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September 2011 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.

Cash in the Parking Lot

Sep 30, 2011

Market Watch

September 30, 2011

Cash in the Parking Lot

 

Investors, speculators, commercials were all leaving the financial markets this week. They were leaving just about everything and parking the cash in US treasuries. Bond yields set a record low below 3%. The money won’t stay there long at that rate of return. There appears to be confidence in US dollar but not much else at the moment. The dollar was up, which of course makes it more difficult to make export sales to countries who float their currency vs. the dollar. There was some good news on the economic front, with US GDP growth revised upward, and a continued shrinkage of the shadow inventory (foreclosure supply) of houses. The CRB Index of commodity prices was down hard. Many commodity ETF’s and hedge funds had double digit losses for the third calendar quarter, which ended on Friday. There was a tendency to "get that loser off my sheet". Cotton was down 38% for the quarter.

 

Corn was down the fifth week in a row, losing nearly 7.2% of its value this week. USDA cut projected feed & residual use for the year by 200 million bushels in the September crop report, but will have to trim it further based on the September 30 Grain Stocks report. Export sales continue to be soft, and the chicken industry is still downsizing based on the egg sets data.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

09/09/11

09/16/11

09/23/11

09/30/11

Change

% Change

Dec

Corn

7.365

6.92

6.385

5.925

0.4600

7.20%

Dec

CBOT Wheat

7.2975

6.8825

6.4075

6.0925

0.3150

4.92%

Dec

KCBT Wheat

8.325

7.84

7.3125

7.04

0.2725

3.73%

Dec

MGEX Wheat

9.0725

8.5625

8.51

8.9225

0.4125

4.85%

Nov

Soybeans

14.2675

13.555

12.58

11.79

0.7900

6.28%

Oct

Soybean Meal

370.3

348.7

326

304.7

21.3000

6.53%

Oct

Soybean Oil

58.34

56.55

52.4

49.95

2.4500

4.68%

Oct

Live Cattle

118.45

118.5

116.825

122.15

5.3250

4.56%

Oct

Feeder Cattle

134.85

137.475

134.825

140.525

5.7000

4.23%

Oct

Lean Hogs

87.25

87.35

88.8

93.375

4.5750

5.15%

Oct

Cotton

110.3

109.08

99.99

98.71

1.2800

1.28%

Dec

Oats

3.4825

3.455

3.315

3.28

0.0350

1.06%

Nov

Rice

18.33

17.89

16.485

15.95

0.5350

3.25%

 

Wheat futures took a hit this week, down 4.92%. Prices rallied at mid-week in anticipation of USDA cutting projected spring wheat acreage and production in the Small Grains report on Friday. That assumption was correct, with harvested acres cut 1.6% for Other Spring wheat and down 1.9% for durum when compared to the September WASDE report. However, the September 1 Wheat stocks were larger than expected at 2.15 billion bushels. It appears that much less wheat was fed in the Jun-August quarter than would normally be fed, despite wheat prices being below corn for much of the period. That resulted in more burdensome wheat stocks despite the reduced production number.

 

Soybeans were down 6.28% The USDA soybean stocks were not a shocker, at 215 million bushels. That was actually 10 million tighter than the average trade guess. The problem was with the soybean meal. The sharply lower corn and wheat prices drove a double digit decline in soybean meal on Friday, with October as low as $304.70. That put tremendous pressure on product value, aggravated by a 155 point slide in soy oil. For the week, soy oil was down 4.68%.

 

Cotton was down 1.28% and December flirted with the dollar mark once again closing at 100.19 points. There were no cotton reports on Friday. It was guilty by association. That is, you could sell it to meet margin calls in other investment areas. Global slowdown concerns persist, which also doesn’t help cotton demand. Weekly export sales data on Thursday showed improved global buying interest, and outstanding commitments are right on track to hit USDA’s forecast for the year. Speculative liquidation is the biggest concern, with most commodities related spec funds and ETF’s losing money in the 3rd calendar quarter.

