Sep 17, 2014
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Market Watch

RSS By: Alan Brugler, AgWeb.com

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

Ol' Man River

Aug 01, 2014

Brugler 

Market Watch with Alan Brugler

August 1, 2014

Ol’ Man River

 

In the song Ol’ Man River, from the 1927 musical Showboat, the singer repeats "Ol Man River,  He don't say nothin', he must know somethin', Old Man River, he just keeps rollin' along". The reference was to the Mississippi River, but might just as well be applied to the current grain markets. They must know something about big crops coming, and they certainly keep rolling along in the bearish direction.  Private forecasters have been quite vocal about how huge the corn, soybean, spring wheat crops will be, but USDA ‘don’t say nothin’.  That will change on August 12, with the first official NASS Crop Production estimates for those crops following August 1 focused surveys.

 

Corn lost another 11 cents this week after slipping 8 cents last week, and 7 cents the week before that. Nearby September has lost 61 cents since July 1st.  The December contract is down 29% since early May.  Larger world production forecasts from the IGC earlier in the week kept pressure on the price, despite solid new crop export sales, and well below normal precip this week for much of the corn belt.  Doane came out today with it’s latest estimate at 14.443 billion bushels of production with a 172.3 bpa yield, citing all time high plant populations with lots of second ears showing up on its annual two week crop tour.  A relatively dry July for much of the Corn Belt does not support higher yields, but the cooler than normal July average temperatures in the states with the largest production has historically produced a positive effect on the national average yields.  The USDA is actively gathering data for its first evidence-based attempt to forecast the national average yield.  The Brugler Virtual Corn Tour is also underway, with results exclusively shared with the clients who participate in the study that takes place in 17 states.  US weekly export sales for the week ending July 24 were 1.267 MMT, 86% of the total was for new crop.  Weekly ethanol production pulled back a modest 5,000 bpd to 954,000 barrels. Ethanol stocks, which for some reason didn’t go up the prior week, rose to 18.6 million barrels this week.  Freeze-minded bulls will be watching the crop progress report on Monday afternoon for any indication that the crop development is losing it’s lead vs. the 5 year average. The CFTC Commitment of Traders report this afternoon showed managed money decreasing their net long position in corn by 7,384 contracts as of July 29 giving them a net long position of 63,024 lots.

Soybean futures continue to attempt rallies, based on dry conditions and strong export sales.  The rallies are squashed by ever rising yield and ending stocks estimates, with more and more "best crop of a lifetime" talk. That makes my contrary opinion bone ache! The Brugler500 Index for soybean conditions was at 380, down 3 from the previous week but still the best since 1994 for this date. The old crop contract actually eeked out a three cent gain on the week.  Declining prices should also be causing Brazilian and Argentine producers to ask themselves "What else can I plant?".  January soybeans on the Dalian exchange have gained the US equivalent of 65 cents since July 14th.  US weekly export sales were reported on Thursday, with USDA showing strong new crop sales included in net sales of 1.456 MMT; 87% of the total was booked for 2014/15 delivery.  Soybean meal export sales for new crop were also considerably large, but the bullish news failed to rally the meal market, which lost $3.80 today and $10.50 on the week.  As of the close on July 29, CFTC shows managed money buying 10,224 net contracts of soybeans, which brings them to a net short position of 8,319 contracts.

 

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/11/14

07/18/14

07/25/14

08/01/14

Change

% Change

Sept

Corn

$3.78

$3.71

$3.63

$3.53

($0.11)

-2.89%

Sept

CBOT Wheat

$5.26

$5.32

$5.38

$5.34

($0.04)

-0.70%

Sept

KCBT Wheat

$6.36

$6.33

$6.31

$6.33

$0.01

0.24%

Sept

MGEX Wheat

$6.28

$6.31

$6.28

$6.16

($0.12)

-1.87%

Aug

Soybeans

$11.95

$11.77

$12.12

$12.15

$0.03

0.23%

Aug

Soybean Meal

$387.00

$380.30

$398.00

$387.50

($10.50)

-2.64%

Aug

Soybean Oil

$36.77

$36.57

$36.09

$35.45

($0.64)

-1.77%

Aug

Live Cattle

$149.13

$151.63

$159.10

$157.30

($1.80)

-1.13%

Aug

Feeder Cattle

$210.38

$211.65

$218.25

$220.28

$2.03

0.93%

Aug

Lean Hogs

$128.68

$127.08

$123.63

$118.03

($5.60)

-4.53%

Oct

Cotton

$68.74

$68.63

$65.16

$62.49

($2.67)

