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June 2012 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.

Big Bang Theory

Jun 29, 2012

Brugler

Market Watch with Alan Brugler

June 29, 2012 

Big Bang Theory 

The 4th of July may not occur until Wednesday, but the markets were shooting off fireworks all week. The grand finale was on Friday, with Gold up $50/ounce, crude oil up more than $6 per barrel and the dollar plummeting after the two day EU meeting offered some fresh solutions to the "crisis that keeps on giving".  Grains also had a stellar week if you were a bull. Corn did a nice impression of a star shell while Minneapolis wheat was more of a Black Cat.

Corn rallied a huge 13.8% this week on drought fears and a little assist from a weak dollar on Friday . Weekly export sales were still poor, but the dropping crop condition ratings had nearly all analysts pulling back from USDA’s 166 bushel per acre yield estimate, and thus tightening up projected ending stocks and raising price expectations. On Friday, USDA released the quarterly Grain Stocks report and for once the trade got it right. The USDA number was 3.148 billion bushels and the average trade guess was 3.17 billion. Planted acreage did expand from the March intentions, as it has had a strong tendency to do over the past decade. USDA found 96.405 million acres.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

06/08/12

06/15/12

06/22/12

06/28/12

Change

% Change

July

Corn

$5.98

$5.80

$5.91

$6.73

$0.82

13.79%

July

CBOT Wheat

$6.30

$6.10

$6.73

$7.39

$0.66

9.77%

July

KCBT Wheat

$6.56

$6.30

$6.86

$7.39

$0.52

7.65%

July

MGEX Wheat

$7.69

$7.88

$8.59

$8.64

$0.05

0.58%

July

Soybeans

$14.26

$13.76

$14.43

$15.13

$0.70

4.87%

July

Soybean Meal

$429.80

$410.10

$422.00

$436.00

$14.00

3.32%

July

Soybean Oil

$49.46

$48.44

$49.74

$52.21

$2.47

4.97%

Jun

Live Cattle

$119.88

$116.15

$116.90

$116.55

($0.35)

-0.30%

Aug

Feeder Cattle

$159.38

$156.03

$152.80

$151.45

($1.35)

-0.88%

July

Lean Hogs

$92.93

$93.03

$94.93

$96.63

$1.70

1.79%

July

Cotton

$72.90

$79.98

$74.17

$72.16

($2.01)

-2.71%

July

Oats

$3.03

$3.08

$3.29

$3.36

$0.07

2.21%

July

Rice

$14.05

$13.92

$14.47

$14.19

($0.28)

-1.94%

 

Soybeans gained 4.9% this week after being up 4.7% the prior week. Weekly soybean export sales were larger than expected for the reporting week ending June 21. Chinese buying is still there. US export commitments (shipments plus open contracts) are now larger than the USDA export estimate for the year. While it is difficult to hurt soybean yields in June, there are widespread complaints about poor stands and a lot of "cupping" of moisture stressed plants during the day. The Brugler500 index for soybean crop conditions dropped to 342 from 349. That was the lowest index reading for this week since 1988. Soy oil futures kept pace with the soybeans, while former bull leader meal lagged a bit.

Two of the three wheat markets posted nice gains for the week, led by Chicago at 9.77%. Minneapolis lagged, despite a bull friendly Planted Acreage number of 11.99 million on Friday. All Wheat acreage was smaller than expected at 56.017 million acres due to the shortfall in Other Spring and a smallish 2.203 million acres for durum. Winter wheat crop condition ratings are done for the year, with the Brugler500 Index at 346. That is most similar to 2005. USDA put June 1 ending stocks at 743 million bushels, on the high end of trade expectations.

Nearby cotton futures closed the week 2.7% lower. The big old crop purchase by China initially supported the market, but most of that purchase was cancelled in the week ending June 21. The market hates the bait or switch, or whatever that was. Export Commitments YTD had been 117% of the USDA forecast for the year. They are now down to 111%. The average trade estimate for US cotton plantings was 12.68 million acres versus 13.16 million on the March intentions report. The USDA figure was very close at 12.635 million.

