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February 2009 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.

Lions or Lambs?

Feb 27, 2009

Tradition has it that March “comes in like a lion and goes out like a lamb”, a reference to the blustery mix of winter and spring weather patterns at the beginning of the month and the tendency for warmer and somewhat calmer conditions at the end of the month. That leads to the question of March price behavior in the agricultural commodities. There were a number of ill winds blowing as we exited February, with a blanket of government spending and tax initiatives covering the ground, as well as the usual quota of hot air coming out of the USDA Outlook Forum held in D.C. on Thursday and Friday.

 

The thinly traded oats market was the big gainer for the week, followed by April hogs. Oats saw some concerns about 2009 acreage in the US and Canada, but they were also moving around due to position adjustments ahead of the delivery period for March futures. Hogs had been badly depressed the previous week (see the 4 weekly Friday closes below). Packer margins improved a bit, and the futures also saw a round of profit taking as the month ground to an end and a few traders tied to realized gains for their bonuses closed out some shorts. Weekly hog slaughter was still running ahead of both the previous week and year ago.

Corn futures had a promising start to the week, but closed almost UNCH with the previous Friday due to a collapse at the end of the month. Heavy deliveries against March corn futures provoked some selling in the nearby contract, and USDA used a larger 2009 corn acreage figure than some traders had anticipated in their initial outlook for 2009. Weekly export sales announced on Thursday morning were also poorer than those seen over the past few weeks and that information contributed to the sell off.

 

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

 

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Wkly

Wkly

 

02/06/09

02/13/09

02/20/09

02/27/09

Change

% Change

March Corn

$3.77

$3.63

$3.50

$3.51

0.00

0.14%

March CHI Wht

$5.57

$5.36

$5.19

$5.11

0.09

-1.69%

March KC Wht

$5.87

$5.75

$5.56

$5.52

0.04

-0.76%

March MGE Wht

$6.55

$6.36

$6.22

$6.26

0.04

0.64%

March Soybeans

$10.01

$9.56

$8.63

$8.75

0.12

1.39%

March Soy Meal

$317.30

$297.70

$270.00

$275.80

5.80

2.15%

March Soy Oil

$33.40

$33.00

$30.22

$30.85

0.63

2.08%

Feb Live Cattle

$83.65

$84.05

$80.68

$82.52

1.85

2.29%

March Feeder Cattle

$94.35

$94.47

$88.38

$92.60

4.22

4.78%

Apr Lean Hogs

$60.40

$63.75

$57.95

$60.90

2.95

5.09%

March Cotton

$49.86

$44.03

$43.03

$42.06

0.97

-2.25%

March Oats

$1.95

$1.85

$1.69

$1.85

0.16

9.50%

March Rice

$12.79

$12.51

$11.99

$12.37

0.38

3.17%

 


Wheat futures were lower in KC and CHI, while a little higher in MPLS. Concerns about a lack of spring wheat acreage helped support the latter, while soft export interest and March delivery mechanics are still issues for the winter wheats. This is the anniversary of the massive short squeeze in Minneapolis, which carried futures over $24 per bushel. There appears to be no interest in a repeat performance.

 

The soy complex was higher for the week. Soy oil gained 2.08%, and meal was up 2.15% for the week. The higher product values allowed nearby beans to gain 12 cents per bushel, or 1.39% on the week. Much slower export sales bookings were a factor, along with the strength of the US dollar. The Census Crush report showed monthly crush activity about as expected, but also revealed an unwanted buildup in both soybean meal and soybean oil stocks. Another dry spell in Argentina increased caution about the rising yield forecasts there. Negotiations between the government and the farmers there have gone nowhere, with threats in the media that farming or the marketing of farm products in Argentina might somehow be nationalized.

 

Cotton prices continued to be bludgeoned by the world economy, losing another 2.25% for the week on demand concerns. Those were exacerbated by falling stock market prices and the Friday GDP revision to -6.2%, which was the worst since the early 1980’s. Export sales were actually a bright spot, with China starting to buy larger quantities, but the Census Consumption report on Thursday didn’t provide a whole lot of bullishness regarding domestic mill use.

