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January 2012 Archive for Market Watch

RSS By: Alan Brugler, AgWeb.com

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

A Dollar Slide Helps A Lot

Jan 27, 2012

Brugler

Market Watch with Alan Brugler

January 27, 2012

A Dollar Slide Helps A Lot

 

The US dollar index has been in retreat for 10 trading sessions, a full two weeks.  It is down 3.4% since January 13. That drop has helped boost the prices of commodities in dollar terms. The drop this week was 1.7%. All of the grains we track were up more than that, with fundamental factors adding to the gains. The only commodity that proved immune to the dollar’s siren call was cotton. Prices there were down 2.6% for the week. The dollar drop was partially due to an improved sovereign debt situation in Europe, with several countries seeing much lower yields required for debt auctions than were seen in December. The Fed accelerated the decline by stating their intent to hold interest rates low into 2014, with nary a whiff of inflation in the air. That got the carry trade involved, selling USD and buy Aussie dollars for one example.

Corn futures were up 30 cents for the wee, or 4.95%. The cash market was consistent in saying that futures had run to far to the downside, with basis firming to try to generate cash sales by producers. Spreads were also firm. Export sales were nothing to write home about, but shipments to date are just 4 million bushels or so behind last year. That’s much stronger than USDA’s forecast for the year and makes you wonder if the US farmer reluctance to feed wheat in place of corn is more widespread around the globe than USDA gives it credit for. China continues to buy and ship US corn, mostly via switches from "unknown destinations" sales.

Wheat was higher at all three exchanges. For the second week in a row, it was Chicago’s turn to gain ground.  Smaller Argentine production estimates, concern about Russian winterkill and fund short covering because of the weaker dollar were all part of the rally. Ukraine also cut projected 2012 production to 18 MMT due to poor winter wheat stands and winterkill. In the US, Chicago futures rallied back to a premium to corn. USDA weekly export sales through the 19th were 618,000 MT of combined old and new crop. That was right in the middle of trade estimates, and supportive given the big fund short position in wheat.

Soybeans were up 2.7% for the week after a 2.5% gain the previous week. Weekly export sales were disappointing, and widespread rains in South America raising final yield ideas. Weekly export sales for last week were bearish at only 466,300 MT of old crop and 126,000 MT for 2012/13. Trade guesses had been in the 700-850,000 MT range. Nearby futures did manage to shrug off those bearish numbers and add another nickel by Friday night.

Cotton dropped 2.64% for the week. USDA reported net weekly upland export sales for last week of ‘zero’, although there were decent pima bookings. Prices basically peaked on Monday and spent the rest of the week selling off despite the weaker dollar. Trading volume was lighter than normal, which was blamed on the Chinese holiday week and its limited potential for export sales to be made. The Cotlook A Index was put at 100.95 on Friday, a premium of nearly 5 cents per pound to the spot futures.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

01/06/12

01/13/12

01/20/12

01/27/12

Change

% Change

Mar

Corn

$6.44

$6.00

$6.12

$6.42

0.3025

4.95%

Mar

CBOT Wheat

$6.25

$6.02

$6.11

$6.47

0.3675

6.02%

Mar

KCBT Wheat

$6.80

$6.70

$6.67

$7.00

0.3300

4.95%

Mar

MGEX Wheat

$8.01

$8.01

$7.99

$8.26

0.2750

3.44%

Mar

Soybeans

$11.97

$11.58

$11.87

$12.19

0.3200

2.70%

Mar

Soybean Meal

$312.40

$301.50

$311.90

$322.20

10.3000

3.30%

Mar

Soybean Oil

$51.12

$50.29

$50.43

$51.59

1.1600

2.30%

Feb

Live Cattle

$120.40

$122.77

$124.55

$124.70

0.1500

0.12%

Jan

Feeder Cattle

$147.30

$150.58

$151.63

$154.60

2.9750

1.96%

Feb

Lean Hogs

$83.90

$85.60

$85.33

$86.68

1.3500

1.58%

Mar

Cotton

$95.86

$95.47

$98.60

$96.00

2.6000

2.64%

Mar

Oats

$2.87

$2.83

$2.95

$2.99

0.0425

1.44%

Mar

Rice

$14.68

$14.44

$14.54

$14.64

0.1000

0.69%

 Cattle futures marked time, waiting for the monthly Cattle Inventory report on Friday night, and also for the cash cattle market to show some direction. Bids and asks were still $5-6 apart on Thursday night. Wholesale prices were weaker on Friday, but up 1.2% for the week in the choice and up 2.1% for select. Beef production YTD is down 4.8% from last year. The Cattle Inventory report on Friday showed a slightly smaller cattle herd and calf crop than expected. Beef cows were down 3.3%, which was a little bigger cut than the average guess. However, there were far more heifers being held for replacements than expected, at 101.4%. That could be a bit bearish for back month feeder cattle.