Cattle futures retreated 0.3% for the week. Wholesale beef prices for the week were lower, with choice down $1.97 and select boxes down $2.00 per cwt. Estimated beef production for the week was 512.5 million pounds, down 0.7% from the equivalent week in 2011. YTD production is down 2.6% on a 4.6% drop in the number of cattle slaughtered. Limited cash cattle trade was reported at $116, but most of the key areas were still inactive on Friday afternoon as high temps interfered with operations.

Lean Hog futures gained a net $1.70 for the week in the run up to the quarterly Hogs & Pigs report. The report was fairly neutral, with All Hogs at 100.8% of year ago. The breeding herd was a little larger at 101% of last year, but farrowing intentions were only 99% of last year. Some of those sows must not be working! Market hog numbers were up 0.8% from June 2011. Wholesale prices dropped a sharp 5.34% for the week, after breaking $100 for the first time since October last week. Loins and hams lost 10% of their value in a week. Ribs were also lower as July 4 demand at the wholesale level was completed. Estimated pork production this past week was up 2% from the prior week, typical for this time of year. Production was still up 3.9% from the same week in 2011, however, and pork tonnage YTD is still 2% larger than at the same point a year ago.

Market Watch: It will be a chopped up week, with the 4th of July holiday in the US falling on a Wednesday this year. Some traders will take 2 vacation days and make it a 5 day holiday, others will just enjoy the mid-week break. Futures trading will halt early on Tuesday, and not resume again until Thursday morning. We’ll have the regular USDA Crop Progress and Export Inspections reports on Monday. Weekly export Sales will be delayed until Friday by the mid-week holiday. July futures deliveries are underway. July serial options for Live Cattle will expire on Friday. Weather forecasts will be monitored closely throughout the week.

 

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

Drought Area Expanding, Weather Models Disagree

Jun 22, 2012

Brugler

Market Watch with Alan Brugler

June 22, 2012

Drought Area Expanding, Weather Models Disagree

The weekly Drought Monitor map released on Thursday confirmed a big expansion in the area of the country under at least one level of drought rating.  Weather models are in agreement that temperatures for much of the US will be above normal this week and likely next week. Rainfall forecasts are more variable, and there is major disagreement between the US model and the European models on how hot and how dry. Be careful which forecaster you are listening to. If they are riding the wrong horse it could make you fall off!

 Corn rallied 1.9% this week after losing 3.1% the prior week. Weekly export sales were still poor, but the dropping crop condition ratings had most analysts pulling back from USDA’s 166 bushel per acre yield estimate, and thus tightening up projected ending stocks and raising price expectations. Old crop corn got a boost because a bird in the hand is worth two in the field. The trade attempted to pin futures at the $6.00 strike price for the July options expiration, because that is where the most people would have been caught (open interest). However, the 590 strike came into play on pre-weekend profit taking.  Ethanol production slowed to 900,000 barrels per day after hitting a 4 month high the previous week. Ethanol stocks built up despite the slower production, raising some demand concerns. Two ethanol plants announced down time between now and harvest due to inability to source old crop corn at workable prices.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

06/01/12

06/08/12

06/15/12

06/22/12

Change

% Change

July

Corn

$5.55

$5.98

$5.80

$5.91

$0.12

1.92%

July

CBOT Wheat

$6.15

$6.30

$6.10

$6.73

$0.64

10.12%

July

KCBT Wheat

$6.42

$6.56

$6.30

$6.86

$0.56

8.54%

July

MGEX Wheat

$7.40

$7.69

$7.88

$8.59

$0.72

9.29%

July

Soybeans

$13.43

$14.26

$13.76

$14.43

$0.67

4.66%

July

Soybean Meal

$395.80

$429.80

$410.10

$422.00

$11.90

2.77%

July

Soybean Oil

$48.71

$49.46

$48.44

$49.74

$1.30

2.63%

Jun

Live Cattle

$117.70

$119.88

$116.15

$116.90

$0.75

0.63%

Aug

Feeder Cattle

$157.38

$159.38

$156.03

$152.80

($3.22)

-2.02%

July

Lean Hogs

$91.59

$92.93

$93.03

$94.93

$1.90

2.04%

July

Cotton

$68.55

$72.90

$79.98

$74.17

($5.81)

-7.97%

July

Oats

$2.82

$3.03

$3.08

$3.29

$0.21

6.92%

July

Rice

$14.06

$14.05

$13.92

$14.47

$0.55

3.91%

 

Soybeans gained 4.7% this past week after losing 3.5% the prior week. Weekly soybean export sales were smaller than expected for the reporting week ending June 14. Chinese buying is still there. US export commitments (shipments plus open contracts) fully cover the USDA export estimate for the year. While it is difficult to hurt soybean yields in June, there are widespread complaints about poor stands. The Brugler500 index for soybean crop conditions dropped to 349 from 357. That was the lowest index reading for this week since 1993, although just a couple points below 2008.

