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September 2009 Archive for Market Watch

RSS By: Alan Brugler, AgWeb.com

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

Cool But Not Cold

Sep 25, 2009

 

Market Watch with Alan Brugler

September 25, 2009

 

Cool But Not Cold

 

Corn traders produced a 16 cent per bushel gain for the week, despite small weekly export sales numbers for the previous week and some relief about the lack of a September freeze. Temperatures continue to be cooler than normal over a chunk of the United States, but the forecasts do not show them being cold enough in vulnerable spots to negatively affect production. Nevertheless, December contract posted the highest weekly close since July 31. Lack of farmer selling has been limiting hedge pressure and supporting cash basis bids. This is not totally unexpected, given the lateness of the crop and prices that are down considerably from where they were in June.

 

Wheat had a promising rally going, right up until Friday. Shorts were being chased out, and weekly export sales numbers improved. However, longs headed for the exits on Friday, preferring not to risk their gains over the weekend and into Wednesday morning’s USDA reports. While the more complete surveys aren’t out yet, USDA is expected to raise spring wheat and durum production estimates on Wednesday, and those bushels are likely to go straight to carryover in the October WASDE report. Ability to export wheat is still a question mark, with first quarter shipments under 200 million bushels.

 

The soy complex was lower, with soybeans down 1.6%. Soy oil saw daily export sales announcements totaling more than 200,000 MT, but still couldn’t rally. The Census report confirmed that US inventory on September 1 was still over 3 billion pounds, and that is weighing on prices. Soy meal saw substantial competition from DDGs, but has been supported by a slow crush pace that is limiting tonnage. Census reported monthly crush of 119.83 million bushels. July had been 128.77 million bushels.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:

 

Market Watch

 

 

 

 

Weekly

Weekly

 

09/04/09

09/11/09

09/18/09

09/25/09

Change

% Change

December Corn

$3.06

$3.20

$3.18

$3.34

0.16

5.03%

December CBOT Wheat

$4.72

$4.67

$4.57

$4.50

-0.08

-1.64%

December KCBT Wheat

$4.90

$4.78

$4.72

$4.69

-0.03

-0.58%

December MGEX Wheat

$4.99

$4.94

$4.97

$4.87

-0.10

-2.01%

November Soybeans

$9.22

$9.03

$9.41

$9.26

-0.15

-1.59%

October Soy Meal

$287.20

$280.50

$290.00

$289.20

-0.80

-0.28%

October Soy Oil

$33.83

$33.52

$34.68

$34.04

-0.64

-1.85%

October Live Cattle

$86.65

$87.22

$85.55

$86.05

0.50

0.58%

October Feeder Cattle

$98.55

$99.33

$97.03

$96.60

-0.43

-0.44%

October Lean Hogs

$50.50

$52.47

$50.80

$49.95

-0.85

-1.67%

October Cotton

$57.53

$59.31

$63.18

$60.60

-2.58

-4.08%

December Oats

$2.08

$2.08

$2.13

$2.19

0.06

2.82%

November Rice

$14.16

$13.52

$13.47

$13.09

-0.38

-2.82%

 

Cotton futures felt bullish right up until Friday, when a test of the August high at 65.47 found nobody home. After the market stalled at 65.39, bulls headed for the sidelines and provided a massive correction. Fundamentally, not a whole lot changed. Weekly export sales were small, and Turkey was a bigger buyer than China (which is on vacation this coming week). Cold temps in the Lubbock area fueled talk of bolls shutting down cellulose production, but that’s tough to quantify in terms of yield loss. It was also a fairly small area. Some cotton was also likely lost to flooding in the Southeast. The US dollar rallied at mid-week, but was lower on Friday.

 

Cattle futures bulls survived several selling attempts to post a net gain of 50 cents for the week. Cash cattle trade was mostly $84.50 on Friday, about UNCH from the previous week. Packers can’t be happy about that, with wholesale prices down by more than a dollar again on Friday. The choice cutout fell to the lowest price since July 17, putting some pressure on margins.