Lean Hog futures were up 1.58% this past week.  Estimated pork production for the week was down 2.1% from the prior week, and 0.2% smaller than the same week in 2011. YTD production is still about 6 million pounds larger. Average dressed weight is estimated at 209 pounds, vs. the 208 actual figure for last year. The pork cutout was down 2.78% on a Friday/Friday basis after being up 2.1% the previous week. Thus, packers are presumed to have a little less money to play with.

Market Watch: The Chinese markets will re-open this week after a week long holiday. Livestock traders will start the week reacting to the USDA Cattle Inventory report, and on Friday the February cattle futures options will expire. Grain trade will be focused still on South American weather and the export pace for old crop. USDA will issue the usual Export Inspections on Monday and Export Sales report on Thursday morning. Wednesday also marks the first day of the month long pricing period for crop revenue insurance for the 2012 crop.

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 2012 Brugler Marketing & Management, LLC

Grains Try To Rally

Jan 20, 2012

Brugler

Market Watch with Alan Brugler

January 20, 2012

 

Corn futures were up 5 ½ cents on Friday, and gained a net 2% for the week after plunging 44 cents the week prior in the aftermath of the January 12 USDA reports. Trade estimates for weekly export sales ranged from 500 to 900 thousand MT. USDA put the actual figure at 759,900 MT on Friday morning, smack in the middle of the estimates. China continues to buy and ship US corn, mostly via switches from "unknown destinations" sales. There were sales of 142,400 MT to "unknown" this week. Confirmed Chinese sales of 132, 200 MT for the week all came on a switch from previous unknown destination sales.

The wheat complex was again mixed. This time it was Chicago’s turn to gain ground, while KC and Minneapolis were fractionally lower. USDA reported net weekly export sales through January 12 at 584,200 MT, including a net cancellation for 2012/13 sales. Trade estimates ranged from 350 to 600 thousand MT, so this was on the upper end of expectations. KC protein basis has been on fire, with 11.6-12.6% protein wheat basis firming 13 to 18 cents yesterday alone. We also note that the MGE will permit Canadian wheat to be delivered against futures, beginning with the September 2012 new crop contract.

Soybeans were up 2.5% for the week, recovering 28 ¾ of their loss from the USDA report week. Trade estimates ranged from 500 to 900 thousand MT for the USDA weekly export sales report this morning. USDA put the actual number at 991,100 MT. China and Indonesia were the two largest buyers. The La Nina weather pattern is expected to continue until the May-June period, but is expected to decline in strength. At the moment, the drought in southern Brazil and Argentina is no longer a dome, but more of a leaky roof. There are still dry areas that are stressed, and the longer range forecasts have more dry weather in them after fairly widespread showers.

Cotton rose 3.28% for the week. USDA reported net weekly export sales for last week were 189,400 RB for 2011/12 delivery and were 22,500 RB for 2012/13 delivery.  This was up noticeably from the previous week and the four week average. Pima sales were also up 19% from the four week average at 6,700 RB.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/30/11

01/06/12

01/13/12

01/20/12

Change

% Change

Mar

Corn

$6.47

$6.44

$6.00

$6.12

0.1200

2.00%

Mar

CBOT Wheat

$6.53

$6.25

$6.02

$6.11

0.0825

1.37%

Mar

KCBT Wheat

$7.12

$6.80

$6.70

$6.67

0.0300

0.45%

Mar

MGEX Wheat

$8.50

$8.01

$8.01

$7.99

0.0250

0.31%

Mar

Soybeans

$12.08

$11.97

$11.58

$11.87

0.2875

2.48%

Mar

Soybean Meal

$313.10

$312.40

$301.50

$311.90

10.4000

3.45%

Mar

Soybean Oil

$52.42

$51.12

$50.29

$50.43

0.1400

0.28%

Feb

Live Cattle

$121.97

$120.40

$122.77

$124.55

1.7800

1.45%

Jan

Feeder Cattle

$146.35

$147.30

$150.58

$151.63

1.0500

0.70%

Feb

Lean Hogs

$84.30

$83.90

$85.60

$85.33

0.2750

0.32%

Mar

Cotton

$91.38

$95.86

$95.47

$98.60

3.1300

3.28%

Mar

Oats

$3.10

$2.87

$2.83

$2.95

0.1200

4.25%

Mar

Rice

$14.86

$14.68

$14.44

$14.54

0.0950

0.66%

 