The three wheat markets all posted phenomenal gains for the week, led by Chicago and MPLS. Options activity and just plain thin trading conditions in MPLS July accounted for the big moves. Of course much larger than expected USDA weekly export sales also gave prices a boost. European values rose after a major bank lowered its production estimates and increased the average price expectation. Russian wheat production estimates also continue to drift lower due to multiple stresses since the crop was planted last fall. The Brugler500 index for winter wheat dropped to 341 from 344. The most similar year for the index this week is 2005. The index would suggest a winter wheat average yield of 44.5 bpa, but the standard deviation of the estimate allows for a couple bushels either way.

Nearby cotton futures were up and then they were down. Limit up and limit down,  that is. The trade was trying desperately to get out of the July contract ahead of options expiration and the beginning of July contract deliveries. The big old crop purchase by China initially supported the market, but the bull must be fed daily. USDA reported weekly cotton export sales were 491,900 running bales last week, with 16,900 RB of old crop. Old crop purchases need to be shipped by July 31. Export Commitments YTD are now 117% of the USDA forecast for the year. They would typically be 109% at this point.

Cattle futures were up 0.6% after being lower the previous week. The gain in the June contract was not matched by the cash cattle market, which was lower in anticipation of a bearish USDA Cattle on Feed and/or Cold Storage report on Friday afternoon. Wholesale beef prices for the week were a little softer, with choice boxes down 0.7% and select product down 1.1%. Estimated beef production for the week was 507.7 million pounds, down 4.3% from the equivalent week in 2011. YTD production is down 2.8% on a 4.6% drop in the number of cattle slaughtered. In the COF report, USDA put the number of cattle on feed on June 1 at 101.4% of year ago. May placements were 115.3% and May marketings were 100.7%. The Cold Storage report showed beef inventory down 4% from last month but still 11% above year ago on May 31.

Lean Hog futures were up 2.04% for the week. Wholesale prices were firmer, particularly in the rib primal which was up 10.7% on a Thursday/Thursday basis for the week. Cutout value was up 7.5%, again on a Thursday/Thursday comparison. Estimated pork production this past week was down 0.4% from the prior week, typical for this time of year. Production was still up 1.6% from the same week in 2011, however, and pork tonnage YTD is still 2% larger than at the same point a year ago. The Cold Storage report showed frozen pork stocks down 4% from April, but up 16% from year ago.

Market Watch: The elephant in the room for this coming week is the USDA Grain Stocks report on Friday, June 29. USDA will also update Planted Acreage at the same time. Corn prices have seen limit moves after 7 of the past 8 Grain Stocks reports, falling as they do at month end and with the trade having difficulty anticipating what NASS finds in the bins. Contrary to what you may have read elsewhere, USDA will not issue any yield estimates on the 29th. The next opportunity for that is July 11. Weekly Crop Progress on Monday night will also be of interest, with crop ratings expected to drift lower despite rains that provided relief for some of the Belt.  Weekly export sales on Thursday morning will also be of interest. Livestock traders will begin the week adjusting to the Cattle on Feed and Cold Storage numbers released on the 22nd after the close. June cattle futures expire on Friday. Friday will also be First Notice Day for July futures contract deliveries.

 

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

Rain Makes Grain, Maybe?

Jun 15, 2012

Brugler

Market Watch with Alan Brugler

June 15, 2012

Rain Makes Grain, Maybe?
 

The crop weather situation was mixed, with the WCB definitely getting rain and cooler temps. The US model saw relief for the ECB out in the mid-range forecasts, but the European model leaned drier than the other as the trade went home on Friday. New crop futures were mostly lower, amid perceptions (not shared by most of the farmers we talked to this week) that drought stress would be eased comfortably before pollination.