 

Cattle futures were up $1.85 for the week. Cash cattle prices rebounded in the north by $1-3 from the previous week, although southern activity was very late to develop. Wholesale prices weren’t exactly strong, and we witnessed a very rare event early in the week. Choice beef, which is more expensive to produce than Select, saw prices briefly dip below Select (i.e. a negative choice/select spread). Both supply and consumption balance factors are at work there, but Choice volume picked up when it was “on sale” and quickly rectified the situation.

 

Market Watch:  The calendar turns to March, and trader’s thoughts turn to March futures deliveries, the Goldman roll, and the March 1 Planting Intentions survey being completed this week. The actual report won’t come out until March 31. The index fund rolling period officially begins on Friday, but pre-positioning has already started. This is quiet week for ag reports, with USDA’s export inspections and Export Sales reports on Monday and Thursday standing out. Some March options expire on Friday. Not to be forgotten, the annual start of daylight savings time was moved up a few years ago to save energy. You need to roll your clock ahead an hour on Saturday night (3/7).

 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.  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 content, or visit the web site @ www.bruglermktg.com.

 

© 2009 Brugler Marketing & Management, LLC

Red Screen At Night

Feb 20, 2009
 
           
 
Market Watch with Alan Brugler
February 20, 2009
 
Red Screen At Night
 
In folklore, a red sky at night is a sailor’s delight, meaning good weather ahead. In commodities, a red screen at night (lots of negative changes for the day) is probably more delightful for the bears than for the bulls. If that is the case, the bears should be ecstatic, because all of the ag commodities we track had red closes on Friday, and red closes for the week. A contrarian, of course, would see some bullish aspects to such a lopsided market, sensing that values will get too cheap and provide a buying opportunity.
 
Most of the selling appeared to be financially motivated, with big swings in the value of the US dollar during the week, and with some of the major US stock indices trading below their November lows. That wasn’t seen as progress, and certainly isn’t showing any faith that the economic stimulus package is going to work. The reality is that we had a “buy the rumor, sell the fact” reaction to the signing of the bill. Grains and livestock were hurt because of concerns that demand is declining, or that at least prices are reverting to more historical valuations rather than the record high levels of the past few years. Gold futures, not shown in our table, got back above the $1000/ounce mark in a bit of a flight to safety.
 
Soybeans were down a whopping 93 cents per bushel for the week, or 9.73%. That made them the largest loser for the week. Meal futures were also down 9.7%, again reflecting the constrained demand from the livestock sector. Bean oil was down 8.4%, with negative biodiesel processing margins restricting consumption by the industrial sector. With both products exerting that kind of pressure on margins, beans about had to go down. Weekly export sales for beans, meal and oil were all strong, with the weekly soy oil total the largest of the marketing year. Unwinding of March options positions ahead of expiration on Friday complicated the price action. South American weather kind of slipped off of the radar as there were enough showers to stabilize production potential in the view of most analysts. Argentine farmers went on a planned 4-day sellers strike beginning on Friday. It was not expected to immediately affect export supplies, as firms have stockpiled product in anticipation of such an action.
 
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:
 
Market Watch
 
 
 
 
 
 
 
 
 
 
 
Wkly
Wkly
 
01/30/09
02/06/09
02/13/09
02/20/09
Change
% Change
March Corn
$3.79
$3.77
$3.63
$3.50
0.13
-3.58%
March CHI Wht
$5.68
$5.57
$5.36
$5.19
0.16
-3.03%
March KC Wht
$6.01
$5.87
$5.75
$5.56
0.18
-3.18%
March MGE Wht
$6.52
$6.55
$6.36
$6.22
0.14
-2.20%
March Soybeans
$9.80
$10.01
$9.56
$8.63
0.93
-9.73%
March Soy Meal
$311.00
$317.30
$297.70
$270.00
27.70
-9.30%
March Soy Oil
$32.73
$33.40
$33.00
$30.22
2.78
-8.42%
Feb Live Cattle
$82.00
$83.65
$84.05
$80.68
3.38
-4.02%
March Feeder Cattle
$91.00
$94.35
$94.47
$88.38
6.10
-6.45%
Apr Lean Hogs
$62.98
$60.40
$63.75
$57.95
5.80
-9.10%
March Cotton
$49.41
$49.86
$44.03
$43.03
1.00
-2.27%
March Oats
$2.05
$1.95
$1.85
$1.69
0.16
-8.67%
March Rice
$11.77
$12.79
$12.51
$11.99
0.53
-4.20%
 
Corn was down 13 cents for the week, or 3.6%. Weekly export sales were above 1.33 MMT, and have been much stronger over the past four weeks than they were in the fourth quarter. Low prices cure low prices! Producer selling has dried up, as shown by both strong domestic basis bids and the smallest commercial short hedge positions in several years. That will have to change if the larger export sales continue. Downsizing of the livestock herd appears to be continuing, although Canada did show some interest in cattle feeding when their feedlot numbers were released.
 