 

Cattle futures were $5.32 higher for the week, up 4.56%, with October challenging the all time highs of $122.87 on Friday. The October high was $122.30. Cash cattle finally traded on Friday at $120-121, with packers forced to hit the feedlot asking prices. Estimated slaughter for this week was actually up 2.1% with beef production seen up the same amount. Show lists for packers to buy this week were smaller, however. YTD beef production is up 0.3% for the year.

 

Lean Hog futures were up the limit on the spot contract and up $4.57 for the week. The quarterly Hogs & Pigs report showed All Hogs as of September 1 at 101.0% of year ago, Kept for Breeding at 100.6%, above the high end of estimates and Kept for Marketing at 101.0%. These were larger than expected numbers. Those numbers were ignored, however, with the market posting triple digit gains on both Thursday and Friday. There is an old saying that ‘the bear market is over when bad news fails to make it go down’. Estimated pork production for the week was 1.4% smaller than last week, but up 3.1% from the same week in 2010.

 

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 

 

Market Watch: The calendar turns to October, and none too soon for grain traders and stock market types. September was brutal unless you were a short. This week has a fairly light report lineup for commodities. USDA will give us Export Inspections and Crop Progress reports on Monday. The market will also be dealing with the aftermath of the big Friday sell off triggered by the USDA Grain Stocks report. USDA weekly Export Sales will be out on Thursday. Friday will mark the last trading day for the moribund October cotton futures contract, and is also last trading day for October cattle 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.

 

 Copyright 2011 Brugler Marketing & Management, LLC

Twisted

Sep 23, 2011

brulogomed

Market Watch

September 23, 2011

Twisted

 This week was quite twisted with the worst week since October 2008 for the Dow Jones equity index. Ben Bernanke announced the telegraphed bond yield curve ‘twist’ this week, which is to buy more longer dated issues and let up on the shorter dated, at the tune of $400 billion. The dollar had a huge rally of over 1400 points, while crude tanked over $7 and gold dropped $160.

Corn was down the forth week in a row, losing nearly 8% of its value this week. Analysts continue to revise their crop production numbers as the harvest moves north. Informa Economics lowered their production expectations to 12.620 billion down from 12.711 billion bushels. The International Grains Council cut their 2011/12 Global corn production by 4 MMT which is still a record and up 19 MMT from last year. Field reports of harvested yields in some of the disaster areas this year were just barely above the insured amount but other weather damaged areas will be collecting to offset a portion of their losses. Domestic feed use is assumed to be slipping, and USDA cut projected feed use for the year by 200 million bushels last week, however cattle continue to go into feedlots at lower weights at unprecedented numbers due to the Southern Plains drought. USDA weekly corn export sales were at the low end of trade expectations at 598,100 MT which is interesting considering the U.S. dollar was on a down note that export week. The dollar was up sharply this week however as importers covered that end of their buying risk.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

09/02/11

09/09/11

09/16/11

09/23/11

Change

% Change

Dec

Corn

7.6

7.365

6.92

6.385

0.5350

7.73%

Dec

CBOT Wheat

7.755

7.2975

6.8825

6.4075

0.4750

6.90%

Dec

KCBT Wheat

8.8

8.325

7.84

7.3125

0.5275

6.73%

Dec

MGEX Wheat

9.4275

9.0725

8.5625

8.51

0.0525

0.61%

Nov

Soybeans

14.4575

14.2675

13.555

12.58

0.9750

7.19%

Oct

Soybean Meal

379.9

370.3

348.7

326

22.7000

6.51%

Oct

Soybean Oil

57.88

58.34

56.55

52.4

4.1500

7.34%

Oct

Live Cattle

114.8

118.45

118.5

116.825

1.6750

1.41%

Sep

Feeder Cattle

132.65

133.225

135.3

132.1

3.2000

2.37%

Oct

Lean Hogs

85.8

87.25

87.35

88.8

1.4500

1.66%

Oct

Cotton

106.59

110.3

109.08

99.99

9.0900

8.33%

Dec

Oats

3.69

3.4825

3.455

3.315

0.1400

4.05%

Nov

Rice

18.225

18.33

17.89

16.485

1.4050

7.85%

 

Wheat futures were weighed on by the massive spike in the dollar and general uncertainty along with the other markets, coming down almost 7% in Chicago and KC while MN stood by nearly unscathed with only a nickel loss. The Dec contract hit the lowest levels since July 2010. The front month saw these levels in July 2011. Export sales came in higher than expected for the week ending 9/15 at 679.5 TMT. Egypt bought 240 TMT of wheat from Russia this week. The Ukraine harvest produced about 22.2 MMT and most of it milling quality. Informa sees 2011 HRW production at 444 million bushels.

