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June 2010 Archive for Market Watch

RSS By: Alan Brugler, AgWeb.com

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

Back in the Gutter

Jun 25, 2010
 
Market Watch with Alan Brugler
June 25, 2010
 
Back in the Gutter
 
Corn couldn’t stand prosperity. After a two week gain of 21 cents per bushel, futures were down all 5 days, and the net loss for the week was 20 cents. In other words, it only took one week to erase two weeks of rally. Crop condition ratings dropped for the week, with wet weather resulting in drowned out low areas and yellow corn in others. Hillsides and sandy ground seemed to benefit. Weekly export sales were strong, at over 1.4 MMT, but this was ignored by a market that is confident it has enough supply to get it to September. With 10% of the U.S. crop thought likely to be pollinating by July 4th (some writers have estimates over 20%!) early availability of new crop supplies is taken for granted. The Chinese did allow the Yuan to float higher vs. the dollar, but didn’t appear to use the new found purchasing power to extend corn purchases over and above the 900+ thousand tonnes they have already bought.
 
            Cash wheat prices failed to fully follow the futures rally higher, reflecting the reality of a harvest in progress and large stocks of old wheat already in the bin. Technical selling kicked in as prices hit overhead resistance areas, and by the end of the week futures were down almost 5% in Minneapolis. KC and Chicago had smaller losses. Weekly export sales were solid, but most of the big tenders like Egypt and Saudi Arabia still seem to be going to EU and FSU suppliers. The U.S. just isn’t competitive after allowing for freight across the Atlantic.
 
Soybeans posted a 4 cent loss for the week. Crude oil was up sharply on Friday, with traders getting excited about storms in the Caribbean that had some potential for brewing up into an early season hurricane. Soy oil was unable to follow suit with a 1 point loss on Friday and a 2% decline for the week. That put pressure on crush margins. Export shipments are still on track to meet USDA’s projection for the year, although they have slowed significantly because of South American competition. Chinese imports from all sources for the month of June are expected to be all time record large at over 5 MMT. That’s good for world demand in general, and much needed given the projected growth in world ending stocks.
 
July Cotton posted the largest percentage gain for the week of the commodities followed in our table. Cert stocks dropped sharply, presumably going straight from the warehouse to the export market. That diminished the risk of deliveries against July futures, but didn’t totally prevent them. One of the major merchants was right there on first notice day to put out some bales. Weekly export sales were slower than expected, and growing weather in the Southeast improved. All of that didn’t seem to matter for the week. USDA will release an updated Planted Acres number on Wednesday morning
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
06/04/10
06/11/10
06/18/10
06/25/10
Change
% Change
July
Corn
$3.40
$3.50
$3.61
$3.41
0.20
5.61%
July
CBOT Wheat
$4.36
$4.41
$4.62
$4.56
0.05
1.19%
July
KCBT Wheat
$4.65
$4.67
$4.97
$4.84
0.14
2.71%
July
MGEX Wheat
$4.93
$5.02
$5.38
$5.12
0.26
4.83%
July
Soybeans
$9.35
$9.46
$9.61
$9.57
0.04
0.42%
July
Soybean Meal
$277.20
$289.70
$289.40
$289.75
0.35
0.12%
July
Soybean Oil
$36.78
$36.90
$37.92
$37.16
0.76
2.00%
June
Live Cattle
$90.95
$89.50
$89.30
$90.95
1.65
1.85%
Aug
Feeder Cattle
$108.87
$110.07
$110.17
$113.32
3.15
2.86%
July
Lean Hogs
$79.73
$78.55
$80.87
$80.72
0.15
0.19%
July
Cotton
$77.06
$81.54
$81.78
$84.72
2.94
3.59%
July
Oats
$1.94
$2.27
$2.63
$2.64
0.01
0.38%
July
Rice
$10.84
$11.01
$11.01
$10.06
0.95
8.59%
 
Hogs pulled back 15 cents for the week on some light position squaring prior to Friday afternoon’s USDA Hogs & Pigs report. The report showed a smaller hog herd than expected, at 96.4% of year ago. Market hog numbers were also on the lower end of trade estimates at 96.3%. The breeding herd was down 3% from a year earlier, but this was not as large of a reduction as some had anticipated. Efficiency continues to improve, with 9.81 pigs per litter saved in the Mar-May farrowings. Estimated red meat production for the week was down 1.1% from the same week a year ago. Pork production YTD is down 4.2%.
 