Wheat futures were down 2% for the week in Minneapolis and 3% in Chicago and KC. KC tried to lead a bounce after early week weakness, with more talk about dryness spreading from OK and TX into higher acreage areas of Kansas. Minneapolis spring wheat production could be increased in response to price signals from the HRW market, and didn’t drop as far. Weekly export sales were about as expected. Commitments (shipped wheat plus outstanding contracts) are at 87% of USDA’s projection for the year. That’s down from last year’s 96%, but similar to the pace seen in 2004-2007.
 
Cotton futures were down 2.3% for the week. Net upland export sales for the prior week were 435,400 running bales. China was a larger buyer at 200,000 RB, with Pakistan and Turkey next in line. The declining prices for competing field crops allowed cotton to drift lower without risking further acreage losses in 2009. In fact, because cotton prices are already below loan rate, the equation becomes simply a question of whether the producer can make money at the loan rate or LDP plus a small rally premium. Essentially, the lower other crops go, the more attractive cotton could become as an alternative, despite 7.7 million bales of projected carryover.
 
Cattle futures were down 4% for the week. Futures wobbled back and forth, but ongoing declines in wholesale prices weighed on the market by limiting what packers could afford to pay for cattle. Cash cattle prices were lower, as feedlots dumped cattle at midweek when the equity market and banking situation appeared to deteriorate. Demand for lean trimmings continues to be supported by good fast food demand, but packer offerings of choice are described as heavy. Friday afternoon’s Cattle on Feed report showed slightly larger than expected January marketings, but placements were also on the upper end of trade expectations. The Feb 1 On Feed number was 11.288 million head, 94.3% of year ago.
 
Hogs lost more than 9% of their value in one week, using the April contract as the barometer. Cash prices as measured by the CME Index weren’t that bad, but the lean pork cutout took a hit. Loin prices in particular were under some pressure. On Friday afternoon, the Cold Storage report showed a buildup in most classes of cuts from the prior month. Only pork butts and variety meats were less abundant than in the December report.
 
Market Watch:  The cattle market will start the week digesting the Cattle on Feed report that came out on Friday afternoon. Grain traders will be dealing with the aftermath of Friday’s expiration of March grain options and the new futures positions resulting from the exercise of the in-the-money options. Cotton traders have to content with the beginning of March cotton deliveries. The main reports for the week will be the Census Crush and Cotton Consumption reports scheduled for Thursday morning. USDA will be back to a normal weekly schedule, with Export Inspections due on Monday, and Export Sales on Thursday. Feb pork belly futures expire on Tuesday. Feb Live Cattle will expire on Friday. Friday will also be first notice day for March grain futures deliveries.
 
There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.  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 content, or visit the web site @ www.bruglermktg.com.
 
© 2009 Brugler Marketing & Management, LLC

Market Watch with Alan Brugler February 13, 2009

Feb 14, 2009

February 13, 2009  

Lower Profile

The mid-winter thaw we talked about last week appears to have also melted the commodity bulls’ bank accounts.  Buying interest just seemed to be absent all week, with the notable exception of the hog market, which had some expiration week fireworks in the February futures.  Part of the malaise appeared to be tied to the Obama stimulus package, which was tied up in Congress all week.  As a huge bill, there are a lot of hidden items that will come to the market’s attention over time, but the initial impression was a lot of small incentives in the Ag sector, and rather incremental improvements in consumer balance sheets or spendable cash as the various tax cuts are phased in.

 

 February lean hogs future contracts were the biggest gainers for the week.  Friday at 12 noon Central Standard Time was when February lean hog futures expired.  February contracts expired 30 cents lower from the opening pit traded price, but closed $2.47 higher than its previous Friday last settlement, an increase of 4.38%.  Since the opening trade this past Monday, February 9 February lean hogs have slowly increased in contract price each day to expire at the CME lean hog index value on Friday.  Rally in cash hogs and the CME Lean Hog Index made their values at a premium to the futures.  Modest gains in lean pork cutout allowed cash and futures to move higher.  Pork packer profit margins reported-ably continue to be dismal.