Soybeans were down just shy of $1, over 7% following last week’s 5% decline. Crude oil tanking this week sure didn’t help out, dropping over $7/barrel. Soybeans hit the lowest levels since March 2011 on the Nov and the lowest levels since Dec 2010 on the front month. Informa sees 2012 soybean acreage at 75.8 million acres and 2011 production at 3.092 billion bushels. China appreciated the drop in bean prices this week with Private Exporters announcing the sale of 306,000 MT of soybeans for 2011/12 delivery. Weekly export sales for the week ended 9/15 were near targets at 404 TMT. The Census Crush report which would have normally been released this week has been discontinued.

Cotton was down 909 points, ending at 99.99 in the 9th month of the year. It fared the worst this week of the above tracked commodities, down 8.33% on continued global economic and stability concerns. The dollar rallying hard did not help along with the rest of the ag markets down heavily. Weekly export sales for the week ended 9/15 were positive, at 66.3K RB. The Census Cotton Consumption report which would have normally been released this week has been discontinued.

Cattle futures were down $1.67 for the week and Feeder cattle were down $3.20 for the week. We could see a turn around in prices on Monday however with the monthly Cattle on Feed report much friendlier than was anticipated by analysts. The number of cattle on feed as of September 1st were 10.721 million head with the average trade estimate looking for 10.985 million head. Cattle under 600 pounds coming into the feedlots were 144.4% above last year with the placement number actually down just under 1% from last year. Cattle 600-699 pounds were 93.67%, cattle 700-799 pounds were 84.28% and cattle over 800 pounds were 84.66% letting us know market ready cattle numbers will be down into October and maybe November although this is the third highest on feed number since the series began in 1996.

Lean Hog futures were the only commodity to show black ink this week closing up 1.66% from the previous week. The monthly Cold Storage report showed a 3% drop from the previous month likely attributed to strong export sales. Total pork stocks were up 13% from a year ago however at 440.66 million pounds. Carcass cutout prices have been rising, closing up $2.47 for the week while cash hog prices have been dropping this week improving packer margins.  Pork and poultry supplies are up year over year with chicken breast and breast meat nearly double a year ago competing with beef for the consumer dollar. And with the latest twist to Fed policy the consumer will be watching their dollars even closer.

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 

 Market Watch: Next week brings: Weekly Export Inspections, Crop Progress, Weekly Export Sales, Q2 GDP, and the much awaited Grain Stocks report Friday. All of these reports are important but the Grain Stocks report tells us what the implied use was and how much corn there really was over the year. German Chancellor Merkel is meeting Tuesday with Greek Prime Minister Papandreou to try and sort out the Euro crisis, but this has been going on now for some time. Also inspectors will be headed to Athens to check up on Greek progress of the bailout program (Reuters).

 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.

  Copyright 2011 Brugler Marketing & Management, LLC

Persistent Selling

Sep 16, 2011

Brugler

Market Watch with Alan Brugler

September 16, 2011

Persistent Selling

The livestock industry had a good week, with higher selling prices available in the futures, and plunging grain prices. There was persistent selling in grains all week, following the USDA production reports on Monday morning. The USDA numbers were actually as bullish as anticipated (except maybe for wheat), but the large spec funds had loaded up on longs ahead of the report and weren’t getting any upside movement. They decided to leave the party, or at least took some money off the table ahead of end of quarter asset allocation adjustments. A few traders may also be looking ahead to the September 30 USDA Grain Stocks report. Those quarter reports have tended to catch the market off guard in the past two years. 