Cattle futures were up $1.65 or 1.85% for the week. Wholesale beef prices crept higher, giving packers a little wiggle room on margins. Cash trade was mostly steady with the prior week, with Wednesday and Thursday transactions mostly at $91. Futures had been at a discount to that level, and rallied as the threat of deliveries against June diminished. Beef production YTD is down 1.2%, and estimated production for the week ending June 26 was 505.2 million pounds. That would be down 2.4% from the same week in 2009.
 
Market Watch: Crop watchers will focus very intently on Wednesday morning’s USDA Planted Acreage and Grain Stocks reports. Generally the trade is looking for USDA to show larger corn and soybean plantings than in the March Intentions report. There are some questions about the unplanted acreage in June, i.e. whether final numbers will match this early June survey. The Monday evening Crop Progress report will be monitored for changes in Crop Condition ratings. Wednesday will also be FND for July futures deliveries and expiration day for June Live Cattle. July serial cattle options are due to expire on Friday, July 2. Trade is expected to be thin on Friday, due to the July 4th weekend and the market holiday on July 5.
 
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, or of any particular risk management technique. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited. Call 402-697-3623 for information on our more extensive paid subscription and consulting services.
 
                                                                                                                                      Copyright 2010 Brugler Marketing & Management, LLC

Rising Tide

Jun 18, 2010
 

Market Watch with Alan Brugler
June 18, 2010
 
Rising Tide
 
The US dollar topped out, or at least had a big correction. The euro was rising in part due to some hopeful signs of fiscal discipline and in part because the dollar looked shakier after less robust than expected employment and other economic indicators were released during the week. Commodity prices are proving that they are still aware of the inverse correlation to the dollar, with the rising tide of the euro floating most of the commodities higher for the week in dollar terms. Gold in fact posted a new all time high close in nominal dollar terms at $1258.30 per ounce.
 
Corn was up for the second week in a row, with a two week gain of 21 cents per bushel. Weekly export sales continue to be robust, in excess of 1.2 million metric tonnes for the week. Ethanol production is also at near record levels despite EPA’s decision to again delay any action on the E10-E15 blend decision. EIA is now releasing monthly ethanol production statistics which should help the industry get a more current picture of what is doing on with both fuel demand and corn consumption. On the crop production side, flooding has erased some earlier planted acres in NE, IA and IN, and heavy rainfall is likely leaching out nitrogen and crusting soils in other areas. Informa on Friday lowered its estimate of US 2010 corn planted acreage to 89.3 million from 89.6 in May. The USDA is currently at 88.798 million, with new numbers due on June 30. On the bear side, Corn Belt areas that are typically moisture limited are seeing excellent yield potential and crop condition ratings are the highest for this date since the early 1990’s.
 
Wheat futures were the bull leader, drawing inspiration from the previous weeks’ Canadian announcement that some of their crop would not be planted because of wet weather. Minneapolis spring wheat futures see the most direct competition from Canada, and posted a 7.27% gain for the week. The 2 week total is 45 cents per bushel for old crop spring wheat. KC futures were up 6.48%, as they compete with spring wheat in the higher protein end of the market. Widespread rains were also delaying HRW harvest and threatening quality. Chicago wheat came along for the ride.
 
