is $1.42 under the KC September contract and HRS is 84 cents under the MGEX September. It appears as though the CBOT Variable Storage Rate is helping basis nationally. Export sales were better than last week but down from the four week average.


Soybeans were down .25% for the week, closing 3 cents lower, trading sideways since Monday. New crop export sales were impressive at 1.115 MMT, mostly for China with old crop sales really dismal. Soybean meal was down 2.57%, and soy oil was up 1.98% for the week. The energy markets helped the soy oil to keep a firmer tone. The U.S. Census Bureau monthly soybean crush came in below trade expectations at 129.17 million bushels and that added a bearish tone to the week. Private exporters continue announce new crop soybean sales for 2010/11. Announcements were for South Korea, (110,000 MT) China (175,500 MT) and Unknown (175,000 MT) this week. The U.S. Census Bureau monthly soybean crush came in below trade expectations at 129.17 million bushels and that added a bearish tone to the week.



Cotton was up .45 % for the week, down earlier in the week and then pulled up later in the week by the realization that certificated stocks are almost gone. Cotton condition ratings only reinforced the bearish sentiment about cotton, with expectations of a huge new crop balancing concerns of a shortage. ICE margins were increased this week on cotton which could have effected price action later in the week, as a bit of a wet blanket on specs. The Delta States should expect some welcome relief from Tropical Storm Bonnie to the recent lack of moisture that has affected crop development. Census Bureau reported domestic cotton mill use last month at an annualized rate of 3.491 million bales compared to 3.158 last year. Monthly consumption in June was at 331,684 RB up from May’s 274,517 RB. Weekly export sales were good with 287,300 RB sold for 2009/10 and 380,000 RB committed from 2010/11, mostly for China.


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


 

Market Watch

 

 

 

 

Weekly

Weekly

Month

07/02/10

07/09/10

07/16/10

07/23/10

Change

% Change

Sep

Corn

$3.73

$3.84

$3.95

$3.71

0.24

5.95%

Sep

CBOT Wheat

$5.03

$5.38

$5.87

$5.96

0.09

1.53%

Sep

KCBT Wheat

$5.16

$5.53

$5.99

$6.15

0.16

2.67%

Sep

MGEX Wheat

$5.31

$5.63

$6.12

$6.29

0.17

2.78%

Aug

Soybeans

$9.45

$9.93

$10.20

$10.17

0.03

0.25%

Aug

Soybean Meal

$286.00

$300.90

$307.80

$299.90

7.90

2.57%

Aug

Soybean Oil

$36.16

$37.50

$38.31

$39.07

0.76

1.98%

Aug

Live Cattle

$89.48

$90.20

$92.27

$93.42

1.15

1.25%

Aug

Feeder Cattle

$112.68

$113.25

$113.10

$115.17

2.07

1.83%

Aug

Lean Hogs

$80.05

$80.03

$81.70

$83.23

1.52

1.87%

Oct

Cotton

$77.83

$78.15

$79.96

$80.32

0.36

0.45%

Sep

Oats

$2.48

$2.65

$2.68

$2.55

0.13

4.77%

Sep

Rice

$9.81

$9.99

$9.86

$10.28

0.42

4.26%


Cattle futures were up $1.15 on good volume higher cash and boxed beef prices.  Cash cattle traded $1 to $2 higher, at mostly $95 around the country in the live and $150-151 in the dressed. There was good sales volume; Texas sales numbered 27,000 on last reports, Kansas sales at 38,000 and Nebraska sales volume at 52,000 head. Choice beef was up $1.41 from Thursday to Thursday, with most of the gain occurring on Tuesday. Select cuts narrowed the spread between the two, closing up $1.96 for the week. Yesterday’s Cold Storage report showed a 1.5% decline in beef stocks from May 31st and a drop of 12.9% from a year ago. The COF report was friendly when compared to average trade guesses for all categories. July 1st cattle on feed numbers were at 103% of a year ago, June placements were at 117% and June marketings were at 100% of a year ago. The inventory report showed an expected decrease in beef cows, down 2%, a decrease in beef replacement heifers of 2% and a 1% drop in the 500 and under calf crop.


