Aug 27, 2014
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Market Watch

RSS By: Alan Brugler, AgWeb.com

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

Strong Dollar vs. Fundamentals

Aug 22, 2014

 Brugler

Market Watch with Alan Brugler

August 22, 2014

Strong Dollar Vs. Fundamentals

The US dollar index broke out of a multi-week consolidation to the upside this week. Commodities priced in dollars tend to go down when each dollar can buy more value. It also means it takes more euros or yen or pesos to buy the same export good, sometimes resulting in lost export business.  There is a strong inverse correlation between the CRB Index (basket of commodities) and the US dollar which reflects these relationships. However, we have also taught our Brugler Ag Marketing Professional clients over the years that a) There are typically 3-4 commodities that are going the opposite direction to the CRB index due to their unique fundamental situations and b) for grains, the market pays more attention to exports and thus the dollar after harvest. Prior to harvest, fundamental news shifts carry more weight. Cattle appeared to be one of the counter-trend markets, due to futures being at a big discount to the cash market heading into the last week of deliveries. Soybeans and wheat were reacting to bullish fundamental threads, while some of the other markets let the dollar current push them along.

Corn ended the week just 1/4 cent from where it began. If not for a little last minute window dressing it might even have closed higher. USDA weekly Export Sales were about as expected at 819,200 MT. Cumulative sales commitments are now 100% of the USDA revised forecast for full year shipments. They would typically be 107% by now, which caused some head scratching when USDA hiked the number a week ago. The Pro Farmer group projected the US average yield at 169.3 bpa on Friday, vs. USDA @ 167.4 bpa.  The weekly CFTC commitment of traders report showed managed money accounts decreased their net long position in corn by 2,946, taking them down to a net long position of 64,719 contracts as of the closing bell on Aug 19.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/01/14

08/08/14

08/15/14

08/22/14

Change

% Change

Sept

Corn

$3.53

$3.52

$3.66

$3.66

($0.0025)

-0.07%

Sept

CBOT Wheat

$5.34

$5.49

$5.51

$5.52

$0.01

0.14%

Sept

KCBT Wheat

$6.33

$6.29

$6.19

$6.34

$0.15

2.34%

Sept

MGEX Wheat

$6.16

$6.19

$6.11

$6.27

$0.16

2.58%

Sept

Soybeans

$10.74

$11.14

$11.03

$11.66

$0.64

5.76%

Sept

Soybean Meal

$355.80

$367.90

$388.30

$433.30

$45.00

11.59%

Sept

Soybean Oil

$35.54

$35.52

$32.87

$32.36

($0.51)

-1.55%

Aug

Live Cattle

$157.30

$152.55

$150.60

$151.85

$1.25

0.83%

Aug

Feeder Cattle

$220.28

$215.33

$217.23

$216.10

($1.13)

-0.52%

Oct

Lean Hogs

$102.83

$99.33

$94.95

$92.88

($2.08)

-2.19%

Oct

Cotton

$62.49

$63.81

$63.60

$67.46

$3.86

6.07%

Sept

Oats

$3.51

$3.58

$3.65

$3.84

$0.19

5.21%

Sept

Rice

$12.79

$12.66

$12.91

$12.83

($0.08)

-0.62%

 

Soybean futures were up 64 cents per bushel in the nearby September contract for the week, but it was a mirage. Even with strong plus basis, flat prices are below where they were earlier in the summer, and the new crop November futures were 7 3/4 lower for the week.  New crop soybean export sales were reported at 1,420,600 MT, with China the largest buyer @ 947,900 MT.  We continue to have to report sales of 100,000 MT or more under the daily reporting system. A new sale of 120,000 MT to China was announced on Friday. The weekly CFTC Commitment of Traders report showed managed money accounts adding 4,994 contracts to their short position during the week ending Tuesday August 19.  The managed money net position is now short -16,698 contracts; the second most bearish net position reported for managed money since October 10, 2006.

Wheat futures saw another small weekly gain in Chicago, up 1 cent.  Unlike the past two weeks, the hard wheat futures contracts were higher as well, up 2.3 and 2.6%. The regular Friday "shooting in Ukraine" report propped up prices, already given a boost by heavy rains and high winds in spring wheat country. Those will slow an already delayed harvest.  Stats Canada also showed a smaller Canadian crop than expected, at 27.704 MMT vs. trade ideas closer to 29 MMT. Cumulative US export commitments are now 43% of the USDA forecast for the full year, up from the 5 year average of 41% for this week. The weekly CFTC Commitment of Traders report showed managed money accounts with a net short position of 50,668 contracts, with net buying for the week of 10.456 contracts. They added 2,062 contracts to their net long position in KC wheat, bringing them to a net long position of 15,421 contracts.