-4.10%

Sept

Oats

$3.28

$3.32

$3.48

$3.51

$0.03

0.79%

Sept

Rice

$13.20

$13.13

$12.94

$12.79

($0.15)

-1.16%

 

Wheat futures ended the week on a higher tone, but were mixed on the week.  CBT wheat lost 4 cents, and MGE wheat was down 12 cents.  KCBT was a penny higher.  Uncertainty about the effect of the Russsian/Ukraine conflict on its grain output combined with strong US export sales helped the wheat markets rally late in the week.  USDA reported stronger than expected weekly export sales for the week ending July 24; published at 801,000 MT.  Nigeria, Panama and Brazil were all in for at least 100,000 MT each.  Total commitments as a percent of total projected exports are now at 40%, vs. the five year average for this date of 34%.  The Egyptians bought 175,000 MT of Russian wheat on Wednesday.  No US wheat was offered, as it was uncompetitive with freight costs included.  The IGC raised its global wheat production forecast to 702 million, which is up from a previous projection of 699 million but still below the prior season's 710 million.  USDA currently has the projected world consumption at 699.92 MMT, down from 705.52 MMT in 2013/14.  As of the close last Tuesday, managed money account sold 17,449 contracts in CBOT wheat for the week, giving them a net short position of 71,968 lots.

 

October Cotton futures plunged another 4.1% this week, with the Dec14 futures posting new life of contract lows after plunging more than 1000 points during the month of July.  The over arching concern in the market is a ballooning US ending stocks estimate coupled with large Chinese stocks that could further constrain US exports. USDA reported net weekly export sales totaled 260,400 RB, including only 300 RB of Pima.  The USDA marketing year for cotton ends July 31, which will be in NEXT week’s Export Sales report.  Any unshipped sales at that point will be applied to 2014/15 outstanding sales.  This export sales report was through July 24.  The ICAC expects world ending stocks to rise by 6% in 2014/15 to 21.4 MMT with a stocks to use ratio of 89%.  The weekly Commitment of Traders report showed managed money accounts decreasing their net long position in cotton by 2,730 contracts bringing their overall net long on July 29 to 888 lots.  

 

Cattle futures fell off on Thursday and Friday to post a loss of $1.80 on the week, after gaining $7.55 in the August contract during the month of July.  Feeders lost ground on Thursday and Friday too, but held onto a gain of $2.03 for the week.  The August feeder contract picked up $7.05 during the month of July.  Nearby cattle futures are still trading at a discount to the cash market.  Some cash cattle traded in Nebraska around $163 this week, and most reported sales around the country were between $162 and $165 on relatively light volume, after seeing early week asking prices at $168-170.  Dressed sales were also light, mostly reported around $258. Wholesale beef prices hit record highs again this week. Choice boxes were 2.2% higher on the week and 6.26% higher on the month.  Select boxes picked up 1.5% for the week, and were 8.81% higher during the month of July.  Weekly estimated slaughter was actually 3K head larger than last week, and were 48K head smaller than the same week last year.  Total cattle slaughter year to date is currently thought to be off 6.9% from 2013.  The CFTC Commitment of Traders report showed managed money accounts decreasing their net long position in live cattle by 2,218 contracts last week bringing their overall net long position to 116,437 contracts

August Hog futures were down $5.60, or 4.63% on the week.  August hogs lost Weekly estimated slaughter was 5K head larger than last week, but were 160K head smaller than the same week a year ago.  Thus far in 2014, hog slaughter is off 4.8% from the the same point in 2013.  USDA published weekly pork export sales at 6,900 MT for the week ending July 24.  Pork carcass cutout values continued to slip this week, with the average price reported at $127.32 on Friday vs. $131.79 a week ago for a weekly loss of 3.39%.  Bellies were down 9.43% on the week; Ham cuts were the only primal posting a gain on the week, up 2.47%.  As of the close last Tuesday, managed money accounts reported a weekly decrease of 1,037 contracts in lean hog longs giving them a net long position of 53,834 contracts.

 

 Market Watch

 

 

Cattle traders will begin the week adjusting for any surprise futures positions obtained at options expiration on August 1. Grain traders will be looking for any shifts in the weather forecast models over the weekend, and will be looking for any significant change in the Monday afternoon crop condition ratings.  On the report front, this is a "tweener" week ahead of the first actual USDA production estimates, to be released on August 12. We will get the usual USDA Export Inspections and Crop Progress reports on Monday, and the weekly Export Sales report on Thursday morning. Monday also marks first notice day for August cattle deliveries. Given the discount of futures to cash, it is unlikely that there would be any.

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