Corn

Corn futures closed lower for the day and for the week.  Argentine weather seems to have been again the dominant factor affecting US corn futures, along with a potential farmer strike stalling exports there.  This past Tuesday the USDA did not increase US corn ending stocks, the market was expecting the USDA to increase corn ending stocks for 2008/09.  Weekly export sales continue to improve, with the highest net sales of the year reported on Thursday at 1.543 MMT. Concerns about domestic demand offset that needed improvement in export business. Ethanol processing margins continue to be poor, and livestock producers who do not hedge are reporting negative closeouts.  Late Friday, the Buenos Aires Grain Exchange reported its estimated Argentine corn crop to be 14 MMT for 2008/09, higher than the USDA estimate for Argentine corn crop at 13.5 MMT.

Soybeans

Soybeans futures end the day and week lower.  Like corn, Argentine weather and crop conditions there again dominated there affect on US soybean futures for the week.  This past Tuesday the USDA estimated Argentine soybean production at 43.8 MMT and Brazilian production at 57 MMT.  Though the USDA trimmed soy production for both countries, the figures were less than the market had expected.  Late Friday the Buenos Aires Grains Exchange estimated Argentina’s 2008/09 soy crop at 40MMT, from planting 17.75 million hectares.  This past Thursday the USDA reported the previous week net soybean export sales at 1.07 MMT, reaffirming the strong export demand for US soybeans by China.

Wheat

Wheat futures in Chicago, Kansas City, and Minneapolis end the day and week lower.  Spillover bearish pressure from corn and soybeans was one of the dominant factors to wheat.  Weather concerns in the HRW wheat crop areas of the US plains affected wheat futures, but the northern part of the plains has received snow to help replenish soil moisture there.  Continued dryness is evident in western Oklahoma and western Texas crop areas.  Though China weather concerns affecting wheat crops there were reported, China’s existing stock was adequate for their supply needs.  Continued competition for wheat exports from Russian wheat was evident by Egypt’s recent passing over US wheat for Russian wheat.  This past Tuesday the USDA didn’t significantly adjust any if its estimates for US wheat for 2008/09 market year.


Below is a table showing the net weekly change of selected agricultural futures contracts:

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Wkly

Wkly

 

01/23/09

01/30/09

02/06/09

02/13/09

Change

% Change

March Corn

$3.91

$3.79

$3.77

$3.63

0.14

-3.71%

March CHI Wheat

$5.83

$5.68

$5.57

$5.36

0.22

-3.86%

March KC Wheat

$6.11

$6.01

$5.87

$5.75

0.12

-2.05%

March MGE Wheat

$6.61

$6.52

$6.55

$6.36

0.19

-2.86%

March Soybeans

$10.09

$9.80

$10.01

$9.56

0.46

-4.55%

March Soy Meal

$318.30

$311.00

$317.30

$297.70

19.60

-6.18%

March Soy Oil

$33.60

$32.73

$33.40

$33.00

0.40

-1.20%

Feb Live Cattle

$82.67

$82.00

$83.65

$84.05

0.40

0.48%

Mar Feeder Cattle

$92.75

$91.00

$94.35

$94.47

0.12

0.13%

Feb Lean Hogs

$58.92

$58.55

$56.35

$58.82

2.47

4.38%

March Cotton

$50.64

$49.41

$49.86

$44.03

5.83

-11.69%

March Oats

$2.15

$2.05

$1.95

$1.85

0.11

-5.38%

March Rice

$12.75

$11.77

$12.79

$12.51

0.28

-2.15%

 


Corn

Corn futures closed lower for the day and for the week.  Argentine weather seems to have been again the dominant factor affecting US corn futures, along with a potential farmer strike stalling exports there.  This past Tuesday the USDA did not increase US corn ending stocks, the market was expecting the USDA to increase corn ending stocks for 2008/09.  Weekly export sales continue to improve, with the highest net sales of the year reported on Thursday at 1.543 MMT. Concerns about domestic demand offset that needed improvement in export business. Ethanol processing margins continue to be poor, and livestock producers who do not hedge are reporting negative closeouts.  Late Friday, the Buenos Aires Grain Exchange reported its estimated Argentine corn crop to be 14 MMT for 2008/09, higher than the USDA estimate for Argentine corn crop at 13.5 MMT.