Cattle futures rallied hard all week, and gained 1.45% for the week. Cash cattle trade was up $3 on Friday, affirming the bull move in the futures. USDA weekly export sales through Jan 12 were 16,200 MT, much stronger than usual for mid-January. Boxed beef prices saw further deterioration in the Choice, down 1.2% for the week, while Select was only off a nickel from the previous Friday.  The USDA Cattle on Feed report on Friday afternoon showed Jan 1 numbers at 103% of year ago, with December placements at 94.1% and marketings at 98.1%. The report is bull friendly, but might have a short rope given the Board rally ahead of the release.

Lean Hog futures were down 27 cents for the week.  The pork cutout was up $1.79 for the week, a 2.1% increase on a Friday/Friday basis, with the belly and rib primal the strongest parts of the hog. Estimated pork production for the week was up 0.8% from the previous week and 2.4% larger than the same week in 2011. Average dressed weight is estimated at 209 pounds, which is equal to year ago.

Market Watch: The markets will be open all week in the US, and closed all week in China.  Livestock traders will start the week reacting to the USDA Cattle on Feed and Cold Storage reports which were released after the market closed on Friday. The Fed will meet on Tuesday and Wednesday. No rate hikes are expected. The regular USDA export reports will be released on Monday (Inspections) and Thursday (Export Sales). January feeder cattle expire on Thursday. USDA will release the semi-annual Cattle Inventory report on Friday afternoon. Friday will also mark the expiration of the February serial grain 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. Our web site is www.bruglermarketing.com

 

 Copyright 2012 Brugler Marketing & Management, LLC

Winter Games

Jan 13, 2012

Brugler

Market Watch with Alan Brugler

January 13, 2012

Winter GameThe term Winter Games usually applies to the Winter Olympics. Those won’t happen until February 2014 in Sochi, Russia. We’re talking about market games, the kind that are played around USDA reports and other major news events. For the January 12 USDA reports, the grain bears were the clear winners, outpointing the bulls in rather lopsided fashion.

Corn futures were down 44 cents per bushel for the week, a 6.8% drop. All of that occurred on Thursday and Friday following the USDA reports. It wasn’t so much what they said as what they didn’t say. Traders had convinced themselves USDA was going to reduce projected ending stocks for 2011/12 to 750 million bushels or so. When USDA found more than 9.6 billion bushels sitting around the country on December 1 (about 250 million more than the trade collectively had expected) it was tough to argue for a cut in ending stocks. USDA also raised the production estimate for 2011. The net result was a limit down market on Thursday, and some additional weakness on Friday after a half hearted rally attempt. Cumulative export shipments continue to run close to last year’s total, but net weekly sales continue to struggle with cheap feed wheat competition. One area that is good right now is ethanol exports. The US shipped out a record 152.5 million gallons in November, and is on pace for a billion gallon year. That represents about 364 million bushels of corn exported in liquid form, and totally offsets losses in whole corn shipments.

The wheat complex was mixed. Minneapolis actually gained a quarter of a cent per bushel for the week despite a post-report slide. KC was down 1.5% and Chicago lost 3.5%. Weekly export sales continue to be less than stellar, although USDA raised projected sales for the year based on progress toward the projection. Argentine new crop is now available in the world market. The Egyptians continue to buy wheat from countries closer to home, with lower freight costs. USDA hiked projected world ending stocks to 210 MMT, the largest pile in history if the estimate holds up through a couple years of revisions and updates. The stocks/use ratio would be the loosest since 2001.  

Soybeans dropped 2.5% for the week. Product value was under pressure, with meal losing 1.5% and soy oil losing 1.2% on the week. The USDA numbers were a mixed picture. USDA trimmed projected Argentine production to 50.5 MMT from 52 MMT, and cut expected Brazilian output to 74 MMT. However, those were smaller cuts than private industry expected, and USDA raised projected US ending stocks to a comfy 275 million bushels.