October Cotton futures shot up 6.07% for the week despite a surging US dollar index and competition from lower crude oil (synthetic fiber). Rapidly declining cert stocks may have spooked a few shorts, with a lot of the deliverable inventory being loaded out. The weekly USDA export sales report put Upland sales at 155,600 running bales. Total export commitments for the marketing year total 48% of the full year projection, and are running ahead of the 40% average for this date. The CFTC COT disaggregated futures and options report shows managed money speculative accounts adding shorts. They were net short -7,404 contracts at the end of the day on August 19.

Cattle futures were up $1.25 for the week, with all of it coming on Friday ahead of the USDA Cattle on Feed and Cold Storage reports. The COF report showed a few more cattle in the lots than expected, with July placements down 7.4% when trade ideas had been closer to 10%. When combined with smaller July marketings than expected, the August 1 On Feed total was 98.12% of year ago. The Cold Storage report also showed some beef backing up in the cooler, with the July 31 beef stocks 2.3% larger than last month. They are still very small vs. year ago. Wholesale beef prices were weaker this week, being dragged down by the pork market and larger weekly slaughter. Choice boxes were 2.3% lower on the week. Select boxes dropped 3.5%. Weekly estimated slaughter was up 2.5% from last week, but down 5.9% from year ago. Beef production YTD is down 6.3%, with slaughter down 7%. Higher carcass weights make up the difference.

Hog futures were down 2.19% this week, a slowing from the sharp 4.4% slide the previous week, but still bearish. Thus far in 2014, hog slaughter is off 5.0% from the same point in 2013.  Pork production is only down 1.3%, due to substantially higher carcass weights. Carcasses are currently running 10# above year ago, with live weights up about 13 pounds. Pork carcass cutout values continued to slip this week, with the average price reported at $103.60 on Friday, a weekly loss of 7.3%.  Hams were down 20.6%  a week ago, and fell another 9.6% this week. This time they were joined by a 10.6% drop in pork bellies, more typical seasonal weakness for the latter.

 Market Watch

The ag markets will begin the week reacting to the USDA Cattle on Feed and Cold Storage reports released on Friday night. Grain traders will be making adjustments tied to any surprise futures positions inherited on the expiration of September options, also on Friday. We will get the usual month end portfolio adjustment this week, with the Rogers roll out of October contracts at the end of the week. USDA Export Inspections and Crop Progress reports will be out on Monday and the weekly Export Sales report on Thursday morning. The markets are open on Friday, but it will be the beginning of the Labor Day holiday weekend and the trading population is expected to be thin.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses. 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

Beware of Falling Cats

Aug 15, 2014

 Brugler

Market Watch with Alan Brugler

August 15, 2014

Beware of Falling Cats 

There are falling cats in the news and falling cats in the market this weekend. According to the AP, a cat named Gizmo fell out of a Manhattan (NY, not Kansas) apartment penthouse and dropped 12 stories to hit a third floor landing. Amazingly, a visit to the vet showed only scratches and a broken tooth. In the markets, we have the "dead cat bounce", the notion that even a dead cat falling out of a penthouse will bounce when he hits the concrete. That is used as an analogy for rallies following a sharp market decline, with the added caution that if the cat was already dead the bounce won’t last. We had dead cat bounce talk this week in corn, wheat and cattle markets. For a couple hours on Friday, hogs were included in that conversation, but they quickly returned to earth. 

Corn rallied 14 cents per bushel this week, a nearly 4% gain that "snuck up" on a lot of traders. USDA weekly Export Sales were about as expected at 879,600 MT. Cumulative sales commitments are now 100% of the USDA revised forecast for full year shipments. They would typically be 108% by now, which caused some head scratching when USDA hiked the number on Tuesday. On Tuesday, USDA hiked the projected US average yield to 167.4 bpa, a conservative figure compared to trade expectations. The yield was based on record large ear counts and the third largest ear weight in the last decade, so it wasn’t exactly a conservative number. Projected ending stocks for 2015 were nudged to 1.808 billion bushels, with the midpoint cash average price forecast at $3.90. The weekly CFTC commitment of traders report showed managed money accounts decreased their net long position in corn by 4,023, taking them down to a net long position of 67,665 contracts as of the closing bell on Tuesday.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/25/14

08/01/14

08/08/14

08/15/14

Change

% Change

Sept

Corn

$3.63

$3.53

$3.52

$3.66

$0.14

3.98%

Sept

CBOT Wheat

$5.38

$5.34

$5.49

$5.51

$0.02

0.36%

Sept

KCBT Wheat

$6.31

$6.33

$6.29

$6.19

($0.10)