That which goes up can again go down. Corn rallied 7.8% two weeks ago, but gave back 3.1% this week. The entire loss was on Friday; after rumors spread that a firm was planning on importing cheap Brazilian corn into the US this summer to break the old crop tightness. Weekly export sales were already poor, but the potential for adding supplies chased some "short squeeze" bulls out of the July contract. The Wall Street Journal chose to highlight the closure of a small old North Dakota ethanol plant in April (and first announced months before that) as a sign that corn use for ethanol would flatten or reverse lower. There was also "talk" of other plants either shutting down or taking extended down time this summer due to tight corn supplies. Ethanol production last week was the largest in 4 months, and blending demand has been strong. Go figure! China continues to buy small quantities, but much of the world seems intent to either use feed wheat bought previously, use South American corn, or wait for the expected record US new crop harvest.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/25/12

06/01/12

06/08/12

06/15/12

Change

% Change

July

Corn

$5.79

$5.55

$5.98

$5.80

($0.19)

-3.09%

July

CBOT Wheat

$6.80

$6.15

$6.30

$6.10

($0.21)

-3.29%

July

KCBT Wheat

$7.00

$6.42

$6.56

$6.30

($0.26)

-3.96%

July

MGEX Wheat

$7.86

$7.40

$7.69

$7.88

$0.18

2.37%

July

Soybeans

$13.82

$13.43

$14.26

$13.76

($0.50)

-3.52%

July

Soybean Meal

$409.30

$395.80

$429.80

$410.10

($19.70)

-4.58%

July

Soybean Oil

$50.12

$48.71

$49.46

$48.44

($1.02)

-2.06%

Jun

Live Cattle

$117.65

$117.70

$119.88

$116.15

($3.72)

-3.11%

Aug

Feeder Cattle

$158.50

$157.38

$159.38

$156.03

($3.35)

-2.10%

July

Lean Hogs

$86.58

$91.59

$92.93

$93.03

$0.10

0.11%

July

Cotton

$73.62

$68.55

$72.90

$79.98

$7.08

9.71%

July

Oats

$2.96

$2.82

$3.03

$3.08

$0.04

1.48%

July

Rice

$14.51

$14.06

$14.05

$13.92

($0.13)

-0.93%

 

Soybeans lost 3.5% for the week after being up 6.2% the prior week. Weekly soybean export sales were larger than expected for the reporting week ending June 7. Chinese buying is still there. US export commitments (shipments plus open contracts) fully cover the USDA export estimate for the year. While it is difficult to hurt soybean yields in June, there are widespread complaints about poor stands. The Brugler500 index for soybean crop conditions dropped to 357 from 368. Ratings are now similar to 2008, and well below the 5 year average.

The three wheat markets were running at different speeds. All were down on Friday, and the December contracts were all down. However, MPLS July had a big up day which allowed it to post a 2.8% gain for the week while the winter wheat futures were down 3.2% in Chicago and nearly 4% in KC. Crop condition ratings rebounded slightly from the Brugler500 index of 340 the previous week. Weekly export sales for the week ending June 7th were 432,900 MT and just under the high end of trade estimates. Private exporters announced to USDA export sales of 110,000 metric tons of SRW wheat for delivery to China during the 2012/2013 marketing year.

Nearby cotton futures surged 9.7% for the week. China bought a huge chunk of old crop cotton from the US (744,200) running bales, putting the weekly sales total at 795,700 RB. China also took 180,500 RB of the 219,600 RB for 2012/13. Cumulative old crop commitments (exports plus sales contracts outstanding) are 117% of the USDA projected exports for the year. They are typically at 108% by mid-June, so we will either have larger than expected exports between now and July 31 or carry over more commitments than usual into the 2012/13 marketing year. The third alternative is a raft of cancellations. We saw that a year ago, but the prices locked in this year were much less burdensome than those buyers were trying to get out of last summer.