 

Hogs were lower on the week, mostly because we couldn’t support the wholesale prices. The Cold Storage report showed some progress, but pork belly inventory was larger than expected. Export sales data always lags, but the market acts like we had some good interest in buying hams and then lost it after those orders were filled. Friday afternoon’s Hogs & Pigs report was bullish on paper, with All Hogs, Kept for Breeding and Market Hogs all smaller than the trade average guesses. The breeding herd was down to 96.9% of year ago, confirming some sow liquidation and/or diversion of gilts into the market hog category.

 

Market Watch:  Hog traders will start out reacting to the Hogs and Pigs report. Grain traders will begin Monday by adapting to any surprise exercises from the 9/25 expiration of October grain options. Monday night’s Crop Progress report will again be of interest as we gauge how quickly the risk of frost and freeze losses is diminishing. USDA will provide some fresh grist for the mill on Wednesday morning with the annual Small Grains Production report and the quarterly Grain Stocks report. The latter report will define the final ending stocks for 2008/09 corn and soybeans.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.

© 2009 Brugler Marketing & Management, LLC

Frost Rally Melts

Sep 21, 2009

 

Market Watch with Alan Brugler

September 18, 2009

 

Frost Rally Melts

 

Corn traders had a heck of a ride, as the long range forecasts on Tuesday appeared to have a substantial portion of the Corn Belt getting hit by a freeze or heavy frost. December futures were limit up at one point on Tuesday, peaking at $3.47 ¾. However, both the GFS and European models thawed out as the week went on, and by Friday night corn prices were showing a net loss of 2 cents for the week. Even the substantially weaker US dollar was unable to halt the slide. A huge Mexican corn purchase will show up in this coming Thursday’s Export Sales report, but wasn’t much help when visions of a 13 billion bushel crop were in the bears’ heads.

 

Wheat still struggled with bearish world fundamentals. A French forecasting firm left EU soft wheat production at about 130 MMT, down 7% from last year. However, some vulnerable (from an El Nino standpoint) crop areas in southern Australia saw nice spring rains and kept Aussie crop estimates in the 21-23 MMT range. The warmer weather forecasts for North America also leave the Canadians with more time to get their spring wheat crop mature and harvested. Russia continues to capture much of the export trade to Egypt, now that quality issues have been resolved. Brazil, on the other hand, detained a vessel of US wheat for vomitoxin testing after a reported “tip” from a Brazilian politician.

 

The soy complex was higher, with November beans gaining 4.2% for the week despite the removal of the frost threat and the likelihood of a record crop. The main story is the big fall export lineup, with China having already booked an estimated 382 million bushels of US new crop and other countries also showing more forward business than a year ago. US crushers are trying to short stop some of those beans from getting to the PNW or the Gulf, and some may be planning on getting some receipts via the delivery route. September futures expired weakly on Monday, but November rallied to close the chart gap on Tuesday and then held most of the value for the rest of the week.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:

 

Market Watch

 

 

 

 

Weekly

Weekly

 

08/28/09

09/04/09

09/11/09

09/18/09

Change

% Change

December Corn

$3.29

$3.06

$3.20

$3.18

-0.02

-0.55%

December CBOT Wheat

$4.95

$4.72

$4.67

$4.57

-0.10

-2.14%

December KCBT Wheat

$5.17

$4.90

$4.78

$4.72

-0.06

-1.20%

December MGEX Wheat

$5.40

$4.99

$4.94

$4.97

0.03

0.56%

November Soybeans

$10.11

$9.22

$9.03

$9.41

0.38

4.21%

October Soy Meal

$320.00

$287.20

$280.50

$290.00

9.50

3.39%

October Soy Oil

$36.27

$33.83

$33.52

$34.68

1.16

3.46%

October Live Cattle

$86.70

$86.65

$87.22

$85.55

-1.67

-1.91%

September Feeder Cattle

$98.15

$98.95

$99.17

$97.25

-1.92

-1.94%

October Lean Hogs

$48.07

$50.50

$52.47

$50.80

-1.67

-3.18%

October Cotton

$56.30

$57.53

$59.31

$63.18

3.87

6.53%

December Oats

$2.25

$2.08

$2.08

$2.13

0.05

2.40%

November Rice

$13.76

$14.16

$13.52

$13.47

-0.05

-0.41%

 

Cotton futures were actually the biggest bull story by the time the end of the week rolled around, gaining 6.53% for the week. Cotton appeared to be attracting a lot of speculative interest, perhaps encouraged by the sliding US dollar and certainly supported by improving economic indicators in several countries. The wet weather in the southern US is also seen as delaying harvest a bit, although there is plenty of carryover cotton from last year to keep the mills adequately supplied.

