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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.

Voting With Their Feet

Nov 09, 2012

 

Brugler

Market Watch with Alan Brugler

November 9, 2012

 Voting With Their Feet

 

The US stock market saw some minor short covering on Friday, but had a huge loss for the week which began as soon as the election results were announced on Tuesday night. The Dow and S&P had their largest loss in more than 5 months. Traders and investors were voting with their feet and dumping stocks to avoid potential increases in capital gains taxes and dividend taxes. Futures markets were not immune to the selling, although those with the largest losses were easily explained by more bearish fundamentals

Corn futures closed a penny lower for the week after a 2 cent gain the previous week. That’s a sideways market. It would have been higher if not for small losses on Friday following the monthly USDA Crop Production and WASDE reports. USDA raised projected US average yield to 122.3 bpa and increased the projected production to 10.725 billion bushels. World ending stocks increased to 118 MMT. Export interest continues to be very weak. Ethanol production is on pace to meet the USDA forecast, despite an estimated 10 plants that are either shut down or have announced that they will be closing due to poor margins. Ethanol stocks dropped in the weekly report, but there is some suspicion the data were screwed up by the power outages from Sandy.

The soy complex posted the largest losses for the week. Meal was down the hardest, losing 5.5% for the week. That pressured product value and took beans down 4.9%. Beans had a pair of bearish USDA reports on Friday and lost 47 of their 75 cents for the week on Friday. USDA increased projected US production more than expected at 2.971 billion bushels, with average yield also above the highest of the published trade estimates at 39.3 bpa. In the WASDE report, USDA increased projected world ending stocks to 60.02 MMT compared to an upwardly revised 56 MMT for last year. They lowered the expected cash average price for the year to $14.90.

Chicago wheat futures were 2.5% higher for the week despite a sell off on Friday. KC and MPLS were also higher, but with smaller moves. EU futures set new contract highs on the MATIF, signaling that the cheap supplies of French wheat are just about used up and the US is becoming competitive. On the other hand, USDA was forced to reduce projected US exports by 50 million bushels due to slow sales in the first 5 months of the marketing year and a fairly narrow sales window before Southern Hemisphere new crop supplies become available. USDA hiked projected US ending stocks to 704 million bushels. They also caught traders leaning the wrong way on Friday on the global ending stocks. The trade was looking for 171.5 MMT, and got 174.2 MMT.

Cotton futures sank 1.1% for the week after losing nearly 3% the previous week. on the reality of burdensome global cotton supplies. USDA raised projected world cotton ending stocks for next summer once again, to 80.27 million bales. That’s 75.5% of projected annual use, more than a 9 month supply of extra cotton.  Chinese consumption was cut 500,000 bales. Their projected ending stocks are still about 46% of the world total. US cotton ending stocks forecasts continue to grow in the face of the global supply glut. USDA is now projecting 5.8 million bales.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

10/19/12

10/26/12

11/02/12

11/09/12

Change

% Change

Dec

Corn

$7.62

$7.38

$7.40

$7.39

($0.01)

-0.10%

Dec

CBOT Wheat

$8.73

$8.64

$8.65

$8.87

$0.22

2.54%

Dec

KCBT Wheat

$9.06

$9.09

$9.09

$9.22

$0.14

1.49%

Dec

MGEX Wheat

$9.38

$9.40

$9.40

$9.51

$0.10

1.09%

Nov

Soybeans

$15.34

$15.61

$15.27

$14.52

($0.75)

-4.91%

Dec

Soybean Meal

$463.80

$483.40

$475.90

$449.70

($26.20)

-5.51%

Dec

Soybean Oil

$51.58

$50.96

$49.26

$47.77

($1.49)

-3.02%

Dec

Live Cattle

$127.28

$125.25

$125.43

$125.75

$0.33

0.26%

Nov

Feeder Cattle

$148.38

$145.33

$144.90

$144.20

($0.70)

-0.48%

Dec

Lean Hogs

$79.63

$78.90

$77.75

$80.75

$3.00

3.86%

Dec

Cotton

$76.88

$72.42

$70.35

$69.58

($0.77)

-1.09%

Dec

Oats

$3.94

$3.90

$3.67

$3.64

($0.04)

-0.95%

Nov

Rice

$15.02

$14.80

$14.71

$14.94

$0.23

1.56%

 

Cattle futures finished 0.26% higher for the week. Wholesale prices were lower for the week, despite a strong weekly export sales total and slaughter numbers that continue to lag behind year ago levels. On a Friday/Friday basis the choice cutout was down 0.5%. The select boxes were down 1.1%. Week to date slaughter including Saturday is estimated at 2.367 million head, 60,000 head larger than a year ago and up 8,000 from the previous week. Thus, supply appears ample. The higher cutout values suggest demand isn’t too shabby at the moment, whether that is domestic or export business. 

Hog futures surged 3.86% higher this week, the strongest performance on our commodities board. Estimated pork production for the week was actually up 0.6% from the previous week, and up 0.5% from the same week in 2011. Pork production YTD is up 2.2%. Estimated carcass weights are rising seasonally, but still down 4 pounds from last year. The pork carcass cutout value gained 1.25% for the week on a Friday/Friday basis, with a huge 15% gain in the picnic primal. The CME Lean Hog Index is $82.35, a $1.60 premium to nearby futures. Last week it was $5.77, so convergence is in fact taking place.

 

Market Watch:

 The banks and some federal government offices are closed on Monday for Veteran’s Day in the US, but futures markets are open. The USDA export inspections and crop progress reports will be delayed until Tuesday. NOPA monthly crush report will be released on Wednesday. Wednesday will also mark the expiration of the November rice and oilseeds futures contracts. USDA weekly export sales will be delayed until Friday. The USDA monthly Cattle on Feed report is also scheduled to be released on Friday afternoon.

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 2012 Brugler Marketing & Management, LLC

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