Soybeans rallied a cautious 15 cents for the week. Soy oil was up on strong export sales to China, and a firmer tone in the energy markets. While the US biodiesel industry is practically dead because of Congressional inaction on the expired blend credit, several other countries have mandated 5% or higher blends and are using a lot more bean oil for fuel this year than last year. Meal lagged, and held back gains in the beans because of its lack of contribution to product value. Rising chicken numbers are supportive, but overall GCAU’s are still below last year. Planting delays mean that some soybeans are still in the bag, and we encountered producers this week who were seriously looking at taking prevented planting payments from crop insurance rather than risk a low yield on late planted beans. Gains were limited by abundant overall world soybean supplies, and a pileup of inventory at Chinese ports.
  
July Cotton eked out a small 0.29% gain for the week. Weekly export sales came in well above expectations at 540,600 RB but below the prior week’s surprisingly large 823,100 running bales. A period of much above normal temperatures and below normal precip is seen for the southern U.S. There is doubt and debate as to whether it will set up into a drought producing high pressure “dome”, but the market is clearly keeping some weather premium in the new crop December bids just in case. Old crop is scarce and must be rationed via price until new crop is available.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
05/28/10
06/04/10
06/11/10
06/18/10
Change
% Change
July
Corn
$3.59
$3.40
$3.50
$3.61
0.11
3.22%
July
CBOT Wheat
$4.58
$4.36
$4.41
$4.62
0.21
4.76%
July
KCBT Wheat
$4.82
$4.65
$4.67
$4.97
0.30
6.48%
July
MGEX Wheat
$5.06
$4.93
$5.02
$5.38
0.37
7.27%
July
Soybeans
$9.38
$9.35
$9.46
$9.61
0.15
1.56%
July
Soybean Meal
$273.50
$277.20
$289.70
$289.40
0.30
0.10%
July
Soybean Oil
$37.61
$36.78
$36.90
$37.92
1.02
2.76%
June
Live Cattle
$90.52
$90.95
$89.50
$89.30
0.20
0.22%
Aug
Feeder Cattle
$108.42
$108.87
$110.07
$110.17
0.10
0.09%
July
Lean Hogs
$82.60
$79.73
$78.55
$80.87
2.32
2.95%
July
Cotton
$80.05
$77.06
$81.54
$81.78
0.24
0.29%
July
Oats
$1.91
$1.94
$2.27
$2.63
0.36
15.86%
July
Rice
$11.64
$10.84
$11.01
$11.01
0.00
0.05%
 
Hogs were up handily on the week, gaining $2.32 per hundredweight. Estimated weekly pork production of 409.9 million pounds was down 0.7% from the previous week and 2% smaller than the same week a year ago. Average carcass weights are believed to be 2 pounds higher than last year at this time. For the year to date, pork production is still down 4.2% and allowing futures prices to trade at much higher levels ($80.87) than they were a year ago ($61.42). 
 
Cattle futures were down 20 cents on the week. The futures discount to cash proved justified, with cash cattle down $2 on the week at mostly $91. Wholesale prices failed to hold on to early week gains. On Friday afternoon the USDA released the monthly Cattle on Feed report. The report showed slightly smaller than expected May marketings at 95.7% of year ago. Placements were very close to the average trade guess at 123.4% of last year. The On Feed number showed year over year growth in numbers at 100.8% of last year. There was little in the way of a surprise in the report, but futures were oversold going into the report and thus MIGHT be susceptible to a relief rally if there is any kind of July 4th beef demand to prop up carcass values.
 
Market Watch: Crop watchers will focus on Monday evening’s USDA Crop Condition reports to see how much impact wet weather and flooding is having on the crops nationally. Traders will also have the Census Crush report on Thursday, and weekly Export Sales on Thursday morning as well. The Fed Open Market Committee meets on Tuesday and Wednesday, but is not expected to raise interest rates at this meeting. Livestock traders will watch for the USDA Cold Storage data on Tuesday afternoon, and the quarterly Hogs & Pigs report to be released on Friday afternoon. Friday will also be the last trading day for July grain options. As the week goes on, attention will focus more sharply on the USDA June 30 reports, with both Grain Stocks and Planted Acreage containing critical information to 2010 and 2011 balance sheets.
 