 

Cattle futures bulls lost the battle, with prices sliding to the lowest daily level since August 31 on Friday ahead of the Cattle on Feed report. Softening wholesale prices spoke volumes about US demand, as a large weekly export sales number and a weak dollar failed to turn values up. That translated into weaker US cash cattle prices on Thursday, with most at $84.50. The USDA report itself showed larger than expected placements at 102.4% of year ago. Marketings were slightly above estimates at 96.1%, but the net effect was September 1 on feed numbers that were 98.9% of last year. The trade also appears to be slightly behind on getting them moved out of the lot.

 

Hogs had a fighting chance of notching a 5th consecutive higher weekly close, but blew it on Friday when October futures dropped $1.37 and went  $1.49 below the most recent CME Lean Hog Index quote. Friday’s pork cutout was down a modest 25 cents at $56.79, but Russian and/or Mexican ham interest appeared to have been satisfied for the time being.

 

Market Watch:  As we anticipated in last week’s column, traders went back to weather forecasting after the crop report, trying to be the first to spot any potential for frost/freeze damage. Those who did so last week were burned, but the sport is likely to continue this week. The Monday night USDA Crop Progress report will be important input, showing how much maturity has advanced since last week and thus how many bushels of corn or soybeans are now safe from premature death. We know it will be a lot more than last week. Livestock traders will start the week working through the Cattle on Feed report from Friday night.

 

Tuesday will be the first day of Autumn and also the release date for the USDA Cold Storage report. Thursday will see weekly Export Sales, and also Census Crush and Census Cotton Consumption reports.  Thursday will be a busy day, as it is also expiration day for September Feeder Cattle and first notice day for October cotton deliveries. Not to be ignored, Friday will feature a USDA quarterly Hogs & Pigs report, and will also mark the expiration of October grain options.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.

© 2009 Brugler Marketing & Management, LLC

Sell The Rumor, Buy The Fact

Sep 11, 2009

 

Market Watch with Alan Brugler

September 11, 2009

 

Sell The Rumor, Buy The Fact

 

September corn futures showed a 14 cent gain for the week. December futures were up 13 ½ cents. USDA raised its estimate of the 2009 US corn yield to 161.9 bushels per acre, driving up the crop size to 12.954 billion bushels. It could have been worse, as they also raised old crop ethanol use and new crop export and residual use. The net result was a new crop ending stocks figure of 1.635 billion bushels. The average trade guess had been 1.769 billion, so there was a little bullish afterglow from the report. True to conventional trade wisdom, traders sold the rumor of the big crop estimate and bought the fact. And, of course, debate continues about whether all the acres are actually there, and whether the yield number will hold up after colder weather sets in and some of the extremely late fields presumably get “caught” at less than fully mature stages.

 

Wheat still struggled with bearish world fundamentals. In Friday’s WASDE report, USDA hiked projected world wheat production to 663.72 MMT from 659.29 MMT, with additional production seen in the EU and Russia. The increased crop production outstrips demand growth, with USDA seeing world ending stocks growing to 186.61 MMT. The relevance to US producers is the inability to export needed quantities because the US wheat is still in many cases higher priced than the competition after freight is added to the destination. USDA made no changes in the US ending stocks forecast on Friday, deferring until after the September 30 Small Grains production and Grain Stocks reports.