Corn was down the third week in a row, losing more than 6% of its value. USDA actually showed a smaller yield estimate than the trade average guess, at 148.1 bpa. Production was cut to 12.497 billion bushels. Field reports of harvested yields were the typical "above expected" and "below expected" without defining whether expected was better than last year or just better than earlier gloom and doom ideas. The key question is whether those yields are larger than USDA has already projected for those same counties. Acreage changes can also move the production meter. The FSA folks increased planted acreage and prevented planting claims, but these do not flow directly to the NASS acreage tables. Domestic feed use is assumed to be slipping, and USDA cut projected feed use for the year by 200 million bushels. USDA weekly corn export sales were the largest since March, showing that low prices are beginning to attract buying interest.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/26/11

09/02/11

09/09/11

09/16/11

Change

% Change

Dec

Corn

7.67

7.6

7.365

6.92

0.4450

6.04%

Dec

CBOT Wheat

7.97

7.755

7.2975

6.8825

0.4150

5.69%

Dec

KCBT Wheat

8.92

8.8

8.325

7.84

0.4850

5.83%

Dec

MGEX Wheat

9.3675

9.4275

9.0725

8.5625

0.5100

5.62%

Nov

Soybeans

14.235

14.4575

14.2675

13.555

0.7125

4.99%

Oct

Soybean Meal

376.25

379.9

370.3

348.7

21.6000

5.83%

Oct

Soybean Oil

56.93

57.88

58.34

56.55

1.7900

3.07%

Oct

Live Cattle

115.2

114.8

118.45

118.5

0.0500

0.04%

Sep

Feeder Cattle

132.6

132.65

133.225

135.3

2.0750

1.56%

Oct

Lean Hogs

87.1

85.8

87.25

87.35

0.1000

0.11%

Oct

Cotton

103.92

106.59

110.3

109.08

1.2200

1.11%

Sep

Oats

3.79

3.69

3.4825

3.455

0.0275

0.79%

Sep

Rice

16.99

17.96

18.06

17.89

0.1700

0.94%

 

Wheat futures were again lower at all three exchanges this week, with KC sinking another 5.8% because a respectable portion of the winter wheat growing area saw rain. Planting activity is expected to pick up, but the drought is nowhere near over. Scattered areas might get 2" over a week, but a lot were reporting .15" at a time and central Texas as mostly still bone dry. Chicago and MPLS was down almost as much as KC, with the US still uncompetitive into Egypt and some other major buyers. With freight, US wheat is still as much as $30/MT too high to work into Egypt. On Monday, USDA projected world wheat use for animal feed use in 2011/12 will be record large.

Soybeans were down 5% for the week. Soybean meal prices fell 5.8% and put a lot of pressure on crush margins. Soy oil was also down 3%. Declining chick placements and abundant DDG supplies are working against higher meal prices at the present time. Projected soybean ending stocks rose to 165 million bushels, as USDA trimmed use and raised production. USDA made no changes to expected Brazilian or Argentine soybean production, and also left projected Chinese imports UNCH from last month.

Cotton was down 1.1% for the week. Weekly cotton export sales were net negative, which is rare this time of year. There were more cancellations than new bookings. USDA is now projecting US cotton production at 16.56 million bales on an average yield of 807 pounds per acre. World ending stocks were tightened to 51.91 million bales from 52.66 million last month.

Cattle futures were up only a nickel for the week, as Friday profit taking erased gains. Cash cattle prices were up sharply for the week, with $118-119 trades reported in the south.  Packers were able to use that to catch up from a light kill in the holiday week. Estimated beef production was up 13.2% from the previous week. Unlike hogs, beef production for the week was down 4.1% from the same week in 2010. Wholesale prices were up sharply, with choice boxed beef up 3% for the week. Select was up 1.5%, Friday to Friday.

Lean Hog futures were up one thin dime for the week, courtesy of a triple digit loss on Friday. Pork production jumped 14.3% for the week as packers caught up from the Labor Day week. Production was also up an estimated 4.2% vs. the same post-holiday week in 2010. We’re definitely talking more pork production. Estimated carcass weights were down about 3 pounds from last year, with hogs pulled ahead to free up producers for harvest activity. The pork cutout value was up 23 cents cents for the week on a Thursday/Thursday basis.

