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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.

Over and Over and Over

Feb 15, 2013

Brugler


Market Watch with Alan Brugler

February 15, 2013

Over and Over and Over

There seemed to be a relentless bearishness to the commodity market this week, with selling just coming in waves. Corn was down for 10 days in a row before bouncing on Friday. Gold sank nearly $28 per ounce on Friday alone. Hogs were under pressure, wheat was down again. You get the picture; on of selling over and over and over. It was broad based, with the CRB Index falling for the week.  Barclays indicated that it was pulling money from hedge funds trading commodities on the bank’s behalf, joining a parade of  financial entities since December that don’t think commodities are a sexy place to be when the stock market is regularly moving to higher levels. Since most of this money plays the long side, when it leaves we do tend to see some price pressure.

 

Corn futures dropped 1.45% this past week. Nearby March futures were down 4 out of 5 days, and ended a streak of 10 consecutive lower closes with a 4 cent gain on Friday. There was a rotation of ownership, with open interest dropping in the March due to index fund roll activity, but total OI saw others taking up the slack. The EIA weekly ethanol report on Wednesday showed larger daily corn use than the previous week. More importantly, ethanol is back to a substantial discount to gasoline. Weekly ethanol stocks dropped 3% despite the larger production and a rise in imports from Brazil. Ethanol plant margins have turned positive in many areas, with some Nebraska plants resuming operation. US corn weekly export sales remain weak.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

01/25/13

02/01/13

02/08/13

02/15/13

Change

% Change

Mar

Corn

$7.21

$7.36

$7.09

$6.99

($0.10)

-1.45%

Mar

CBOT Wheat

$7.77

$7.65

$7.56

$7.42

($0.14)

-1.85%

Mar

KCBT Wheat

$8.29

$8.23

$8.00

$7.78

($0.22)

-2.75%

Mar

MGEX Wheat

$8.64

$8.52

$8.37

$8.24

($0.14)

-1.61%

Mar

Soybeans

$14.41

$14.74

$14.53

$14.25

($0.28)

-1.93%

Mar

Soybean Meal

$416.40

$428.20

$422.40

$409.40

($13.00)

-3.08%

Mar

Soybean Oil

$52.10

$52.99

$51.43

$51.62

$0.19

0.37%

Feb

Live Cattle

$126.30

$127.10

$126.45

$126.50

$0.05

0.04%

Mar

Feeder Cattle

$147.95

$149.20

$145.00

$143.38

($1.63)

-1.12%

Apr

Lean Hogs

$88.93

$88.75

$86.13

$84.25

($1.88)

-2.18%

Mar

Cotton

$80.52

$82.98

$82.67

$81.32

($1.35)

-1.63%

Mar

Oats

$3.63

$3.59

$3.86

$3.79

($0.07)

-1.75%

Mar

Rice

$15.48

$15.56

$16.35

$15.84

($0.51)

-3.12%

 

The soybean market was under pressure early in the week from improved weather forecasts for South America, and then had a shot of bad news from the weekly export sales report. The USDA showed net negative old crop sales due to cancellations. Beans dropped nearly 2% for the week, with March futures also hurt by index fund roll selling and other traders exiting before their March options positions expire this coming Friday. Meal prices were down more than 3% on the week, with cheaper corn and expanded US crush both part of the equation. There was also  some oil/meal spreading, with soy oil up by .37% for the week.

Wheat was lower on all three exchanges, with KC the weakest once again. Much improved moisture in the Plains was the bearish story. From some accounts you would think that the ½" of water equivalent from the snow storm was a drought breaker. That would be a stretch with 95% of the Plains still in D0 to D4 drought. The snow was followed by addition precip in the forecasts for the next two weeks, removing a little of the weather premium. USDA weekly wheat export sales were stronger than expected by the trade, but with the bearish momentum that new merely slowed the rate of decline. We did get a delayed reaction, with prices up 7 to 8 cents per bushel on Friday heading into the 3-day weekend.

Cotton prices retreated 1.6% for the week. Weekly export sales were much improved from the previous week, at 357,200 RB of upland for the 2012/13 and 2013/14 marketing year in the week ending February 7.  China bought 97,200 RB. Total export commitments for Upland cotton stand at 86% of the USDA projection compared to the 5-year average of 83%. Net sales of American Pima were 17,600 RB for the 2013/14 marketing year and 23,500 RB for 2012/13. World ending stocks are still seen as very large, at 81.86 million bales.

Cattle futures posted a net gain for the week of exactly 5 cents per hundred pounds. Weekly beef production was 0.8% larger than last week, but down 0.7% from the same week in 2012. Average carcass weights are still an estimated 14 pounds per animal higher than last year at this time. Wholesale prices were down $.17/cwt for Choice boxes, a 0.1% drop. Select beef was up $.78 per cwt, or 0.4%. The choice/select spread dropped down to $1.55. In recent years it has dropped to less than a dollar in February or March, and sometimes goes negative. US weekly beef export sales through February 7 slowed to less than 8,000 MT, but shipments were more than double that.

Hogs were down 2.18% after falling 1.4% the prior week. Estimated weekly slaughter was 2.145 million head, up 6,000 from previous week but 0.3% smaller than the same week in 2012. Pork production was up 0.2% from the previous week and down 0.8% from the same week in 2012. Average weights are now estimated to be two pounds lighter than actual weights a year ago. The pork carcass cutout sank 2.71% for the week, with loins under the most pressure. Cash hog prices were weak on Friday. The IA/MN weighted average was down $.95. The average WCB direct sale was $81.70 vs. $84.55 a week ago. The ECB average was $81.10 vs. $85.56 a week ago.   

Market Watch: Traders tired of 21 hour trading days will get a break on Monday, with the US markets closed for the President’s Day holiday. That will delay the routine  weekly reports from USDA to Tuesday for the Export Inspections and Friday for the weekly Export Sales.  Friday will be first notice day for March cotton futures deliveries.  Friday will also mark the monthly USDA Cattle on Feed report, and both the monthly and annual Cold Storage reports. March grain options will also expire on Friday.

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. Visit our web site at https://www.bruglermarketing.com 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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