-1.63%

Sept

MGEX Wheat

$6.28

$6.16

$6.19

$6.11

($0.08)

-1.25%

Sept

Soybeans

$11.14

$10.74

$11.14

$11.03

($0.11)

-1.01%

Sept

Soybean Meal

$369.80

$355.80

$367.90

$388.30

$20.40

5.54%

Sept

Soybean Oil

$36.18

$35.54

$35.52

$32.87

($2.65)

-7.46%

Aug

Live Cattle

$159.10

$157.30

$152.55

$150.60

($1.95)

-1.28%

Aug

Feeder Cattle

$218.25

$220.28

$215.33

$217.23

$1.90

0.88%

Oct

Lean Hogs

$107.28

$102.83

$99.33

$94.95

($4.38)

-4.40%

Oct

Cotton

$65.16

$62.49

$63.81

$63.60

($0.21)

-0.33%

Sept

Oats

$3.48

$3.51

$3.58

$3.65

$0.07

2.03%

Sept

Rice

$12.94

$12.79

$12.66

$12.91

$0.25

1.94%

 

Soybean futures were down 11 cents per bushel in the nearby September contract for the week, and 33 cents lower for new crop November.  USDA hiked projected production a modest 16 mbu from their July forecast, and increased projected 2015 ending stocks to 430 million bushels. USDA put weekly export sales at 1,143,200 MT including 61,400 MT of old crop. That was within the range of trade estimates, and continued to have to report sales of 100,000 MT or more under the daily reporting system. New crop export commitments to all destinations are now above last year’s record level, although commitments to China still lag.  The NOPA crush report for July was 119.62 million bushels, about 3 million more than trade estimates. Soy oil stocks are still quite comfortable at 1.589 billion pounds for NOPA members (the US total is larger but not directly surveyed). The weekly CFTC Commitment of Traders report showed managed money accounts getting less-short by 2,909 contracts during the week ending Tuesday August 12.  The managed money net position is now short -11,704 contracts. 

Wheat futures saw another weekly gain in Chicago, up 2 cents. KC was down again, and MPLS also settled lower by 1.25% for the week. USDA weekly Export Sales totaled 338,700 MT.  The main buyers were Brazil, Mexico and Unknown destinations. Cumulative export commitments are now 42% of the USDA forecast for the full year, up from the 5 year average of 38%. On Tuesday, USDA bumped up projected HRW, SRW and spring wheat production, but also foresaw additional export sales and moved the ending stocks figure only 3 million bushels to 663 million.  The weekly CFTC Commitment of Traders report showed managed money accounts with a net short position of 61,124 contracts, with net buying for the week of 5,909 contracts. They were still net long KC wheat.

October Cotton futures lost 0.33% for the week. That was a modest loss considering the increase in projected US ending stocks to 5.6 million bales announced by USDA on Tuesday. USDA hiked projected exports, but raised expected production more. One reason for a cautious approach was the first cut in projected world ending stocks in a span of several monthly reports. They are still projected to grow to record levels this year. The weekly USDA export sales report put Upland sales at 184,500 running bales, including 8,100 RB booked for the 15/16 marketing year.  Pima sales were reported at 3,300 RB for 14/15. The CFTC COT disaggregated futures and options report shows managed money accounts are now net short -5,733 contracts, after they were net short just -1,753 contracts last week.

Cattle futures were down $1.95 or 1.28% this week after a 3% decline the previous week.  Feeders were up $1.90 or 0.88% despite action in both corn and cattle pointing toward lower feeder values. Nearby cattle futures are still trading at a discount to the cash market, which works well for hedgers.  Cash cattle traded on Thursday and Friday at $155-156, down $4 from last week. August futures went home at $150.60, however, still a plus $5 basis. Wholesale beef prices were weaker this week, being dragged down by the pork market. Choice boxes were 1.9% lower on the week. Select boxes dropped 1.8%. Weekly estimated slaughter was up 0.7% from last week, but down 7.5% from year ago. Beef production YTD is down 6.3%, with slaughter down 7%. Higher carcass weights make up the difference.

Hog futures were down a sharp 4.4%, continuing the collapse from the previous 2 weeks. Thus far in 2014, hog slaughter is off 4.9% from the same point in 2013.  Pork production is only down 1.2%, due to substantially higher carcass weights. Carcasses are currently running 9# above year ago, with live weights up about 12 pounds. Pork carcass cutout values continued to slip this week, with the average price reported at $111.80 on Friday, a weekly loss of 10.8%!  Hams were down 20.6% in a single week. Russia had reportedly been active in hams earlier in the spring, and the weakness may be related to that product needing to find a different home. The weekly CFTC commitment of traders report showed managed money accounts are now net long 48,369 contracts, slipping -3,967 contracts from the previous weekly report.