Hogs were $1.52 higher for the week, up 1.87%. On a Thursday/Thursday basis, the pork carcass cutout was up 5.2%. Hams and Bellies were the strongest and Ribs were the weakest but all positive for the week. Fund buying was a bullish feature along with fund rolling from the August to October contract. The Cold Storage report showed pork leading the decline in meat supplies. Pork inventories in cold storage were down 7.3% from last month and 23.3% lower than a year ago. Bellie stocks were the largest contributor to the total decline in pork supplies, down 35 million pounds from last year.


Market Watch: Hot weather is still the fundamental story both in the U.S. and abroad. Rains continue to benefit the major grain areas tempering the effects of the heat. Monday’s crop progress report should show Winter Wheat harvest complete in those states that were nearly finished last week and some progress in the states that were significantly behind normal. Soybean and cotton crop development in the Delta will probably look better next week than this week. Most of the reports next week are financial. Although the Dollar was down sharply yesterday for the week it was nearly unchanged.


Looking for professional help with your marketing decisions? Consider subscribing to our daily Ag Marketing Professional service or Special Research Reports. Readers are also invited to attend our Summer Seminar in  Omaha, NE Aug 2-3. Call our office for details at 402-697-3623, or visit 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

Now We're On Fire

Jul 16, 2010
 

Market Watch with Alan Brugler
July 16, 2010
 
Now We’re On Fire
 
Corn extended its gains another 2.9%, and is now up 45 cents per bushel in 3 weeks. Elevators report plenty of old crop movement, and some are complaining about the heat damage and other quality concerns. That isn’t the market’s concern, however. Collectively, the concern is whether we can make the USDA’s current yield forecast, or if persistent high daytime and nighttime temps will negatively impact the U.S. average yield. USDA projected 1.373 billion bushels of ending stocks for new crop on July 9. With 80 or 81 million harvested acres, a drop of only 3 or 4 bushels per acre in the national average yield would drop stocks very close to pipeline levels. The market is already doing some price rationing against that risk.
 
Wheat again posted the largest percentage gains in our table. There is an old trade axiom that goes “wheat takes no prisoners”.  Global ending stocks are still projected by USDA to be a very burdensome 187 million metric tonnes, but there are a number of estimates floating around that reduce that figure by 8 to 12 MMT. Russia, Ukraine, the EU and other countries are seeing drought issues pop up, along with the infamous sukhovei in Russia.  Projected U.S. ending stocks ballooned to 1.093 billion bushels in the July WASDE report, but exports could grow another 100-200 million bushels if world stocks continue to tighten. Bears point to the extremely weak cash basis and suggest that futures are getting ahead of themselves with the dollar plus gains in CHI and KC over the past three weeks.
 
Soybeans rose 2.6% for the week, a much tamer pace than the 6.5% the previous week. They were limited by the size of the gains in the products. Soybean meal was up 2.3%, and soy oil was up 2.2% for the week. Meal was trying to keep up with corn, but soy oil had to deal with weakness in the overall energy markets. Weekly soybean export sales were strong, notably in the old crop, and a weakening US dollar index supported the rally. Crop condition ratings declined to a level below 2004. NOPA’s monthly crush report was very close to the trade estimates, at just over 126 million bushels.

Cotton was up a similar 2.3% for the week.  USDA’s 18.3 million bales production estimate is still overhanging the market. Drought is beginning to be discussed, with the Drought Monitor showing real problems in Louisiana and spreading to surrounding states. The NOAA 30-day weather forecast looks for moderating temps in August for the main cotton growing areas (not the case for the Corn Belt).
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
06/25/10
07/02/10
07/09/10
07/16/10
Change
% Change
Sep
Corn
$3.50
$3.73
$3.84
$3.95
0.11
2.93%
Sep
CBOT Wheat
$4.71
$5.03
$5.38
$5.87
0.49
9.15%
Sep
KCBT Wheat
$4.95
$5.16
$5.53
$5.99
0.46
8.27%
Sep
MGEX Wheat
$5.24
$5.31
$5.63
$6.12
0.49
8.61%
Aug
Soybeans
$9.41
$9.45
$9.93
$10.20
0.26
2.64%
Aug
Soybean Meal
$280.30
$286.00
$300.90
$307.80
6.90
2.29%
Aug
Soybean Oil
$37.33
$36.16
$37.50
$38.31
0.81
2.16%
Aug
Live Cattle
$89.38
$89.48
$90.20
$92.27
2.07
2.29%
Aug
Feeder Cattle
$113.32
$112.68
$113.25
$113.10
0.15
0.13%
Aug
Lean Hogs
$83.93
$80.05
$80.03
$81.70
1.68
2.09%
Oct
Cotton
$80.21
$77.83
$78.15
$79.96
1.81
2.32%
Sep
Oats
$2.66
$2.48
$2.65
$2.68
0.02
0.94%
Sep
Rice
$10.21
$9.81
$9.99
$9.86
0.13
1.30%
 