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, or of any particular risk management technique. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited. Call 402-697-3623 for information on our more extensive paid subscription and consulting services.
 
                                                                                                                                      Copyright 2010 Brugler Marketing & Management, LLC

The Patient is Not Dead

Jun 11, 2010


 

Market Watch with Mikki Allen and Sean Privitera

June 11, 2010


The Patient is Not Dead


This week was a little calmer, even though there were some wild price spikes due to short covering. The Euro-drama mellowed out a bit and left us looking at ag fundamentals like the WASDE report which came out Thursday and was very friendly for corn due to increased ethanol use. The report was neutral for Soy and wheat.

Corn futures finished the week on the plus side, up 10 cents for the week, thanks to a decrease in ending stocks for both 2009/10 and 2010/11 marketing years. USDA increased ethanol and food, seed and industrial usage and decreased feed and residual which lowered ending stocks for 2009/10 to 1.603 billion bushels on the June report down 135 million bushels from the May report. USDA also increased domestic usage for 2010/11 by 100 million bushels for ethanol and 110 million bushels for food, seed and industrial bringing the 2010/11 ending stocks projections to 1.573 billion bushels with a 13.37 billion crop. Export sales were descent with old crop sales at 1,018,838 MT and new crop sales at 143,512 MT. An unknown destination is claiming 85,400 MT of the new crop bushels. The majority of the corn producing areas of the country have been getting rain with some areas wishing they weren’t. Above normal rainfall is forecast for the Northern Plains for the next 6 to 14 days, through June 24th.


Wheat futures finished the week on the plus side, 5 cents higher for the week on the CBOT, 2 cents higher on the KC and 9 cents higher on the MGEX.  Most of the up move occurred post crop report. USDA is projecting a 20 million bushel decrease in ending stocks by raising export estimates for 2009/10 by 20 million bushels. USDA raised 2010/11 wheat production by 24 million bushels which was offset by 20 million bushels of usage and the decreased beginning stocks dropping ending stocks from the May report by 6 million bushels. Above normal rainfall is predicted for the Northern Plains over the next couple of weeks but the spring wheat has been planted. Unusually heavy rains have delayed Canadian wheat and barley planting and wheat acreage could fall as much as 12.5 million acres. A normal Canadian crop would be 60 million acres. Areas most affected are Saskatchewan and Alberta. The U.S. oat futures were up 33 cents for the week.


Soybeans were up 11 cents for the week with some concerns for planting delays because of the weather in the areas are behind. Missouri and Ohio have had the roughest time getting the beans in the ground due to excessive moisture. The USDA monthly WASDE was rather insignificant for soybeans with the corn getting all the attention. Domestic crushing increased usage by 5 million bushels, which in turn dropped ending stocks for 2009/10 and beginning stocks for 2010/11. Nothing changed from the May report for the 2010/11 crop except for beginning stocks which reduced the carryout by 5 million bushels to 360 million, almost double this year’s ending stocks. USDA raised world soybean ending stocks for the last three years by .62 MMT for 2008/09, 1.71 MMT for 2009/10 and .90 MMT for 2010/11 from the May report. China was back in the market this week for U.S. soybeans and U.S. soybean oil. Private exporters reported to the USDA the sale of 240 TMT of soybeans for 2010/11 delivery and 40 TMT of soybean oil for 2009/10 delivery.


Cotton started the week off with a huge swing on Monday with a close near the highs of the day which set the pace for the rest of the week. This week, cotton gained 5.81%, even after a 97 point drop on Friday. The total range for the week from low to high was 819 points. Cotton planting was ahead of average with a high rating. The monthly USDA WASDE reported 2010/2011 World cotton ending stocks at 49.59 million bales, down from 50.13 on the May report. U.S. ending stocks came in at 2.8 million bales down .20 million bales from the May report. USDA’s estimate for 2009/10 ending stocks on this mornings report was 2.9 million bales. Certificated stocks had a total decrease of over 284k bales in the first 4 days of the week.