 

Market Watch: The market focus shifts a little this week. Harvest progress and updated condition ratings will get attention on Monday evening with the USDA Crop Progress report. The Fed meets on Tuesday and Wednesday, with various "twist" or other easing schemes expected to be discussed due to slow US growth and the shaky banking situation in Europe. USDA will release a Cold Storage rport on Thursday. The Cattle on Feed report is scheduled for Friday the 23rd after the close. Friday will also mark the expiration of October grain and financial futures 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.

 

 Copyright 2011 Brugler Marketing & Management, LLC

Things Have Changed

Sep 09, 2011

Brugler

Market Watch with Alan Brugler

September 9, 2011

Things Have Changed

 

Ten-year retrospectives are in vogue this weekend, as it is the 10th anniversary of the 9/11/01 terrorist attacks on the United States. The TV versions look at how people pulled together, how they were changed, and how the world has changed. The commodity markets have changed as well. Gold futures on 9/11/01 closed at $275.60. On 9/9/11 they were $1,856.40. That is a 673% rise. Nearby corn futures were $2.14¼. This Friday they were $7.26, a 338% increase. The Dow Jones Industrial Average was at 9605.51 on 9/10/01 and 10992.13 on 9/9/11. That return is an anemic 14.4% (excluding dividends), but is a positive number when the avowed goal of bin Laden and his associates was to destroy the American financial system.

 

Corn closed 24¼ cents lower for the week. Most of the week was again spent trading yield estimates, with weather firm CROPCAST taking the cake for lowest published number ahead of the USDA report. The demand side is another story. Field reports were the typical "above expected" and "below expected" without defining whether "expected" was better than last year or just better than earlier gloom-and-doom ideas. Domestic feed use is assumed to be slipping. USDA weekly export sales were also unexciting at 820,600 MT, on the lower end of trade ideas. With the outside markets under serious "get me out" pressure on Friday because of perceived European economic weakness, it was tough to get the bulls interested in committing more money to the long side of corn.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/19/11

08/26/11

09/02/11

09/09/11

Change

% Change

Sep

Corn

$7.11

7.525

7.5025

7.26

0.2425

3.23%

Sep

CBOT Wheat

$7.31

7.6225

7.3

7.01

0.2900

3.97%

Sep

KCBT Wheat

$8.19

8.6325

8.58

8.1025

0.4775

5.57%

Sep

MGEX Wheat

$9.45

9.5625

9.8425

9.4575

0.3850

3.91%

Sep

Soybeans

$13.60

14.1475

14.365

14.165

0.2000

1.39%

Sep

Soybean Meal

$354.10

376

377.8

368.7

9.1000

2.41%

Sep

Soybean Oil

$55.39

56.6

57.74

58.2

0.4600

0.80%

Oct

Live Cattle

$115.50

115.2

114.8

118.45

3.6500

3.18%

Sep

Feeder Cattle

$133.80

132.6

132.65

133.225

0.5750

0.43%

Oct

Lean Hogs

$88.38

87.1

85.8

87.25

1.4500

1.69%

Oct

Cotton

$106.76

103.92

106.59

110.3

3.7100

3.48%

Sep

Oats

$3.49

3.79

3.69

3.4825

0.2075

5.62%

Sep

Rice

$16.75

16.99

17.96

18.06

0.1000

0.56%

 

Wheat futures were lower at all three exchanges this week, with KC sinking a huge 5.6%. Wheat had to deal with a cocktail of bearish notions, including but not limited to: approval of Indian wheat exports, lower Russian prices in the latest Egyptian tender, a strengthening US dollar and spotty improvements in rainfall that could encourage winter wheat planting. The strengthening of La Niña weather conditions was a modest bullish support for winter wheat, as it suggests no definite end to the southern drought pattern. However, producers are expected to dust in the wheat, given higher crop insurance guarantee levels and a need for cash flow.

 

Soybeans were down 1.4% for the week, erasing all but 2 cents of the prior week advance. Soybean meal prices fell 2.4% and put a lot of pressure on crush margins. Weak basis suggests there is just too much meal around. Declining chick placements and abundant DDG supplies are working against higher meal prices at the present time. Projected soybean ending stocks are dropping with the production ideas, with the main question being whether USDA will go along with the private cuts in expectations. Actually, the average trade guess for 2012 ending stocks is only 3 million bushels smaller than last month, as we’re already down at or near pipeline levels. Chinese soy oil futures prices are the highest in quite some time. They are buying beans, but a lot of them are still coming out of South America due to an overhang from last year’s crop.  


