Market Watch with Alan Brugler
May 3, 2013
May Showers Bring May Showers?
The usual pattern would be "April showers bring May flowers" and "May showers bring big yields". This year it seems like May showers just bring more May showers, and in some cases snow drifts. It was snowing in the center of the Corn Belt this morning, while areas further west were melting off some white stuff received mid-week. The US weather pattern is expected to turn a little drier, particularly in the western Corn Belt. The east got a few nice days, with more in the forecast. Temperature forecasts continue to call for below normal readings into mid-May, which should keep some weather premium in the corn and wheat markets.
Corn futures rallied 56 cents, or 8.5% on the week. Ethanol production rose to an average 853K bpd last week. This is up 21K from last week and above the 4-week average of 824.5K. Ethanol stocks dropped to 17.036 million barrels. Exports sales were strong at 985,300 MT. Cold and wet weather still kept most of the planters out of the fields, with USDA showing only 5% of the crop in the 18 major states planted as of April 28. Estimates for this week are in the 15% range. The CFTC Disag report shows managed money added to their net long position by 33,258 contracts to be net long 45,497 contracts.
Soybeans ended the week 24 cents higher, after another choppy week of trading. May futures rallied more than 41 cents on Monday, then surged higher on Tuesday before closing about 2 cents lower on the day. Wednesday posted a 28¾ cent loss, but futures rallied on Thursday, and again on Friday to maintain a solid gain for the week. US export sales last week showed a net reduction of 109,800 MT for 2012/13 due to cancellations, and large weekly sales of 1.341 MMT MT for the 2013/14 marketing year. US export commitments are now 99% of the revised USDA expectation for the 2012/13 marketing year. The CFTC Disag report shows managed money added to their net long position by 17,605 contracts to be net long 91,310 contracts.
Chicago wheat futures gained 3.17%, KC wheat gained 4.56%, and in Minneapolis wheat futures were up 5.75% on the week. The Brugler500 index for Winter Wheat condition dropped from 298 to 293 on a 500 point scale. The HRW rating declined again on freeze damage. The SRW rating held steady. The Wheat Quality Tour projected Kansas production at 313.1 million bushels on a 41.4 bpa yield. Oklahoma is seen around 85 million bushels on a 25 bushel average yield. On Friday, a Memphis based consulting firm estimated the US winter wheat crop at 1.529 billion bushels, with HRW production at 798 million bushels. US weekly export sales were a stronger than expected 716,455 MT. This brought total export commitments to 95% of the USDA projection vs. the 5-year average of 100%. The CFTC Disag report shows managed money cut their net short position in Chicago wheat by 15,091 contracts to be net short 5,779 contracts. In KC wheat, the managed money accounts added 8,326 contracts to be net long 12,631 contracts.
Cotton was very choppy this week, with May futures posting a net change of 2.6% for the week after another strong week of export sales. US weekly upland cotton sales were reported at 314,369 RB for old crop and 87,516 RB of new crop sales yesterday. This was the largest weekly old crop sales total since January. The ICAC expects global cotton ending stocks to hit 17.9 MMT at the end of the 2012/13 season, and to rise to 18.25 MMT in 2013/14. The CFTC commitment of traders report shows managed money net long 48,594 contracts after a reduction of 1,357 contracts this week.
Cattle futures were slightly lower for the week, losing 58 cents or 0.48%. Boxed beef prices were strong, with the Choice boxed beef quote setting a new all time high on Thursday at $200.58. That boosted cash cattle prices, with some $131 trades reported. June futures don’t have to respect the cash market until we get into June, and continue to have a pessimistic view of prices 30 or 45 days from now. Choice boxed beef gained another $1.10 on Friday, capping an $8.79 rally from last Friday, and posting another new high at $201.68. The weekly slaughter numbers this week were 1,000 head smaller than last week, and 3,000 head smaller than the same period last year. Beef export sales for the week ending April 25 totaled 14,300 MT, vs. 15,854 MT the previous week. Those sales typically rise between now and mid-summer. The CFTC Disag report shows managed money added 1,846 contracts to their net long position as of Tuesday to now be net long 25,043 contracts.
Hog futures were off 35 cents this week, losing 0.39%. The CFTC report, which runs Tues to Tues, shows managed money added to their net long position with a net increase of 10,005 contracts. The pork carcass cutout lost $0.53 or 0.60% for the week. The estimated weekly slaughter is 2.098 million head including Saturdays projected kill, which is 50,000 head less than last week, but 19,000 head more than the same period last year. USDA reported weekly pork export sales of only 7,989 MT. Either the new reporting system is missing some transactions or export sales are really poor vs. year ago.
The march toward the May 10 USDA crop reports begins. USDA will have no survey based production info in this report, but the WASDE folks will put out their first world S&D estimates for 2013/14. That alone makes the report day significant. The other USDA reports for the week that will get attention are the crop progress report on Monday night, and the weekly Export Sales report on Thursday morning. May cotton futures expire on Wednesday.
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