Hog futures were down 1.62% for the week. Trading was slow to moderate with very light retail demand and moderate offerings, and processing cuts experiences moderate demand and light offerings. The monthly WASDE report released this week showed a decrease in second and third quarter hog production from the May report, dropping annual hog production to 22,122 million pounds from 22,237 million pounds and putting 2010 ending stocks at 500 million pounds.

Cattle futures prices dropped again this week, down 1.62%. Boxed beef got killed: choice was down $7.28 or 4.54% and select was down $7.17 or 4.7%. Moderate demand and moderate to heavy offerings Friday for Boxed beef. September Cattle Crush closed at $107.94, October at $107.01, and November at $127.21. Beef exports were 6,400 MT and shipments were 10,400 MT mostly to Mexico, Japan and South Korea. U.S. beef production increased 10 million pounds for the third quarter of 2010 on this mornings monthly WASDE report and decreased 110 million pounds for the fourth quarter from the May report.

 

Market Watch

 

 

 

 

Weekly

Weekly

Month

05/21/10

05/28/10

06/04/10

06/11/10

Change

% Change

July

Corn

$3.69

$3.59

$3.40

$3.50

0.10

2.79%

July

CBOT Wheat

$4.72

$4.58

$4.36

$4.41

0.05

1.15%

July

KCBT Wheat

$4.95

$4.82

$4.65

$4.67

0.02

0.43%

July

MGEX Wheat

$5.15

$5.06

$4.93

$5.02

0.09

1.83%

July

Soybeans

$9.41

$9.38

$9.35

$9.46

0.11

1.20%

July

Soybean Meal

$275.60

$273.50

$277.20

$289.70

12.50

4.51%

July

Soybean Oil

$36.96

$37.61

$36.78

$36.90

0.12

0.33%

June

Live Cattle

$91.37

$90.52

$90.95

$89.50

1.45

1.59%

Aug

Feeder Cattle

$110.15

$108.42

$108.87

$110.07

1.20

1.10%

June

Lean Hogs

$81.45

$81.85

$79.05

$77.77

1.28

1.62%

July

Cotton

$82.97

$80.05

$77.06

$81.54

4.48

5.81%

July

Oats

$1.96

$1.91

$1.94

$2.27

0.33

17.01%

July

Rice

$12.20

$11.64

$10.84

$11.01

0.17

1.62%


Market Watch: What to look out for next week: NOPA crush, crop progress, CPI, and Cattle on Feed.


Another Red Friday

Jun 04, 2010

                                                                 
                                                                          

Market Watch with Mikki Allen and Sean Privitera

June 4, 2010


European markets continued to sell of on concerns about European banks. The concerns sent the euro to new four year lows and prompted buying in the U.S. dollar and gold as a safe place to park your cash for now. U.S. jobs data added to fuel to the fire with private employers hiring just 41,000 in May, down from 218,000 in April. Total jobs came in at 431,000 below the 513,000 expected by the trade.
 
Corn never really recovered from last Friday’s selloff and continued to erode throughout the week.  Export sales were way below trade estimates at 313,047 MT, nearly 400 MT below the lowest guess. The US dollar closed above the triple top on strong buying after the euro began to drop which will affect export business. Index Funds dropped just over 5,000 contracts from their net long and commercials decreased 26,000 net short corn positions from last week. Managed Money has about the same net long as the previous week at 80,743 contracts.
 
Wheat futures started selling off last Friday and continued a gradual decline throughout the week finishing down 22 cents on the Chicago wheat, 17 cents on KC and 13 cents on MGEX wheat. Harvest is underway and headed north. Protein levels are at the 12% mark so far and recent warmer temperatures have put the rust problems to the background. Egypt bought wheat from Russia and France this week. The EU granted export licenses for 298,000 MT of soft wheat, bringing the total for the marketing year to 16.4 MMT. The cheaper euro should keep EU wheat very competitive in the world market. One area of global concern is dryness in the southern parts of Buenos Aires province, accounting for near half of the country’s wheat crop which is slowing wheat sowing. The USDA forecasts the 2010/11 Argentine wheat crop at 12 MMT.
 