Soybeans

Soybeans futures end the day and week lower.  Like corn, Argentine weather and crop conditions there again dominated there affect on US soybean futures for the week.  This past Tuesday the USDA estimated Argentine soybean production at 43.8 MMT and Brazilian production at 57 MMT.  Though the USDA trimmed soy production for both countries, the figures were less than the market had expected.  Late Friday the Buenos Aires Grains Exchange estimated Argentina’s 2008/09 soy crop at 40MMT, from planting 17.75 million hectares.  This past Thursday the USDA reported the previous week net soybean export sales at 1.07 MMT, reaffirming the strong export demand for US soybeans by China.

Wheat

Wheat futures in Chicago, Kansas City, and Minneapolis end the day and week lower.  Spillover bearish pressure from corn and soybeans was one of the dominant factors to wheat.  Weather concerns in the HRW wheat crop areas of the US plains affected wheat futures, but the northern part of the plains has received snow to help replenish soil moisture there.  Continued dryness is evident in western Oklahoma and western Texas crop areas.  Though China weather concerns affecting wheat crops there were reported, China’s existing stock was adequate for their supply needs.  Continued competition for wheat exports from Russian wheat was evident by Egypt’s recent passing over US wheat for Russian wheat.  This past Tuesday the USDA didn’t significantly adjust any if its estimates for US wheat for 2008/09 market year.

Cotton

Continuing concerns over domestic and global demand and consumption of cotton as a result of the global slowdown and current US recession greatly affected cotton futures this week.  Supporting this sentiment was the USDA reduction of the world and US cotton consumption for 2008/09, by 4 million and 2million (480lb) bales, respectively.  Late Friday afternoon, the National Cotton Council reported US cotton producers will plant 8.107 million acres, a decrease of 14% from the previous year, with land shifting towards soybeans.  This amount was lower than the USDA estimate of 8.4 million acres.  Spillover selling from grains affected cotton for the week as well.

Cattle

Live cattle futures this week closely watch the US equities market and followed in kind, closing lower for the day but higher for the week.  Feeder cattle futures followed live cattle and closed lower for the day and higher for the week.  Total beef production was 0.9% lower from the previous week.  This supports market sentiment this week over declining beef demand especially higher price choice resulting from the present US recession.  The most recent USDA WASDE report released this past Tuesday projected a reduction of 400 million pounds of beef produced for 2009.  Choice boxed beef prices fell to a new 4 ½ year low.  Feeder cattle supplies showed a reduction for the week which lent support to feeder cattle futures.

Market Watch:  Monday is a market holiday, with no trading on the US exchanges. On Tuesday, traders will look forward to the release of the monthly NOPA soybean crush report, seeking evidence of either a further slow down or a recovery of demand. USDA will also issue Export Inspections on Tuesday.  The monthly Milk Production report will be out on Thursday, along with PPI, and jobless claims. On Friday, USDA will release the monthly Cattle on Feed and Cold Storage reports. March grain and financial options also will expire on Friday.

 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.  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 Ag Market Professional or SRR subscriptions, or visit the web site @ www.bruglermktg.com.

© 2009 Brugler Marketing & Management, LLC

Sunshine Returns

Feb 06, 2009

There’s nothing like a mid-winter thaw up to change attitudes. While there were heavy snows and ice in the east, much of the nation’s midsection saw a warm up from previous sub-zero temps. Big sections of the snow cover map became bare ground. The ag commodity markets had a similar thaw from their icy bearish attitude of the previous week (when all of the commodities we track were in the red). Rice was the largest gainer for this past week, with March up more than 8.6% despite modest weekly export sales. Traders in that electronic pit saw hints of smaller US long grain rice production in 2009 due to cash contracting changes. The other commodities saw smaller advances, and we still had some laggards in the feed grains and the feeder cattle.