Cattle futures were down 3.1% this past week. Wholesale beef prices slowed down, but are still only about $2.03 from all time highs in the choice. For the week, choice boxed beef was up 0.5%, while select dropped 1.54%. Estimated beef production for the week was 2.9% smaller than the same week in 2011. YTD production is down 2.7%, while cumulative beef export sales are running above year ago. Cash cattle traded lower this week. 

Lean Hog futures were up 0.11% for the week, as profit taking selling on Friday took off almost all of the gain for the week. Pork production was down 2.6% from the previous week. It was still up 0.7% from the same week in 2011. Cumulative pork production for the year is 2.0% larger than last year on 1.6% more hogs. Cash and futures deserved to be up, with packers extracting 11% more value for the pork carcass cutout this week than last week. Quotes for pork ribs, seasonally strong for BBQ, shot up 22% for the week. 

Market Watch:

The main USDA reports this coming week will fall on Friday, with Cold Storage and Cattle on Feed to be released at 2 pm CDT. There will of course be interest in the Crop Progress report onn Monday afternoon at 3:00 pm.  The Fed Open Market Committee is due to meet on Tuesday and Wednesday.  Thursday will include the weekly USDA Export Sales report. July grain futures options will expire on Friday.

 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

Hot or Dry - You Pick

Jun 08, 2012

Market Watch with Alan Brugler

June 8, 2012

Hot or Dry - You Pick!

 

How do we know it is a weather market? When lousy export sales reports fail to break it, or when a strong dollar index rally ahead of the weekend is ignored. Weather forecasts are abundant, and you can always find weather guy A to disagree with weather girl B. The agreement is that above normal temps have been the case, and continue to persist into mid-June. With pollination of corn working its way north into Illinois this week, there is more concern being expressed. Areas south of I-80 also have missed a lot of  the May and early June rainfall, so those who discount the heat are still nervous about the soil moisture.

What does go down does come back up. Corn rallied 7.8% this past week, after losing 4.7% the prior week and 9% the week before that. Weekly export sales were again poor at only 399,000 MT. China continues to buy small quantities, but increased competition from Brazilian new crop has hurt sales out of the Gulf. On a bullish note, wheat futures are high enough to remove themselves from feed ration consideration unless local basis is extremely weak. The big story of the week was the continued above normal temperatures and the developing dryness in the Corn Belt, with evaporation losses larger than replacement moisture. Nebraska convened its drought advisory group for the first time since 2006. A private weather and satellite sensing firm indicated that conditions already point to a US average yield below 158 bushels per acre in its proprietary model.

Soybeans rallied 6.2% this week, aided by an 8.6% rise in soybean meal. Weekly soybean export sales were smaller than expected for the reporting week ending May 31. Chinese buying is still there, with old crop purchases announced under the daily reporting system. US export commitments (shipments plus open contracts) fully cover the USDA export estimate for the year. While it is difficult to hurt soybean yields in June, there are widespread complaints about poor stands. Without the plants it is harder to recover bushels later in the year. USDA crop condition ratings were so-so for the first report of the year.  

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/18/12

05/25/12

06/01/12

06/08/12

Change

% Change

July

Corn

$6.36

$5.79

$5.55

$5.98

$0.44

7.84%

July

CBOT Wheat

$6.95

$6.80

$6.15

$6.30

$0.15

2.48%

July

KCBT Wheat

$7.05

$7.00

$6.42

$6.56

$0.14

2.18%

July

MGEX Wheat

$7.92

$7.86

$7.40

$7.69

$0.30

4.02%

July

Soybeans

$14.05

$13.82

$13.43

$14.26

$0.84

6.24%

July

Soybean Meal

$417.90

$409.30

$395.80

$429.80

$34.00

8.59%

July

Soybean Oil

$50.32

$50.12

$48.71

$49.46

$0.75

1.54%

Jun

Live Cattle

$119.53

$117.65

$117.70

$119.88

$2.18

1.85%

Aug

Feeder Cattle

$160.70

$158.50

$157.38

$159.38

$2.00

1.27%

June

Lean Hogs

$87.43

$85.20

$90.73

$93.03

$2.30

2.54%

July

Cotton

$77.99

$73.62

$68.55

$72.90

$4.35

6.35%

July

Oats

$3.40

$2.96

$2.82

$3.03

$0.21

7.54%

July

Rice

$15.18

$14.51

$14.06

$14.05

($0.00)

-0.04%

 

The three wheat markets were all higher for the week, despite being lower on Friday. The weekly export sales report was disappointing at only 165,700 MT. Sales of 1,295,600 MT were carried over from the 2011/12 marketing year, which ended May 31st. Crop condition ratings declined, with the Brugler500 index at 340 vs. 342 last week. Both HRW and SRW states were lower. Spring wheat is in much better shape, with an index of 391 for the first report of the year. Hot and dry weekend weather were expected to knock that number back a little bit in this Monday’s report.