 Market Watch

We will get the usual USDA Export Inspections and Crop Progress reports on Monday and the weekly Export Sales report on Thursday morning. The main USDA reports for the week will be the Cattle on Feed and Cold Storage reports on Friday afternoon. September grain options will also expire on Friday, August 22.

 

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

A Mixed Bag

Aug 08, 2014

 Brugler

Market Watch with Alan Brugler

August 8, 2014

A Mixed Bag

Futures activity was volatile this week, but also somewhat directionless. Wheat rallied and then gave it back. Ditto for corn. Old crop August beans were up 70 cents per bushel, but new crop November was up only 17 3/4. Hogs were ugly all week (if you weren’t following the hedge advice) while cattle sold off enough on Friday to erase gains from the other four days. The stock market was similarly erratic, with big early week losses countered by a 185 point Dow advance on Friday.   Some of this choppiness is politically related, with Russia/Ukrain,  Isreal/Hamas, and ISIL vs. everybody playing back and forth. Part of it is related to a reduced number fo futures players. Less liquidity makes it easier to extend price runs in both directions.

Corn lost 1 cent after losing nearly a dime the previous week. Trade estimates for weekly export sales were between 700-900,000 MT.  USDA put the actual figure at 879,600 MT. Cumulative sales commitments are now 101% of the USDA forecast for full year shipments, but only 89% had been shipped by July 31. Census reported that official June ethanol exports were up 13% from May at 59.9 mgal, while imports dropped 75% to 7.3 mgal. Private estimates for US corn yields were uniformly bearish, running from Informa’s 168 bpa to Lanworth’s 174.8 bpa. USDA will release the first official estimate for the year on Tuesday at 11 am CDT.  Friday’s Commitment of Traders report showed the large spec funds adding longs in corn, with the net long position up 8,664 contracts from the previous Tuesday night. Some of those may have washed out on Friday.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/18/14

07/25/14

08/01/14

08/08/14

Change

% Change

Sept

Corn

$3.71

$3.63

$3.53

$3.52

($0.01)

-0.21%

Sept

CBOT Wheat

$5.32

$5.38

$5.34

$5.49

$0.15

2.81%

Sept

KCBT Wheat

$6.33

$6.31

$6.33

$6.29

($0.03)

-0.55%

Sept

MGEX Wheat

$6.31

$6.28

$6.16

$6.19

$0.03

0.45%

Aug

Soybeans

$11.77

$12.12

$12.15

$12.85

$0.70

5.74%

Aug

Soybean Meal

$380.30

$398.00

$387.50

$397.50

$10.00

2.58%

Aug

Soybean Oil

$36.57

$36.09

$35.45

$35.44

($0.01)

-0.03%

Aug

Live Cattle

$151.63

$159.10

$157.30

$152.55

($4.75)

-3.02%

Aug

Feeder Cattle

$211.65

$218.25

$220.28

$215.33

($4.95)

-2.25%

Aug

Lean Hogs

$127.08

$123.63

$118.03

$114.23

($3.80)

-3.22%

Oct

Cotton

$68.63

$65.16

$62.49

$63.81

$1.32

2.11%

Sept

Oats

$3.32

$3.48

$3.51

$3.58

$0.07

2.00%

Sept

Rice

$13.13

$12.94

$12.79

$12.66

($0.13)

-1.02%

 

Soybean futures were up 70 cents per bushel in nearby August, with a short squeeze in the beans aided by the $10 gain in meal prices to add product value.  A Bloomberg survey shows an average trade estimate of 45.5 bpa and 3.815 billion bushels of production for the August 12 USDA report.  USDA put weekly export sales at 1.103 MMT, within the range of trade estimates.  Indonesia was the largest old crop buyer. Soybean meal export sales were a strong 731,100 MT, including 252,100 MT to be shipped before August 31. Soy oil bookings were 25,400 MT.

Wheat futures were strong early in the week but gave back most of it (CHI and MPLS) or all of it (KC) by Friday night. KC was down 0.55% for the week, while Chicago was up 2.8%.  USDA weekly export sales for the week ending July 31 were expected between 500-700,000 MT.   USDA put the actual figure at 590,900 MT.  A Bloomberg survey shows the average trade estimate for ending stocks at 666 million bushels for 2015 up from 660 million in the July WASDE report. The  average pre-report guess for US wheat production is 2.015 billion bushels.