Cattle futures were up, you guessed it, 2.29%. Cash cattle traded $1 to $2 higher, at $93-94 in the south and $150-152 in the north. That was above the prior August futures level and futures rallied to close the basis gap. Choice beef was down $0.74/cwt. from Thursday to Thursday, with most of that loss occurring on Wednesday. Select cuts were under less pressure, losing $0.26 for the week. Increased chicken supplies are competing for meat market share, with both lower end beef and pork directly in the line of fire.
 
Hogs were also higher for the week, up 2.09%. On a Thursday/Thursday basis, the pork carcass cutout was down 2%. Bellies and ribs were the strongest. Without much strength in the underlying product, cash hog advances were limited and so were futures. Fund buying was a bullish feature. A weaker US dollar offered some pork export potential, but the final numbers for May that were released mid-week were not as bullish as some had hoped.

 
Market Watch: Hot weather is the fundamental story, and that will have traders poring over the weather forecast maps on Sunday evening when Globex trading resumes. They’ll be looking at Europe as well as the U.S. runs. On Monday night, USDA will tell us if their reporters are seeing any negative effects of the current weather pattern on crop conditions. On Thursday morning, Census will release the monthly Crush and Cotton Consumption reports for June. USAD will follow with Cold Storage in the afternoon. On Friday, cattle traders will get to see both the monthly Cattle on Feed report and the semi-annual USDA Cattle Inventory report. Friday will also mark the last trading day for August futures options in the grains and oilseeds.
 
Looking for professional help with your marketing decisions? Consider subscribing to our daily Ag Marketing Professional service or Special Research Reports. Eastern Corn Belt readers are also invited to attend our Summer Seminar in Ft. Wayne, Indiana on July 22-23. Call our office for details at 402-697-3623, or visit our Brugler Web sites www.bruglermarketing.com or www.bruglermktg.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

Heating Up

Jul 09, 2010
 
Market Watch with Alan Brugler
July 9, 2010
 
Heating Up
 
Corn extended its gains out of the V-bottom, rising another 3.09% for the week. Rising temperatures were accompanied by rising prices, with all of the ag commodities we track up for the week. The net change for the last two weeks in front month corn futures has been 34 cents per bushel. On Friday, USDA showed slightly larger than expected ending stocks estimates at 1.478 billion bushels for old crop and 1.373 billion for new crop. The new spec longs in corn like the fact that year/year ending stocks are expected to decline, and that the new crop stocks/use ratio is projected to be the tightest since 1996/97. That would also be the second highest national average yield on record, and it is still in question.
 
            Wheat posted the largest percentage gains in our table, to the consternation of fundamental analysts and economists. USDA cut projected world production and ending stocks, but not as far as some had anticipated. Global ending stocks are still projected to be a very burdensome 187 million metric tonnes. Projected U.S. ending stocks also ballooned to 1.093 billion bushels by May 31, 2011 despite a 100 million bushel increase in projected U.S. exports compared to the June report.
 
Soybeans jumped 6.5% for the week, aided by an almost identical advance in soybean meal. Meal stocks are ample, but meal is a partial substitute for corn and higher corn and DDGS prices allowed meal to advance. Soy oil was also higher by 3.8% on fresh investment fund buying interest. USDA supported the soybean bulls by dropping its old crop ending stocks projection to 175 million bushels, and more importantly leaving new crop UNCH at 360 million bushels despite increased planted acreage carried over from the June 30 report.
 