Cotton broke its string of up weeks, losing 0.4%. Weekly export sales were net positive 92,800 RB for 2011/12 marketing year and 2,600 RB for 2012/13 for upland cotton. Pima sales were a combined total of 11,900 RB for both marketing years. The problem is still global demand and the potential for further slowing as austerity measures are implemented in Europe and potentially nudge the Eurozone back into recession territory. Chinese appears to be taking steps to ease tariffs for mills that import cotton and promise to export the finished product. That could be friendly for US export prospects. They need the help, with USDA raising projected ending stocks to 3.7 million bales because of a cut in expected export shipments. The sales are on the books, but we continue to see cancellations of cotton purchased last spring at much higher prices. You can’t trust the sale until it is delivered and the payment has cleared.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/23/11

12/30/11

01/06/12

01/13/12

Change

% Change

Mar

Corn

6.195

$6.47

$6.44

$6.00

0.4400

6.84%

Mar

CBOT Wheat

6.22

$6.53

$6.25

$6.02

0.2250

3.60%

Mar

KCBT Wheat

6.75

$7.12

$6.80

$6.70

0.1000

1.47%

Mar

MGEX Wheat

8.445

$8.50

$8.01

$8.01

0.0025

0.03%

Jan

Soybeans

11.63

$11.99

$11.90

$11.60

0.2950

2.48%

Jan

Soybean Meal

297

$309.40

$309.60

$304.80

4.8000

1.55%

Jan

Soybean Oil

50.96

$52.09

$50.80

$50.20

0.6000

1.18%

Feb

Live Cattle

124.325

$121.45

$124.60

$126.40

1.8000

1.44%

Jan

Feeder Cattle

147.625

$146.35

$147.30

$150.58

3.2750

2.22%

Feb

Lean Hogs

85.85

$84.30

$83.90

$85.60

1.7000

2.03%

Mar

Cotton

87.24

$91.38

$95.86

$95.47

0.3900

0.41%

Mar

Oats

3.1125

$3.10

$2.87

$2.83

0.0475

1.65%

Jan

Rice

13.905

$14.61

$14.46

$14.39

0.0750

0.52%

 

Cattle futures were back and forth all week but on Friday night they settled 1.4% higher for the week thanks to a triple digit gain on Friday. Beef production year to date is 50 million pounds below last year, but this is partly a function of the calendar and when the holidays fall. Beef export sales are typically slow in January and February, and this is significant to a beef market that has become heavily dependent on those exports. Boxed beef prices were down again on Friday, with choice off $2.63 at $184.12. They lost 5.1% of their value in one week. Select product was down 2% on a Friday/Friday basis.

Lean Hog futures were up a handy 2% for the week. Estimated pork production for the week was up 7.3% from the holiday limited prior week, and up 3.3% vs. the same week in 2011. Pork production YTD is down 1.4% from last year, but keep in mind this is only for 13 days. The pork carcass cutout value slipped 0.25% for the week, mostly due to weakness in ribs and picnics.

Market Watch: The markets will be closed on Monday the 16th for the MLK holiday in the United States. There will be normal Monday evening Globex trade. The USDA export inspections report will be delayed until Tuesday, and Export Sales will be delayed until Friday. The monthly NOPA crush report is expected on Tuesday morning. The main monthly USDA reports will be the Cattle on Feed and Cold Storage reports issued on Friday afternoon.

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 or visit our web site at www.bruglermarketing.com.

 

 Copyright 2012 Brugler Marketing & Management, LLC

A Dollar Weather Market

Jan 06, 2012

Brugler

Market Watch w/Alan Brugler

January 6, 2012

A Dollar Weather Market

 

Weather markets are notoriously difficult to trade. One of my favorite phrases is that ‘you can get any weather forecast you want to pay for’. Between different weather models and shifting emphasis on critical time frames it is tough to consistently anticipate what the hot money is looking at or reacting to. The task is even more difficult when the weather and crop conditions in question are in the hinterlands of Argentina or Brazil. There was another dominant weather item this week, an ill wind blowing out of the eurozone. The euro dropped below $1.28. Since the euro is more than half of the weighting for the US dollar index, that meant a dollar climbing in value and making commodities priced in dollars a little bit more expensive to buyers than they otherwise would have been.

Corn futures were down 3 cents for the week, but are still up 61 cents in three weeks. The net loss for the first week of the year came about for a variety of small reasons that added up. Weekly export sales were disappointing again at 306,000 MT, the dollar was strong and likely impairing future export interest, and cash (unhedged) margins had become negative for cattle feeders and many ethanol plants. Potential production losses in South America helped encourage the bulls, but forecasts show some rain in Argentina in a couple days. Even if not a drought buster the showers will reduce stress and likely allow a few more fields to be planted in Argentina. A private forecaster on Friday trimmed estimated Argentine corn production by 3 MMT (about 118 million bushels) due to drought impacts already seen.

The wheat complex took a much sharper turn south, losing 4-5% at the three exchanges. USDA weekly export sales, reported on Friday morning, were much worse than the trade had expected at 168,100 MTs. Spring wheat planting won’t begin until April, but the spec community is monitoring the early drought situation in the upper Midwest. Egypt continues to find sources of wheat that are competitive with US supplies and have lower freight costs. They bought 240,000 MT on Friday, from Ukraine, Russia and France.