October Cotton futures recovered 2.1% this week after a 4.1% slide the previous week. USDA put weekly export sales for cotton at 251,000 RB for Upland in 2014/15.  There were net reductions of 1300 RB for upland in 13/14, and net reductions of 900 RB for Pima in 13/14. This report was through July 31, the end of the cotton marketing year.  USDA rolled 551,100 RB of prior old crop sales into the 2014/15 delivery slot. The weekly Commitment of Traders report showed managed money accounts went net short in cotton by 1,753 contracts.  

Cattle futures fell off on Thursday and Friday to post a loss of $4.75 or 3%.  Feeders were down 2.25% for the week. Nearby cattle futures are still trading at a discount to the cash market, which works well for hedgers.  Cash cattle traded on Friday at $160 and $248-252 in the north, while August futures settled at $152.55. Wholesale beef prices hit record highs again this week. Choice boxes were 1.0% lower on the week. Select boxes dropped 2.0% for the week as the choice/select spread widened back out.  Weekly estimated slaughter was down 0.2% from last week, but down 8.8% from year ago. Beef production YTD is down 6.3%, with slaughter down 7%. Higher carcass weights make up the difference. The CFTC Commitment of Traders report showed managed money accounts increasing their net long position in live cattle by 4,204 contracts last week bringing their overall net long position to 120,641 contracts. Just in time for the limit down move on Friday!

August Hog futures were down $3.80 for the week after losing $5.60 the previous week. Thus far in 2014, hog slaughter is off 4.8% from the the same point in 2013.  Pork production is only down 1.1%, due to substantially higher carcass weights. Carcasses are currently running 10# above year ago, with live weights up about 13 pounds. Pork carcass cutout values continued to slip this week, with the average price reported at $124.99 on Friday, a weekly loss of 1.83%.  Hams were down 6.67%, offset partially by a rebound in bellies.  As of the close last Tuesday, managed money accounts reported a weekly decrease of 1,498 contracts in lean hog longs giving them a net long position of 52,336 contracts.

 Market Watch

We will get the usual USDA Export Inspections and Crop Progress reports on Monday, and the weekly Export Sales report on Thursday morning. The main USDA reports for the week will be on Tuesday, however. The NASS division of USDA will release the first official corn and soybean production estimates based on surveys and field plots, and the WASDE division will update projected supply and demand estimates for both the US and globally.  The August hogs and soybean complex contracts expire on Thursday.

Six Hundred and Counting!

According to the Ag Web archiving system, this is our 600th Market Watch column. Thanks to the 1000's of readers each month who make this worth doing, both with your readership and your financial support via our Ag Marketing Professional and Special Research Reports subscription services. Here's to a couple hundred more columns!                                              Alan Brugler

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

Ol' Man River

Aug 01, 2014

Brugler 

Market Watch with Alan Brugler

August 1, 2014

Ol’ Man River

 

In the song Ol’ Man River, from the 1927 musical Showboat, the singer repeats "Ol Man River,  He don't say nothin', he must know somethin', Old Man River, he just keeps rollin' along". The reference was to the Mississippi River, but might just as well be applied to the current grain markets. They must know something about big crops coming, and they certainly keep rolling along in the bearish direction.  Private forecasters have been quite vocal about how huge the corn, soybean, spring wheat crops will be, but USDA ‘don’t say nothin’.  That will change on August 12, with the first official NASS Crop Production estimates for those crops following August 1 focused surveys.

 

Corn lost another 11 cents this week after slipping 8 cents last week, and 7 cents the week before that. Nearby September has lost 61 cents since July 1st.  The December contract is down 29% since early May.  Larger world production forecasts from the IGC earlier in the week kept pressure on the price, despite solid new crop export sales, and well below normal precip this week for much of the corn belt.  Doane came out today with it’s latest estimate at 14.443 billion bushels of production with a 172.3 bpa yield, citing all time high plant populations with lots of second ears showing up on its annual two week crop tour.  A relatively dry July for much of the Corn Belt does not support higher yields, but the cooler than normal July average temperatures in the states with the largest production has historically produced a positive effect on the national average yields.  The USDA is actively gathering data for its first evidence-based attempt to forecast the national average yield.  The Brugler Virtual Corn Tour is also underway, with results exclusively shared with the clients who participate in the study that takes place in 17 states.  US weekly export sales for the week ending July 24 were 1.267 MMT, 86% of the total was for new crop.  Weekly ethanol production pulled back a modest 5,000 bpd to 954,000 barrels. Ethanol stocks, which for some reason didn’t go up the prior week, rose to 18.6 million barrels this week.  Freeze-minded bulls will be watching the crop progress report on Monday afternoon for any indication that the crop development is losing it’s lead vs. the 5 year average. The CFTC Commitment of Traders report this afternoon showed managed money decreasing their net long position in corn by 7,384 contracts as of July 29 giving them a net long position of 63,024 lots.