Nearby cotton futures rebounded with a vengeance. July was up 6.35% for the week, with two limit up days in the middle. Export sales continue to be robust. USDA reported net weekly export sales for upland cotton for the week ending May 31 were 199,200 RB for both marketing years. Pima sales totaled 6,600 for both marketing years. Total export commitments are above 110% of the USDA export figure for the year. There are two months left in the 2011/12 cotton marketing year. The Goldman Roll did take a little off the top on Friday.

Cattle futures were up 1.8% for the week. Wholesale beef prices slowed down, but are still only about $5 from all time highs in the choice. For the week, choice boxed beef was up 0.06%, while select dropped 1.46%. Estimated beef production for the week was 2.6% smaller than the same week in 2011. YTD production is down 2.8%, while cumulative beef export sales are running above year ago. Cash cattle traded mostly at $122, with Nebraska at $124 live, and $195-197 in the dressed trade.

 Lean Hog futures added another $2.30/cwt to the big advance from the previous week. Pork production was up 9.4% from the holiday shortened prior week, and up 1.7% from the same post-Memorial Day week in 2011. Cumulative pork production for the year is 2.1% larger than last year on 1.7% more hogs. The cash hogs were down on Friday, but very choppy for the week as a whole. They deserved to be up, with packers extracting 2.9% more value for the pork carcass cutout this week.

Market Watch:

The main USDA information this coming week will be the Crop Production and Crop Progress reports to be issued on Tuesday morning at 7:30 am CDT.  We’ll also have the regular Export Inspections and Crop Progress reports on Monday, with traders expecting some deterioration in ratings due to hot and dry conditions. USDA will release weekly Export Sales on Thursday morning. NOPA is also expected to release its monthly Crush report on Thursday morning. Thursday will also mark the expiration of the June lean hog futures contract. On Friday, July cotton options will expire, along with July sugar and a raft of stock market index options.

 

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

Losing Week for Most

Jun 01, 2012

Brugler

Market Watch with Alan Brugler

May 25, 2012

Losing Week for Most

 

It was a tough week for nearby corn futures, down 4.7% after losing 9% the previous week. Weekly export sales were again poor at only 282,700 MT. China continues to buy small quantities, but increased competition from Brazilian new crop has hurt sales out of the Gulf. On a bullish note, wheat futures are now high enough to remove themselves from feed ration consideration unless basis is extremely weak. July futures were down 79 cents for the month of May, while new crop December was only off 21 cents. New crop has to maintain at least a minimum of weather risk premium because of the above normal temps and below normal precip in the weather forecasts for the Corn Belt.

 

Soybeans were down 2.7% for the week, held down by a 3.6% loss in soybean meal. Weekly soybean export sales were smaller than expected for the reporting week ending May 24 at 418,700 MT. Chinese buying slacked off, but their estimated imports for May are record large at 7.23 MMT from all sources. US export commitments (shipments plus open contracts) fully cover the USDA export estimate for the year. The Chinese government sold a few very old soybeans from reserves at discounted prices. These reserve sales should be seen as housekeeping and not an attempt to lower domestic bean prices. Chinese veg oil prices have dropped sharply, raising demand concerns but also likely a function of the strong imports of soybeans for crushing.

 

The three wheat markets were all sharply lower. The big futures rally in the middle of the month proved to be nothing more than a short covering panic. World ending stocks are very likely to tighten in 2012/13, and may tighten further when USDA updates the numbers on June 12. However, the rally also priced wheat out of feed rations in several countries, resulting in more corn feeding this summer. That could mean a cut in the global feed use estimate. US weekly export sales were on the low end of trade estimates Thursday. The marketing year ended May 31, with the final export sales report coming next Thursday.

