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RSS By: Alan Brugler, AgWeb.com

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

In Like a Lamb, Out Like a Lion?

Mar 08, 2013

Brugler


Market Watch with Alan Brugler

March 8, 2013

In like a Lamb, Out Like a Lion?

There is a saying that March "comes in like a lion and goes out like a lamb". That is mostly a weather statement, alluding to blustery, stormy conditions as winter comes to an end, transitioning to spring warm by the end of the month. The month began in somewhat lamb like fashion, if you count a few big snow storms as positive events. It is too early to tell how the markets will react to the end of month March 28 USDA reports. Those market movers include the quarterly Grain Stocks report (responsible for most of the limit moves in the past three years) and the Planting Intentions report. The reports still come at the end of the month and the end of the quarter, a time period when big chunks of money are sloshing around. To complicate things, this will also be a 3 day weekend for Easter, with many traders taking extra days away from the market. In the meantime, this week includes Shakespeare’s famous Ides of March (March 15). That is as in "Beware the Ides of March" and a warning to Julius Caesar that was ignored to his own detriment.

Corn gained 2 cents per bushel for the week in the nearby March contract, thanks to a 13 cent rally on Friday. New crop wasn’t nearly as strong, down 9 ¼ cents on the week. The EIA decreased ethanol stocks and zero imports for the week (which were friendly), but the average daily ethanol production was lower and thus implied corn use for the week was also down.  Old crop export sales were net negative, with cancellations exceeding new bookings. USDA reflected that export weakness by cutting their annual projection by 75 million bushels on Friday. They also upped imports to a record large 125 million bushels. Because of the increased availability, they raised projected feed & residual use by 100 million bushels, leaving ending stocks at 632 million. The average cash price dropped a dime, however because of the easing.   

Soybeans were up a hefty 3% for the week, with very strong export sales and limited delivery stocks both driving the March futures higher ahead of expiration. The November contract had a much smaller gain of 5 ¾ cents. The Friday USDA supply/demand report had no surprises, as USDA made no changes in the old crop balance sheet. They did cut projected Argentine production, but left Brazil UNCH and bumped up expected world ending stocks due to smaller Argentine crush ideas.  Weekly US export sales continue to run "hot" vs. the export forecast for the year. Shipments will have to drop off dramatically in the second half of the year to achieve the anticipated 125 million bushel carryover.

KC Wheat lost 20 cents for the week because of improving moisture conditions in the Plains HRW growing area. Chicago was down a steeper 3.26%, and MPLS was down 1.7% for the week. Weekly export sales were stronger than the pre-report trade estimates, but cumulative commitments still lag the pace needed to meet the diminished USDA forecast for the year. USDA trimmed projected exports to 1.025 billion bushels in the Friday WASDE report, but is clearly anticipating stronger than typical US export sales over the next couple months. The US is about the only major supplier other than India during that time frame. 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

02/15/13

02/22/13

03/01/13

03/08/13

Change

% Change

Mar

Corn

$6.99

$6.90

$7.24

$7.26

$0.02

0.24%

Mar

CBOT Wheat

$7.42

$7.15

$7.13

$6.90

($0.23)

-3.26%

Mar

KCBT Wheat

$7.78

$7.50

$7.57

$7.37

($0.20)

-2.58%

Mar

MGEX Wheat

$8.24

$8.03

$8.20

$8.06

($0.14)

-1.68%

Mar

Soybeans

$14.25

$14.61

$14.65

$15.09

$0.44

3.00%

Mar

Soybean Meal

$409.40

$426.90

$427.30

$436.10

$8.80

2.06%

Mar

Soybean Oil

$51.62

$50.35

$49.47

$50.16

$0.69

1.39%

Apr

Live Cattle

$130.45

$128.23

$129.95

$127.55

($2.40)

-1.85%

Mar

Feeder Cattle

$143.38

$141.25

$141.55

$138.98

($2.58)

-1.82%

Apr

Lean Hogs

$84.25

$81.65

$81.13

$82.03

$0.90

1.11%

May

Cotton

$83.19

$83.14

$85.40

$86.75

$1.35

1.58%

Mar

Oats

$3.79

$3.88

$4.03

$4.04

$0.02

0.43%

Mar

Rice

$15.84

$15.59

$15.53

$15.13

($0.41)

-2.61%

 

Cattle futures ignored strong beef prices and steady/firm cash cattle trade. April settled at $127.55, with cash cattle at $128. Nebraska trade was at $203-204. We may be setting up a formula for cash cattle being sold because of the strong basis rather than the board price? Boxed beef had a weekly change of +4.9% or $9.18 for Choice. The Select boxes were up $8.12 or 4.4% on a Fri/Fri basis. Weekly beef export sales rebounded sharply this week to over 15,000 MT. Beef production was up 5.4% from the storm limited prior week, but down 4.8% from the same week in 2012. Average carcass weights are still running about 9 pounds higher than year ago.

Hog futures managed to gain 90 cents for the week, thanks to a triple digit rally on Thursday. Similar to cattle, the trade is concerned over export and retail demand for pork. The loss of the Russian market, and restrictions on Chinese pork imports, have backed up product into the US market.  On a Fri to Fri basis the pork cutout lost $2.89 or 3.57%. Pork production for the week was up 2.4% from the same week in year ago. Pork production YTD is down 2.2% from last year. Carcass weights are still running about 2 pounds below year ago, helping to offset the larger slaughter.  

Cotton was again a big winner this week with the front month up 135 points, gaining 1.58% on the week.  Weekly export sales were down a little bit, but cumulative sales are already at 90% of the USDA’s revised forecast for the year. USDA hiked projected exports on Friday, and cut expected year end stocks to 4.2 million bales. The average cash price estimate was increased to 71.5 cents. Global ending stocks remain burdensome, but much of that cotton is locked up in China, and China continues to be an active buyer in the world market. 

Market Watch: We start off the week dealing with the effects of the time change, with most of the US switching to Daylight Savings time on Sunday.  USDA will have the usual export reports on Monday (Inspections) and Thursday (Sales). NOPA is expected to release their February soybean crush report on Thursday.  Thursday will also be the last trading day for the volatile March grain futures contracts.  Friday will be a "triple witching" expiration day for stock market futures and options.  Coming up: Spring officially begins on March 20. We’re ready, are you? 

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.  Visit our web site at https://www.bruglermarketing.com or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

Copyright 2013 Brugler Marketing & Management, LLC

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