Soybean futures continue to attempt rallies, based on dry conditions and strong export sales.  The rallies are squashed by ever rising yield and ending stocks estimates, with more and more "best crop of a lifetime" talk. That makes my contrary opinion bone ache! The Brugler500 Index for soybean conditions was at 380, down 3 from the previous week but still the best since 1994 for this date. The old crop contract actually eeked out a three cent gain on the week.  Declining prices should also be causing Brazilian and Argentine producers to ask themselves "What else can I plant?".  January soybeans on the Dalian exchange have gained the US equivalent of 65 cents since July 14th.  US weekly export sales were reported on Thursday, with USDA showing strong new crop sales included in net sales of 1.456 MMT; 87% of the total was booked for 2014/15 delivery.  Soybean meal export sales for new crop were also considerably large, but the bullish news failed to rally the meal market, which lost $3.80 today and $10.50 on the week.  As of the close on July 29, CFTC shows managed money buying 10,224 net contracts of soybeans, which brings them to a net short position of 8,319 contracts.

 

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/11/14

07/18/14

07/25/14

08/01/14

Change

% Change

Sept

Corn

$3.78

$3.71

$3.63

$3.53

($0.11)

-2.89%

Sept

CBOT Wheat

$5.26

$5.32

$5.38

$5.34

($0.04)

-0.70%

Sept

KCBT Wheat

$6.36

$6.33

$6.31

$6.33

$0.01

0.24%

Sept

MGEX Wheat

$6.28

$6.31

$6.28

$6.16

($0.12)

-1.87%

Aug

Soybeans

$11.95

$11.77

$12.12

$12.15

$0.03

0.23%

Aug

Soybean Meal

$387.00

$380.30

$398.00

$387.50

($10.50)

-2.64%

Aug

Soybean Oil

$36.77

$36.57

$36.09

$35.45

($0.64)

-1.77%

Aug

Live Cattle

$149.13

$151.63

$159.10

$157.30

($1.80)

-1.13%

Aug

Feeder Cattle

$210.38

$211.65

$218.25

$220.28

$2.03

0.93%

Aug

Lean Hogs

$128.68

$127.08

$123.63

$118.03

($5.60)

-4.53%

Oct

Cotton

$68.74

$68.63

$65.16

$62.49

($2.67)

-4.10%

Sept

Oats

$3.28

$3.32

$3.48

$3.51

$0.03

0.79%

Sept

Rice

$13.20

$13.13

$12.94

$12.79

($0.15)

-1.16%

 

Wheat futures ended the week on a higher tone, but were mixed on the week.  CBT wheat lost 4 cents, and MGE wheat was down 12 cents.  KCBT was a penny higher.  Uncertainty about the effect of the Russsian/Ukraine conflict on its grain output combined with strong US export sales helped the wheat markets rally late in the week.  USDA reported stronger than expected weekly export sales for the week ending July 24; published at 801,000 MT.  Nigeria, Panama and Brazil were all in for at least 100,000 MT each.  Total commitments as a percent of total projected exports are now at 40%, vs. the five year average for this date of 34%.  The Egyptians bought 175,000 MT of Russian wheat on Wednesday.  No US wheat was offered, as it was uncompetitive with freight costs included.  The IGC raised its global wheat production forecast to 702 million, which is up from a previous projection of 699 million but still below the prior season's 710 million.  USDA currently has the projected world consumption at 699.92 MMT, down from 705.52 MMT in 2013/14.  As of the close last Tuesday, managed money account sold 17,449 contracts in CBOT wheat for the week, giving them a net short position of 71,968 lots.

 

October Cotton futures plunged another 4.1% this week, with the Dec14 futures posting new life of contract lows after plunging more than 1000 points during the month of July.  The over arching concern in the market is a ballooning US ending stocks estimate coupled with large Chinese stocks that could further constrain US exports. USDA reported net weekly export sales totaled 260,400 RB, including only 300 RB of Pima.  The USDA marketing year for cotton ends July 31, which will be in NEXT week’s Export Sales report.  Any unshipped sales at that point will be applied to 2014/15 outstanding sales.  This export sales report was through July 24.  The ICAC expects world ending stocks to rise by 6% in 2014/15 to 21.4 MMT with a stocks to use ratio of 89%.  The weekly Commitment of Traders report showed managed money accounts decreasing their net long position in cotton by 2,730 contracts bringing their overall net long on July 29 to 888 lots.  