Soybeans were down 3 cents for the week with huge moves over the past couple of days in both directions. It looked like someone may have been short bought yesterday and purchased what they needed overnight, but then the outside markets had a major impact on commodities today. Commercials have been exiting short positions for the past six weeks and show a net 88,124 net short contracts down from 168,231 contracts. Export sales this week were disappointing and came in under the already discounted trade guesses at 148,142 MT with shipments the past two weeks also lower. China has had a backlog at their ports which has presented a problem for about three weeks.
 
Cotton continues to be volatile. This week, it lost 3.74%, with only rice a “bigger loser” for the week at 6.88%. The downside pressure was driven by a couple of different factors. The huge move up in the dollar due to continued Euro concerns, a decline in the broad stock market, planting that was well ahead of last year, and the disappointing jobs data that came out this morning. The jobs data is important to cotton because cotton has a tight connection with the economy and retail.
 
Hog futures were down 3.42% for the week, pulled down with the rest of the ag space. Lean Hog futures were under pressure from the declining stock indices and a down day Friday in the rest of the ag space. The DJIA was under pressure from disappointing jobs data creating uncertainty in the economy about a recession recovery. Midwest cash trade is mostly lower. Iowa/Minnesota carcass base price average is $76.19, $1.11 higher. Eastern cornbelt is 1.11 higher and Western cornbelt is $.97 lower. Prices are supported by a 4% decrease in pork production in 2010 compared to 2009. Pork trading is slow with light demand and moderate offerings. FI Slaughter was up 2.7% for the week ended May 22nd.
 
Cattle futures prices dropped hard, mostly on outside markets and lower beef prices. Beef prices have been declining this week and got hit hard yesterday afternoon with more downward pressure this morning. Cash trade was active Thursday with feedlots getting their asking price of $95 to $95.50 in the South. Beef exports were 7,924 MT, down about 10,000 MT from last week. Shipments were on steady with the past several weeks.
 

 
Market Watch
 
 
 
 
Weekly
Weekly
Month
05/14/10
05/21/10
05/28/10
06/04/10
Change
% Change
July
Corn
$3.63
$3.69
$3.59
$3.40
0.19
5.29%
July
CBOT Wheat
$4.72
$4.72
$4.58
$4.36
0.22
4.81%
July
KCBT Wheat
$4.91
$4.95
$4.82
$4.65
0.17
3.43%
July
MGEX Wheat
$5.13
$5.15
$5.06
$4.93
0.13
2.62%
July
Soybeans
$9.54
$9.41
$9.38
$9.35
0.03
0.29%
July
Soybean Meal
$276.80
$275.60
$273.50
$277.20
3.70
1.35%
July
Soybean Oil
$37.54
$36.96
$37.61
$36.78
0.83
2.21%
June
Live Cattle
$93.25
$91.37
$90.52
$90.95
0.43
0.48%
Aug
Feeder Cattle
$112.98
$110.15
$108.42
$108.87
0.45
0.42%
June
Lean Hogs
$83.55
$81.45
$81.85
$79.05
2.80
3.42%
July
Cotton
$80.72
$82.97
$80.05
$77.06
2.99
3.74%
July
Oats
$1.96
$1.96
$1.91
$1.94
0.03
1.57%
July
Rice
$11.81
$12.20
$11.64
$10.84
0.80
6.88%


Market Watch: The main focus of next week will be the crop production and WASDE reports out on the 10th. Export sales, and crop progress reports will be back to their normal days. The Euro and concerns about the overall economy will continue to be the spotlight next week as speculators and hedgers alike decide what their next move is. 
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