 

Below is a table showing the net weekly change of selected agricultural futures contracts: 

 

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Wkly

Wkly

 

01/16/09

01/23/09

01/30/09

02/06/09

Change

% Change

March Corn

$3.91

$3.91

$3.79

$3.77

0.02

-0.46%

March CHI Wht

$5.78

$5.83

$5.68

$5.57

0.11

-1.94%

March KC Wht

$6.09

$6.11

$6.01

$5.87

0.15

-2.41%

March MGE Wht

$6.53

$6.61

$6.52

$6.55

0.03

0.42%

March Soybeans

$10.20

$10.09

$9.80

$10.01

0.21

2.14%

March Soy Meal

$316.00

$318.30

$311.00

$317.30

6.30

2.03%

March Soy Oil

$34.59

$33.60

$32.73

$33.40

0.67

2.05%

Feb Live Cattle

$84.52

$82.67

$82.00

$83.65

1.65

2.01%

Mar Feeder Cattle

$94.38

$92.75

$91.00

$94.35

3.35

3.68%

Feb Lean Hogs

$59.95

$58.92

$58.55

$56.35

2.20

-3.76%

March Cotton

$49.00

$50.64

$49.41

$49.86

0.45

0.91%

March Oats

$2.23

$2.15

$2.05

$1.95

0.10

-4.88%

March Rice

$13.65

$12.75

$11.77

$12.79

1.02

8.62%

 

Soybean futures were weak in the early part of the week and bounced sharply on Thursday and Friday despite disappointing weekly export sales numbers from USDA. The trade was taking some guidance from Argentina, both in terms of drier weather forecasts and because of a potential strike by farmers that could interfere with exports. Chinese traders were also back at work after their weeklong vacation, and were actively buying the Dalian soy futures. That suggested additional export sales, because Chinese prices are higher than current US offers plus freight. At least 4 cargoes were rumored to have been sold.

 

Feed grains were still a drag on bullish hopes. The market is clearly still trading old crop fundamentals rather than new crop acreage for both corn and beans. Corn was weighed down by ideas that USDA will show a buildup in carryover to 1.83 billion bushels or more. Demand destruction continues at this price level, in both livestock and the industrial sector. Weekly export sales were above 1.1 MMT, but commitments were still behind their normal levels for the end of January (as a % of projected exports for the year).

 

Wheat futures were held back by the weakness in corn and oats, and due to the same influences. Bulls can talk about smaller US and world crops for 2009/10, but the doubling of US carryover means that more than a third of next year’s crop needs is already in the bin. Dryness in parts of China’s winter wheat belt got attention, but the Chinese are irrigating the mostly dormant crop and arguing that while yield losses could be substantial they could still be less than 5% of the previously expected crop.

 

Cotton futures were up 9/10ths of a percent. The rising value of soybeans lent competition for acreage. A higher US stock market also fed notions that the very worst demand period has been seen or will soon be passed. You can get a lot of arguments on that subject. Weekly export sales were on the lower end of trade estimates, and limited gains. 

 

Cattle futures rallied 2% for the week, with nearly all of the gain on Monday as the market reacted to the smaller than expected cow and calf numbers in the Cattle Inventory report. After Monday, traders were forced to focus on the weakness in demand, with wholesale beef prices sliding in the face of sharp declines in restaurant traffic. Those drops were mostly in the fine dining and family dining categories where a lot of the prime and choice beef is sold. Hamburger demand is holding up well, but that won’t support cattle futures at current price levels.

 

Hogs were down 3.76% for the week.  Cash hogs had been maintaining a premium to the carcass value of the hog, and started to give some of that back.  February futures have a $2.73 discount to the CME Lean Hog index, anticipating cash hog weakness this week and heading into expiration of that contract. Consumer pork demand seems OK, aided by reductions in chicken supplies. However, export business has been hurt by the world economic slowdown, a stronger dollar, and seemingly protectionist measures by some of the US’s trading partners.

 

Market Watch:  We start the week with cattle and cotton reacting to the expiration of their nearby options, with some participants holding unexpected naked futures positions that will need to be adjusted. The Treasury is also expected to announce their banking bailout/repair plan on Monday. As if that wasn’t enough, USDA will release the monthly WASDE supply and demand estimates on Tuesday morning. February usually has modest changes in the US balance sheet, but there are lots of questions about what USDA will do with South American crop size and export forecasts. Friday will feature the expiration of the February hog futures and options. 

 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results. 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 Ag Market Professional or SRR subscriptions, or visit the web site @ www.bruglermktg.com.

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