 

Cattle futures fell off on Thursday and Friday to post a loss of $1.80 on the week, after gaining $7.55 in the August contract during the month of July.  Feeders lost ground on Thursday and Friday too, but held onto a gain of $2.03 for the week.  The August feeder contract picked up $7.05 during the month of July.  Nearby cattle futures are still trading at a discount to the cash market.  Some cash cattle traded in Nebraska around $163 this week, and most reported sales around the country were between $162 and $165 on relatively light volume, after seeing early week asking prices at $168-170.  Dressed sales were also light, mostly reported around $258. Wholesale beef prices hit record highs again this week. Choice boxes were 2.2% higher on the week and 6.26% higher on the month.  Select boxes picked up 1.5% for the week, and were 8.81% higher during the month of July.  Weekly estimated slaughter was actually 3K head larger than last week, and were 48K head smaller than the same week last year.  Total cattle slaughter year to date is currently thought to be off 6.9% from 2013.  The CFTC Commitment of Traders report showed managed money accounts decreasing their net long position in live cattle by 2,218 contracts last week bringing their overall net long position to 116,437 contracts

August Hog futures were down $5.60, or 4.63% on the week.  August hogs lost Weekly estimated slaughter was 5K head larger than last week, but were 160K head smaller than the same week a year ago.  Thus far in 2014, hog slaughter is off 4.8% from the the same point in 2013.  USDA published weekly pork export sales at 6,900 MT for the week ending July 24.  Pork carcass cutout values continued to slip this week, with the average price reported at $127.32 on Friday vs. $131.79 a week ago for a weekly loss of 3.39%.  Bellies were down 9.43% on the week; Ham cuts were the only primal posting a gain on the week, up 2.47%.  As of the close last Tuesday, managed money accounts reported a weekly decrease of 1,037 contracts in lean hog longs giving them a net long position of 53,834 contracts.

 

 Market Watch

 

 

Cattle traders will begin the week adjusting for any surprise futures positions obtained at options expiration on August 1. Grain traders will be looking for any shifts in the weather forecast models over the weekend, and will be looking for any significant change in the Monday afternoon crop condition ratings.  On the report front, this is a "tweener" week ahead of the first actual USDA production estimates, to be released on August 12. We will get the usual USDA Export Inspections and Crop Progress reports on Monday, and the weekly Export Sales report on Thursday morning. Monday also marks first notice day for August cattle deliveries. Given the discount of futures to cash, it is unlikely that there would be any.

Black Hole or Water Well?

Jul 25, 2014


Brugler

Market Watch with Alan Brugler

July 25, 2014

Black Hole or Water Well? 

There is a definite downward bias for commodity prices right now, with the CRB Index in retreat. There are exceptions such as cattle, but most markets are leaking lower. The question becomes this: Are we looking at a black hole or a dried up well? Black holes absorb everything around them (i.e. any bullish grain news quickly disappears off the radar). They keep gaining mass and destroying their surroundings. If you keep throwing things into a well on the other hand, it will eventually fill up and you no longer have the hole. While at times this current market has looked like a black hole (no bullish reaction for a huge 2.4 MMT of weekly soybean export sales) we suspect that it is really a well. We just haven’t had enough bullish grain news yet to fill up the well and start building a rally on the site.

Corn lost 8 cents for the week after slipping 7 cents last week. Nearby September is now down 46 cents since July 3. The highest early July weekly crop condition ratings since 1994 kept a lid on corn prices all week, as they make it easy to believe in upward revisions to the US yield forecast. That would presumably mean more burdensome ending stocks. New crop gloom and doom were fed by national average yield estimates from Lanworth and Allendale, with the latter at a bin busting 174.1 bpa. Old crop export sales were also disappointing in the Thursday USDA report. The one bright spot was ethanol production, consuming nearly 104 million bushels for the week and without a stocks buildup. RFA pointed out on Friday that there are 3,349 E-85 locations in the US now. EPA is only assuming 2,391 locations in their calculations about how much ethanol could be used over and above E10 blends.

Soybean futures ended the week 3% higher. Old crop export sales continue to be made, despite the need for the US to import beans from South America to offset the bushels being shipped.  Timing is everything! Gulf basis bids were firm in trying to attract export bushels away from crush plants. There were also phenomenal new crop bookings made as soon as November futures dropped below $11 per bushel. USDA confirmed 2.451 MMT of 2014/15 sales last week, with 1.2835 MMT slated for delivery to China. Chinese purchases of US new crop beans still lag the record 2013 pace by 2.47 MMT. Sales commitments to all destinations are slightly ahead of last year.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/03/14

07/11/14

07/18/14

07/25/14

Change

% Change

Sept

Corn

$4.09

$3.78

$3.71

$3.63

($0.08)

-2.22%

Sept

CBOT Wheat

$5.79

$5.26

$5.32

$5.38

$0.06

1.08%

Sept

KCBT Wheat

$6.87

$6.36

$6.33

$6.31

($0.01)