Cotton participated in the bull parade, but without a lot of enthusiasm.  USDA projected an even larger U.S. cotton crop than the trade expected, at 18.3 million bales. That was 10% larger than the June estimate, with larger acreage the main change. USDA also reduced projected abandonment due to better than usual weather in the Southwest. That production jump boosted the new crop ending stocks estimate to 3.5 million bales from a very tight 2.8 million in the previous report. World production was increased, but USDA revised the carryover from the previous year downward and put world ending stocks at 49.91 million bales.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
06/18/10
06/25/10
07/02/10
07/09/10
Change
% Change
July
Corn
$3.61
$3.41
$3.64
$3.75
0.11
3.09%
July
CBOT Wheat
$4.62
$4.56
$4.88
$5.24
0.36
7.33%
July
KCBT Wheat
$4.97
$4.84
$5.07
$5.48
0.41
8.03%
July
MGEX Wheat
$5.38
$5.12
$5.22
$5.57
0.35
6.70%
July
Soybeans
$9.61
$9.57
$9.63
$10.26
0.63
6.52%
July
Soybean Meal
$289.40
$289.75
$294.90
$314.10
19.20
6.51%
July
Soybean Oil
$37.92
$37.16
$36.01
$37.38
1.37
3.80%
Aug
Live Cattle
$88.20
$89.38
$89.48
$90.20
0.73
0.81%
Aug
Feeder Cattle
$110.17
$113.32
$112.68
$113.25
0.58
0.51%
July
Lean Hogs
$80.87
$80.72
$78.20
$78.62
0.42
0.54%
Oct
Cotton
$78.56
$80.21
$77.83
$78.15
0.32
0.41%
July
Oats
$2.63
$2.64
$2.43
$2.58
0.15
6.17%
July
Rice
$11.01
$10.06
$9.58
$9.99
0.41
4.28%
 
Cattle futures were up a more modest 0.8% for the week. Cash cattle traded $1 to $2 higher, and futures rallied from a big discount to cash. The positive basis is profitable for hedgers, who get a higher net price than they initially thought possible when they sold the futures. Meat demand over the long holiday weekend was tepid enough to limit replacement buying interest in the wholesale market. Choice beef was down $1.01/cwt. from Thursday to Thursday, with all of that loss occurring on Wednesday. Select cuts were under even more pressure, losing $1.91 for the week. Increased chicken supplies are competing for meat market share, with both lower end beef and pork directly in the line of fire.
 
Hogs were also higher for the week, but only by 42 cents per hundredweight or 0.54%. On a Thursday/Thursday basis, the pork carcass cutout was up only 0.8%. Without much strength in the underlying product, cash hogs were limited and so were futures. A weaker US dollar offered some export potential, but even that faded a little on Friday. Weekly slaughter comparisons were messed up by the July 4 holiday on Monday, but packers were trying to make up some ground as the week went along. They didn’t want to flood the market with pork and drag down the price, and they appear to have been successful.
 
Market Watch: With the USDA reports out of the way, traders will revert to their usual summer time hobby in the grains, which is predicting average yields and thus U.S. and world production. This tends to be a weather game, modified by information inputs such as crop condition ratings, which will be released on Monday evening. USDA will also update export inspections on Monday morning. This is of more interest to soybean traders, due to the tightness of old crop stocks. NOPA is scheduled to release the June soybean crush report on Wednesday morning. Wednesday will also mark the expiration of the July grain futures contracts. July cotton has already expired. Weekly Export Sales will be out on Thursday morning, with analysts looking for indications of additional Chinese demand for corn, soybeans and soy products.
 
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

Can You Say V-Bottom?

Jul 02, 2010
 

Market Watch with Alan Brugler
July 2, 2010
 
Can You Say V-Bottom?
 
Corn couldn’t stand poverty any more than it did the previous prosperity. After a two week gain of 21 cents per bushel, futures were down 20 cents last week and back up a whopping 23 cents this week. The gain for the week was over 6%. The entire rally came on Wednesday, Thursday and Friday. It took only two days to erase the full 7 days of decline ahead of the key June 30 reports. By now, you probably know that USDA found only 4.31 billion bushels of corn in the nation’s bins on June 1, almost 300 million bushels less than the average trade guess going into the report. The Planted Acreage surveys also showed a reduction in corn plantings from the March intentions, with the three very wet states losing 950,000 acres. USDA is very likely to raise its residual use estimate on Friday, dropping old crop ending stocks to 1.4 billion bushels or lower. New crop ending stocks will also likely be tightened from previous estimates.
 
            Wheat futures rallied sharply. The USDA numbers weren’t bullish for wheat, and in fact were on the surface bearish because ending stocks rose to 973 million bushels. Spring wheat and durum acreage were also both larger than initially expected by traders. However, wheat is a substitute for corn in feed rations, and basis is weak enough to encourage more such feed use. There was a substantial speculative short position in wheat, and those shorts were liquidating from Wednesday on. In the background, dryness is afflicting wheat in part of the old FSU, and some areas of Russian and Ukraine were hurt by either winterkill or other weather problems. USDA is expected to trim overall world wheat production in the July 9 report.
 

