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Market Watch

RSS By: Alan Brugler,

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

Oily Situation

Feb 24, 2012


Market Watch with Alan Brugler

February 24, 2012

Oily Situation


Oil and oilseeds dominated the market action this week, although corn also got a lot of attention via the USDA Outlook Forum and the first "armchair estimates" from USDA for 2012/13 production and consumption. Crude oil (WTI) rose to $109.70, up $1.87/barrel on Friday. That was the highest weekly close since April 29, 2011. Iran talk dominated the discussion, but gasoline and diesel prices were also rising and allowing refiners to pay up for product as needed. Biodiesel may not be getting the blend credit that it was, but soy oil followed the energy products higher anyway. The drought is breaking down in South America, but estimates of production losses continue to get larger, and so are projections for US 2012/13 soybean exports. That has the bean market trying to buy acreage this spring in the United States, or at least minimize the loss of acreage to corn. USDA thinks beans are holding all of last year’s acreage, at 75 million planted, but time and spring weather will tell the tale.


Corn futures lost a penny per bushel for the week. The USDA 10 year Outlook Forum production forecast was bearish as expected, with 94 million acres expected to have a near record yield of 164 bushels per acre. USDA did see expanded use, however, and projected ending stocks were at a fairly neutral 1.6 billion bushels. Weekly export sales were disappointing, less than a million metric tonnes. On the bull side, China bought more corn as announced under the daily reporting system, and additional sales were attributed to "unknown destinations".
















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 The wheat complex saw all three exchanges lower. Minneapolis lagged the gains in the other two markets a week ago, and was even weaker this past week. USDA predicted 58 million acreage of wheat will be planted this spring. That implied about a million acres more spring and durum wheat than what the trade has been anticipating. Minneapolis is the delivery location for most of the US spring wheat. A wire service poll of Canadian producers also surfaced expansion plans in Canada for 2012. USDA projected US ending stocks will total 957 million bushels by May 31, 2013, which is an unwelcome expansion given current world stocks levels.


Cotton futures slid 160 points to close 1.75% lower for the week. USDA reported weekly export sales through February 16 at 183,900 RB for both marketing years for Upland cotton. Net Pima sales were 17,300 RB for 2011/12 delivery. Upland cotton acreage is expected to decline to 13.2 million acres because of lower prices. At the Outlook Forum, USDA projected 2012/13 exports would reach 12 million bales. China is expected to cut cotton imports by 1 million bales to 16 million in 2012/13 according to USDA. The USDA projected the on farm price will average 80 cents a pound in the 2012-13 marketing year.


Cattle futures set new all time highs, but dropped by more than $2 on Thursday and ended the week $1.05 lower than they went home the previous Friday. Wholesale prices were stout all week, with Select boxed beef setting an all time high on Friday at $193.40, and strong weekly export sales announced Friday morning confirmed the strength of the demand. Cash cattle trade confirmations were still hard to come by in the southern Plains on Friday afternoon, but a few northern sales were $1-2 lower than the record high of the previous week. Estimated beef production for the week was down 3.7% from the previous week and down 7.7% from last year. YTD production is down 5.3%. Friday’s Cattle on Feed report showed larger than expected marketings at 102.4% of year ago, with placements at 97.8% and February 1 On Feed numbers at 102.0%.


Lean Hog futures were down 0.7% for the week. Pork production for the week was estimated at 441.2 million pounds, down 1.4% from last week but up 0.5% from the same week in 2011. YTD production is up 0.6%. The pork carcass cutout value was down $1.10 for the week on a Friday/Friday basis. Pork ribs were in the most demand for the week. The Cold Storage report earlier in the week showed pork in the cooler to be 8.5% more abundant than a year ago. On the other hand, chicken breast meat supplies were down sharply as production cutbacks have finally started to tighten up supplies.


Market Watch: Grain traders will start the week adjusting for any futures positions inherited due to options "pins" as the March options expired on Friday. March corn was the piñata, if you will pardon the expression, settling at $6.40 ¾ and forcing a number of long March 640 calls to be exercised into long futures. Long 640 puts of course expired worthless. The March 1280 strike price was the battleground for soybeans, settling at $12.79. March Chicago wheat settled at $6.41, again a penny in the money on the calls. February cattle futures expire on Tuesday, which is also the end of the month and a time that can result in fund flow price changes in a lot of markets. The regular USDA reports are the Export Inspections on Monday and weekly Export Sales on Thursday.


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

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