Cotton was the big bull leader this week, up 3.48%. The market had been showing technical buy signals for a couple weeks, but lacked a fundamental trigger. Flooding in Pakistan threatened to take out some production there. Some cotton was lost due to Hurricane Irene, and more to Tropical Storm Lee. Tropical Storm Nate was expected to make hurricane status but drive into Mexico. Weekly cotton export sales are still only a shadow of their former selves. USDA reported the weekly export sales through Sept. 1 were a tepid 46,700 RB.

 

Cattle futures were up a nifty 3.18% for the week. Choice boxed beef was down to $0.63 for the week on a Friday/Friday basis. That is a 0.3% loss. Select beef was down 2.2%. Beef production was down an estimated 12.7% for the week due to Labor Day, and down 1.9% from the same holiday week in 2010. The reduced supply may have helped support beef prices at the end of the week. Cash cattle jumped as much as $5 versus the prior week, with nearly all of that activity on Friday. Estimated carcass weights are now thought to be running 8 lb. below last year.

 

Lean hog futures were up 1.69% for the week, countering last week’s losses. Pork production was down 5.7% for the week, but 2.8% larger than Labor Day week in 2010. Production YTD is still up about 0.8%. Estimated hog carcass weights have dropped to 199 lb. after having been at 206 and higher last spring. Pork carcass cutout values steadied, losing 37 cents for the week. That is 0.39% on a Friday/Friday basis.

 

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call-in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 


Market Watch: The main event this coming week will happen on Monday morning, with the release of the USDA Crop Production report on Sept. 12. Coinciding as it does with the full moon, all kinds of irrational exuberance will be possible! The WASDE supply/demand estimates will also get some attention, particularly ending stocks estimates and the resulting stocks/use ratios. The Export Inspections report will likely be ignored. By Monday afternoon, traders might want to take a glance at the weekly crop progress and crop condition ratings so they can decide whether they want to second-guess the USDA October crop report.

 

The NOPA monthly crush report is scheduled for Wednesday morning. This private report takes on added significance following the termination of the monthly Census Crush reports. Wednesday will also be the last trading day for September grain options. The USDA weekly Export Sales report will be back to its usual Thursday morning slot. A huge selection of financial market options will expire on Friday the 16th.

 

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.

 

 Copyright 2011 Brugler Marketing & Management, LLC

Race to the Bottom

Sep 02, 2011

Brugler

Market Watch with Alan Brugler

September 2, 2011

Race to the Bottom

 

Corn yield guesses were spiraling lower all week, from the Linn Group figure of 149.1 bpa down to FCStone’s 146.3 bpa to Lanworth’s 143 on Friday. It appeared to be a contest to see who could put out the lowest number, a race to the bottom. Soybeans weren’t immune, with FCStone lowering their bean yield estimate to 41.05 bushels and Linn Group at 41. Will USDA really cut the numbers that far? The average drop in corn yield from August to September is much smaller than the trade estimates would require, but there is historical precedent for a drop of 14 bushels or more in corn. USDA did that in 1983. That was a severe fall drought year. All of this has consequences for projected ending stocks, and the price needed to make consumption fit the available supply.

 

Corn closed 2 ¼ cents lower for the week, as the big rally on Friday was not enough to offset losses on Thursday. Most of the week was spent trading yield estimates, which grew lower as the week went on. Yield numbers as low as 143 bpa were floating around on Friday. The demand side is another story. With hogs and cattle prices lower, and chick placements down nearly every week, domestic feed use is assumed to be slipping. USDA weekly export sales were also unexciting. With the outside markets under serious "get me out" pressure on Thursday and Friday because of perceived economic weakness, it was tough to get the bulls interested in committing more money to the long side.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/12/11