           Soybeans initially weren’t participating in the feed grain rally, since USDA raised projected new crop planted acreage and the old crop June 1 stocks estimate was within 20 million bushels of what traders were expecting. However, July futures have shown some independent strength during deliveries. Crop condition ratings have also been dropping for soybeans due to heavy rains creating small lakes in fields from MN to MO. Those rains have also slowed planting of the last 3% of the crop, and USDA is estimating that double crop beans will be a smaller % of total bean acreage in 2010. If accurate, that is likely to bias national average yields to the upside, with fewer low yielding double crop fields to weigh down the number. Old crop July beans were up 6 cents for the week, aided by meal advancing 1.8% and held back by lower soy oil.
 

           Cotton saw a lot of selling pressure after USDA confirmed the planted acreage was above 10.9 million. Crop condition ratings continue to be above average, although some drop is expected this week because of the heavy rains from Hurricane Alex in the states bordering the Gulf. Chinese stocks continue to appear to be on the tight side, and U.S. cert stocks deliverable against July futures have declined from over 1.1 million bales to under 400 thousand bales. The rest have been shipped out as U.S. ending stocks got tighter and the market was forced to pull cotton out of the delivery warehouses.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
06/11/10
06/18/10
06/25/10
07/02/10
Change
% Change
July
Corn
$3.50
$3.61
$3.41
$3.64
0.24
6.90%
July
CBOT Wheat
$4.41
$4.62
$4.56
$4.88
0.32
6.90%
July
KCBT Wheat
$4.67
$4.97
$4.84
$5.07
0.23
4.86%
July
MGEX Wheat
$5.02
$5.38
$5.12
$5.22
0.10
1.95%
July
Soybeans
$9.46
$9.61
$9.57
$9.63
0.06
0.60%
July
Soybean Meal
$289.70
$289.40
$289.75
$294.90
5.15
1.78%
July
Soybean Oil
$36.90
$37.92
$37.16
$36.01
1.15
3.09%
Aug
Live Cattle
$87.28
$88.20
$89.38
$89.48
0.10
0.11%
Aug
Feeder Cattle
$110.07
$110.17
$113.32
$112.68
0.64
0.57%
July
Lean Hogs
$78.55
$80.87
$80.72
$78.20
2.52
3.12%
July
Cotton
$81.54
$81.78
$84.72
$81.85
2.87
3.39%
July
Oats
$2.27
$2.63
$2.64
$2.43
0.21
7.95%
July
Rice
$11.01
$11.01
$10.06
$9.62
0.45
4.42%
 
 
Not Final
 
Hogs rallied for the week despite the drop in the stock market and talk about a consumer in worse shape. Unemployment dropped to 9.5% in May from 9.7%, which was a little supportive. The US dollar index also dropped, potentially aiding exports. The Hogs & Pigs report from last Friday was supportive, showing continued downsizing of the U.S. herd and smallish farrowing intentions through fall. A number of packers were either on reduced hours or dark for the weekend, with nearly all dark on Monday. That meant they needed fewer hogs for the week, but will presumably want to do a little catch up in the week ahead.
 
Cattle futures were 47 cents lower on Friday, but up 10 cents for the week. Wholesale prices were up $1.14 in the Choice on a Thursday/Thursday basis. Select was seeing more pressure from pork and chicken, and up 23 cents for the week. Cash cattle trade was mostly at $91 for the week, unchanged from the previous week and above the Friday futures settlement. That benefits futures hedgers because it represents basis gains.
 
Market Watch: The US markets are closed on Monday for the Independence Day holiday. Corn and soybean traders will come back on Monday night asking “Are we still looking at near record yield potential, or are crop conditions still deteriorating as they have the past two weeks?” With the substantial tightening of the new crop U.S. balance sheet for corn following the Grain Stocks and Acreage reports, getting the last bushel of yield takes on greater significance. USDA’s export inspections and Crop Progress reports will be delayed until Tuesday because of the holiday. Weekly Export Sales will also be deferred until Friday. The main USDA reports for the week will be on Friday morning, however. USDA will release updated Crop Production and World Supply & Demand (WASDE) estimates. They’ve telegraphed some of their punches for the latter via the June 30 reports, but the wheat crop production number will be new. Most analysts are also looking for a cut in world wheat production.
 
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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