-0.20%

Sept

MGEX Wheat

$6.72

$6.28

$6.31

$6.28

($0.03)

-0.44%

Aug

Soybeans

$12.99

$11.95

$11.77

$12.12

$0.36

3.02%

Aug

Soybean Meal

$417.00

$387.00

$380.30

$398.00

$17.70

4.65%

Aug

Soybean Oil

$38.67

$36.77

$36.57

$36.09

($0.48)

-1.31%

Aug

Live Cattle

$155.00

$149.13

$151.63

$159.10

$7.47

4.93%

Aug

Feeder Cattle

$217.63

$210.38

$211.65

$218.25

$6.60

3.12%

Aug

Lean Hogs

$131.60

$128.68

$127.08

$123.63

($3.45)

-2.71%

Oct

Cotton

$71.79

$68.74

$68.63

$65.16

($3.47)

-5.06%

Sept

Oats

$3.51

$3.28

$3.32

$3.48

$0.17

4.98%

Sept

Rice

$13.58

$13.20

$13.13

$12.94

($0.19)

-1.41%

 

Wheat futures ended the week higher in Chicago for the second week in a row.  KC was down 0.2% for the week and MPLS was down 0.4% for the week.  The Spring Wheat Tour projected average yield of 48.6 bpa, an all time record. The 5 year average for the group is 44.7 bpa. That put a small bit of downward pressure on MPLS. They projected durum yield at 36.6 bpa. USDA reported that net weekly sales through July 17 totaled 443,200 MT.  The largest buyer s were Japan and Nigeria. The total was comfortably within the range of estimates, i.e. no bullish surpise. Australian sources are concerned about likely dry conditions over the next  60 days in eastern Australia. Canadian producers are still hoping to dry out, but draw some comfort from the yield numbers on the Spring Wheat Tour.

October Cotton futures plunged 5% this week.  The over arching concern in the market is a ballooning US ending stocks estimate coupled with large Chinese stocks that could further constrain US exports. USDA reported net weekly export sales of US cotton for last week totaled 373,200 RB, including 3,700 RB of upland.  2013/14 sales of Upland cotton were actually posted as a net reduction of 1,900 RB for this week due to cancellations and rollovers. The USDA marketing year for cotton ends July 31. Any unshipped sales at that point will be applied to 2014/15 outstanding sales. This Export Sales report was through July 17.  

Front month cattle futures were up 4.93% for the week, with nearby futures trading at a discount to the cash market and then seeing cash cattle prices skyrocket $6 or more. Cash cattle traded $165-166 on Friday as packers had money to spend and contracts to fill.  What they don’t have is enough ready cattle to buy. Wholesale beef prices hit record highs again this week. Weekly beef production was 10% smaller than the same week in 2013. Beef production YTD is down 6.3%, with USDA expecting the third quarter production to be smaller than even 2003. Average carcass weights are running about 7# above year ago.  The USDA Cattle Inventory report showed the combined beef factory (beef cows + heifers for replacement) down 2.5% from the July 2012 report. Most if not all of that decline likely occurred in 2013, the year USDA did not issue the report due to budget issues.  The monthly Cattle on Feed report showed fewer cattle placed in lots during June than had been expected, with marketings above estimate at 98.2%. That left July 1 inventory at 97.6% of year ago vs. ideas of 98.1%.

August Hog futures were down 2.7%  this week.  Pork production for the week was up 1.4% from the previous week, but down 1.6% from the same week in 2013. Year to Date production is now below year ago by 1.1% as the cumulative effect of reduced slaughter runs offsets the increase in average  carcass weights. Slaughter YTD is down 4.7% with the pork production down 1.1% . The difference is the extra pounds of pork per animal, with this week estimated at 213# vs. 203# a year ago (carcass). Pork carcass cutout values continued to rise, with the average at $131.79 on Friday vs. $137.56 a week ago.  

 Market Watch

Cattle traders will begin the week reacting to the Cattle on Feed report results from Friday evening. Grain traders will be dealing with any futures positions inherited via August options exercises at expiration.  USDA will give us updated crop condition and maturity ratings on Monday evening in the Crop Progress report. Not to be overlooked, the Fed OMC meeting is Tuesday and Wednesday.  In general they are expected to continue to wind down the QE3 program and send some additional warning shots about inflation, tightening labor markets  and the eventual need to start raising short term interest rates.

Thursday will feature the USDA weekly Export Sales report, with some large numbers already "known" via the daily reporting system. Thursday is also first notice day for August futures deliveries in the grains. Friday will turn the calendar to August and mark expiration of the August live cattle options. In the background we will have the usual end of month asset allocation trades with funds selling winners and buying losers.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

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