 Soybeans gave back 9 cents per bushel, mostly due to a sharp drop in soybean oil on Friday that crimped product value. Weekly soybean export sales were weak with net sales of 281,300 MT vs. trade estimates of 400-600,000 MT. High temps and below normal rainfall continue to stress corn and soybean crops in southern Brazil and Argentina. Cumulative export shipments since September 1 are 257 million bushels below last year at this time. Thus, USDA would have cause for cutting projected exports on Thursday, The argument against doing so would be the crop problems in South America, and their potential for allowing larger than expected US exports in the back end of the marketing year.

Cotton was our bull leader for the week, up 4.9% for the week after advancing 4.75% the previous week. USDA reported combined upland and pima sales that were net negative due to cancellations and tepid new bookings. The ICAC now projects an increase of 8% in global cotton production for 2011/12, with consumption slowing 2%. They raised projected ending stocks to 12.15 MMT for 2012/13 from an estimated 11.93 MMT in 2011/12 and only 9.01 MMT in 2010/11. The consumer side is looking up, with US unemployment dropping to 8.5% in the Friday report and addition of a couple hundred thousand non-farm jobs.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/16/11

12/23/11

12/30/11

01/06/12

Change

% Change

Mar

Corn

5.83

6.195

$6.47

$6.44

0.0300

0.46%

Mar

CBOT Wheat

5.8375

6.22

$6.53

$6.25

0.2800

4.29%

Mar

KCBT Wheat

6.395

6.75

$7.12

$6.80

0.3175

4.46%

Mar

MGEX Wheat

8.1125

8.445

$8.50

$8.01

0.4850

5.71%

Jan

Soybeans

11.3

11.63

$11.99

$11.90

0.0900

0.75%

Jan

Soybean Meal

290.3

297

$309.40

$309.60

0.2000

0.06%

Jan

Soybean Oil

49.55

50.96

$52.09

$50.80

1.2900

2.48%

Feb

Live Cattle

118.5

124.325

$121.45

$124.60

3.1500

2.59%

Jan

Feeder Cattle

143.05

147.625

$146.35

$147.30

0.9500

0.65%

Feb

Lean Hogs

83.15

85.85

$84.30

$83.90

0.4000

0.47%

Mar

Cotton

86.07

87.24

$91.38

$95.86

4.4800

4.90%

Mar

Oats

3.0125

3.1125

$3.10

$2.87

0.2225

7.19%

Jan

Rice

13.685

13.905

$14.61

$14.46

0.1450

0.99%

 

Cattle futures were up 2/6% this past week. On Friday, USDA showed poor weekly beef export sales, with combined 2011 (3 days were left to ship it) and 2012 sales of only 5,900 MT. Shipments were strong at 12,400 MT.  USDA estimated beef production for the first week of 2012 was down 13.2% from the same week in 2011. Wholesale prices were weaker at the top end, with choice boxed beef down 2.4% on the week.  The lower quality Select was down only 0.2%. Estimated carcass weights were about 8# below the actual number for this week in January 2011.

 Lean Hog futures lost 40 cents on the week, or 0.47%.  The pork carcass cutout value was down 1.29% for the week. Pork production for the first week of 2012 was 6.0% smaller than the same week in 2011. Cash hogs were firmer at midweek, allowing the CME Lean Hog index to narrow the basis against February futures. The bearish news is that pork cutout values continue to slip. The bull news is that they are still nearly $6 higher than they were exactly 1 year ago.  Front month futures are $4.50 higher than one year ago.

 Market Watch: This will be the first full week of cash and futures trading since mid-December, and the plate will be pretty full. Major index funds are scheduled to make their asset allocation adjustments for the year this week, typically selling winners and buying losers, but also changing their overall emphasis. The elephant in the room will be the USDA reports on the morning on January 12. The lineup features Crop Production, WASDE supply/demand estimates, the quarterly Grain Stocks report and Winter Wheat seedings. The USDA World Outlook Board (WAOB) has had a difficult time anticipating what the Grain Stocks numbers will be in the monthly reports WASDE reports, leading to huge price volatility on Stocks report days since June 2010.  If there are no surprises this time, that will BE the surprise. We’ll also have the regular export reports on Monday and Thursday. January soy complex futures will expire on Friday the 13th.


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 or visit our web site at www.bruglermarketing.com.

 

 Copyright 2012 Brugler Marketing & Management, LLC

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