08/19/11

08/26/11

09/02/11

Change

% Change

Sep

Corn

$7.02

$7.11

7.525

7.5025

0.0225

0.30%

Sep

CBOT Wheat

$7.03

$7.31

7.6225

7.3

0.3225

4.23%

Sep

KCBT Wheat

$7.98

$8.19

8.6325

8.58

0.0525

0.61%

Sep

MGEX Wheat

$8.61

$9.45

9.5625

9.8425

0.2800

2.93%

Sep

Soybeans

$13.37

$13.60

14.1475

14.365

0.2175

1.54%

Sep

Soybean Meal

$348.60

$354.10

376

377.8

1.8000

0.48%

Sep

Soybean Oil

$54.60

$55.39

56.6

57.74

1.1400

2.01%

Oct

Live Cattle

$120.45

$115.50

115.2

114.8

0.4000

0.35%

Sep

Feeder Cattle

$137.53

$133.80

132.6

132.65

0.0500

0.04%

Oct

Lean Hogs

$89.47

$88.38

87.1

85.8

1.3000

1.49%

Oct

Cotton

$101.25

$106.76

103.92

106.59

2.6700

2.57%

Sep

Oats

$3.45

$3.49

3.79

3.69

0.1000

2.64%

Sep

Rice

$16.81

$16.75

16.99

17.96

0.9700

5.71%

 

Wheat futures were a mixed bag. The Minneapolis market was up nearly 3%, with a bit of a short squeeze in the September deliveries, and with harvest still lagging well behind the average pace for this date. KC and Chicago were down for the week, as rain forecasts turned slightly more favorable for winter wheat planting.

 

Soybeans were up 1.5% for the week. Global ending stocks are seen shrinking in 2011/12, due to a smaller crop in the United States and expectations that Brazilian producers will have more corn this year. FC Stone put out a 41.05 bushel yield estimate, lower than other private estimates from the previous week and thus supportive. Projected ending stocks are dropping with the production ideas, with the main question being whether USDA will go along with the private cuts in expectations. It is also noteworthy that Census biodiesel use of soy oil was up sharply in July, but other domestic use slowed. Chinese soy oil futures  prices are the highest in quite some time, but they also appear to have access to more South American soybeans than would usually be available by September. That slows the likely ramp up of US exports.

Cotton prices are back to about where they were two weeks ago. For bulls, that is a good thing, up 2.57% from the previous week. Back to school sales data was a little stronger than some of the talking heads would have suggested, but there are still problems with working high priced yarn into products that consumers are willing to buy. US weekly export sales did improve, thanks to a sharp drop in the rate of cancellations. Some cotton was lost due to Hurricane Irene, and the market is building in a little premium against further losses due to Tropical Storm Lee in the Gulf this weekend or perhaps T.S. Katia next week. The computer models still disagree about whether Katia will make US landfall.

 

Cattle futures were down 40 cents (0.35%) for the week, not a bad showing given the weakness in wholesale prices. Choice boxed beef was down to $181.80 on Thursday. That was a 3.19% drop on a Thursday/Thursday basis. Beef production was down an estimated 1.6% for the week, and down 2.2% from the same week in 2010. Estimated carcass weights are running 3 pounds below last year.

 

Lean Hog futures were down 1.5% for the week.   Pork production was up 0.6% for the week, and estimated to be almost identical to last year’s 422.5 million pounds for the pre-Labor Day week. Estimated hog carcass weights have dropped to 198 pounds after having been at 206 and higher last spring. Pork carcass cutout values were under severe pressure, dropping 7.06% on a Friday/Friday basis. That of course translated directly into plunging cash hog prices.

 

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 


Market Watch: There will be no trading in the US markets on Monday due to the Labor Day holiday. The usual Monday USDA reports, i.e. Export Inspections and Crop Progress, will be delayed until Tuesday.  Energy traders will be measuring the impact of Tropical Storm Lee, which forced some oil and gas platform shut ins in the Gulf of Mexico on Friday. USDA weekly Export Sales will be delayed until Friday morning. Then we will get to the main event, which is the USDA Crop Production report on September 12. Coinciding as it does with the full moon, all kinds of irrational exuberance will be possible!

  

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.

 

 Copyright 2011 Brugler Marketing & Management, LLC

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