 

Nearby cotton futures lost more than 20% during the month of May. For the week they were down 6.8%. Export sales continue to be robust. The USDA weekly export sales report showed strong net old and new crop sales of 310,000 RB, China was in for 89,500RB for 2011/12, and 226,700RB for 2012/12. However, commercials are leery of the long side with poor global demand forecasts and a projected build up of stocks in 2012/13. There was also considerable exodus of speculative longs out of the July contract ahead of the Goldman and DJ-AIG roll period and the July options expiration.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/11/12

05/18/12

05/25/12

06/01/12

Change

% Change

July

Corn

$5.81

$6.36

$5.79

$5.52

($0.27)

-4.67%

July

CBOT Wheat

$5.97

$6.95

$6.80

$6.12

($0.68)

-9.96%

July

KCBT Wheat

$6.10

$7.05

$7.00

$6.37

($0.63)

-9.00%

July

MGEX Wheat

$7.26

$7.92

$7.86

$7.40

($0.47)

-5.95%

July

Soybeans

$14.06

$14.05

$13.82

$13.44

($0.38)

-2.73%

July

Soybean Meal

$408.50

$417.90

$409.30

$394.50

($14.80)

-3.62%

July

Soybean Oil

$52.24

$50.32

$50.12

$48.59

($1.53)

-3.05%

Jun

Live Cattle

$115.15

$119.53

$117.65

$117.70

$0.05

0.04%

Aug

Feeder Cattle

$157.45

$160.70

$158.50

$157.38

($1.13)

-0.71%

June

Lean Hogs

$85.30

$87.43

$85.20

$90.73

$5.53

6.48%

July

Cotton

$78.97

$77.99

$73.62

$68.59

($5.03)

-6.83%

July

Oats

$3.32

$3.40

$2.96

$2.85

($0.11)

-3.80%

July

Rice

$15.71

$15.18

$14.51

$14.04

($0.47)

-3.21%

 

Cattle futures were up 5 cents for the week. Cash cattle trade developed at mostly $121 on Friday, with some additional offers at $122-123. Nebraska business was mostly $194-195 on a dressed basis. Weekly beef export sales reported by USDA totaled 20,300 MT, the highest since the reporting week ending May 3. Cumulative exports are 8% larger than 2011 at this point, and 2011 was a record sales year. Wholesale prices did rise 0.9% for the week in the choice, with choice boxes up $1.75 but Select up only 21 cents on a Thursday/Thursday comparison. Estimated carcass weights are now 11 pounds above last May’s actual.  They had been running 27 pounds high earlier in the spring. Estimated beef production for the week was down 2.5% from the same week in 2011. Year to date production is now down 2.9% from last year, although the head count is down 4.7%.

 

Lean Hog futures jumped more than $5.50 per hundred pounds this past week.  The pork carcass cutout value was up $3.75 on a Thursday/Thursday basis, a 4.8% increase. Refilling business after the holiday was supportive to pork, with packer offerings termed light to moderate while demand was moderate. Pork production year to date is up 1.7% from last year. Production this past week was up 4.52% from the same Memorial Day week last year. Carcass weights are estimated at 208 pounds, which would be up 2# from the 2011 actual weight.  

 

Market Watch:

June cattle options expired on Friday, so the first order of business for cattle futures this week will be dealing with any surprise futures positions arising out of options expiration. With the massive liquidation of speculative fund positions last week, more attention than usual will be paid to the outside markets and whether we will experience more of the same. We continue to describe the European situation as the "crisis that keeps on giving". While financial institutions have had 2 years to make adjustments for a Greek or Italian or Spanish default the size of the problem makes it hard to cover all the risks. Just ask JP Morgan! The grain market will be focused on the USDA crop condition ratings on Monday evening. The wheat crop is far enough along for the ratings to correlate well with final yields. Corn and soybean ratings should be treated only as "hints". We’ll also have the regular USDA weekly Export Sales report on Thursday, with keen interest in whether the sharp drop in grain prices has attracted any additional export business.

 

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. Our web site is www.bruglermarketing.com.

 

 Copyright 2012 Brugler Marketing & Management, LLC

 


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