 

Soybean futures were a mixed bag. The soon to expire September contract shown in the table gained 24 cents on the week because of limited availability of new crop supplies and solid export and crush demand. November futures, on the other hand, were down 18 cents for the week. Soybean meal lost big chunks of price premium due to widespread availability of DDGs from expanded ethanol production and the big price discount for feeders by using that byproduct in feed rations. There were even rumors of big export interest in DDGs. Lower soy oil prices weighed on soybean product value. USDA raised projected average yield to 42.3 bushels per acre and raised the likely crop size to 3.245 billion bushels. On the other hand, likely Brazilian production was raised 2 MMT.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:

             

Market Watch

 

 

 

 

Weekly

Weekly

 

08/21/09

08/28/09

09/04/09

09/11/09

Change

% Change

September Corn

$3.22

$3.21

$3.01

$3.15

0.14

4.66%

September CBOT Wheat

$4.60

$4.67

$4.44

$4.42

-0.02

-0.51%

September KCBT Wheat

$4.94

$5.00

$4.77

$4.67

-0.10

-2.15%

September MGEX Wheat

$5.32

$5.22

$4.84

$4.76

-0.08

-1.65%

September Soybeans

$10.23

$11.36

$9.61

$9.85

0.24

2.45%

September Soy Meal

$333.00

$387.00

$332.20

$338.00

5.80

1.75%

September Soy Oil

$36.33

$36.07

$33.65

$33.36

-0.29

-0.86%

October Live Cattle

$88.60

$86.70

$86.65

$87.22

0.57

0.66%

September Feeder Cattle

$100.70

$98.15

$98.95

$99.17

0.22

0.22%

October Lean Hogs

$47.85

$48.07

$50.50

$52.47

1.97

3.90%

October Cotton

$56.45

$56.30

$57.53

$59.31

1.78

3.09%

September Oats

$2.05

$2.11

$1.96

$1.96

0.00

0.13%

September Rice

$13.13

$13.51

$13.93

$13.33

-0.60

-4.27%

 

Cotton futures extended their rally by another 3.09%, thanks to a 32 point gain on Friday. Friday action was really pretty bearish, since October turned a 136 point gain at the high into a 32 point gain by the close. USDA showed the expected increase in cotton production and also in exports, but left projected new crop ending stocks UNCH at 5.6 million bales. A drop in projected world ending stocks was seen as positive for US exports.

 

Cattle futures bulls worked hard to extract a 0.66% gain in prices for the week. Ready cattle numbers are tight, but beef demand hasn’t fully recovered. Choice beef prices bounced on Tuesday due to refill demand from grocery stores, but by Thursday and Friday wholesale prices were leaking lower. Cash cattle traded at $84.50-85.00 on Friday, essentially steady with the previous week.

 

Hogs extended their rally of the 3 previous weeks, up another 3.9% for the holiday shortened week. October futures held a dollar premium to the rising CME Lean Hog Index. A jump in the cutout value of the hog helped firm hog prices, but a big drop in the quoted value of pork loins at the wholesale level weighed on futures prices on Friday by taking the carcass value down $1.34/hundred. 

 

Market Watch:  With the crop report out of the way, grain traders are likely to go back to weather forecasting, trying to be the first to spot any potential for frost/freeze damage. The Monday night USDA Crop Progress report will be important input, showing how much maturity has advanced since last week and thus how many bushels of corn or soybeans are now safe from premature death. Monday will also be the expiration day for September grain futures contracts. On Monday morning, NOPA is also expected to report on its members’ August crush activity. On Friday, USDA will give livestock producers some fresh information, with both the monthly Cattle on Feed and Milk Production reports.


 

 

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.

© 2009 Brugler Marketing & Management, LLC

Monster Crops Assumed

Sep 04, 2009

 

Market Watch Summary with Alan Brugler

September 4, 2009

 

Monster Crops Assumed

 

 

There may be a lot of immature corn and soybeans out there, but the markets were clearly reaching some comfort level about crop size this past week. The weather forecasts had no threatening temps out through mid-September. Taking their cue from the record spring wheat yields and the resulting plunge in Minneapolis wheat prices, traders were aggressively selling corn and beans, while end users for the most part sat on their hands. Monster crops are seen as being in the offing, with a Memphis based private firm suggesting that USDA would show a corn crop larger than 13 billion bushels in this coming Friday’s report. Yield estimates are mostly in the 161-163 range (all would be a US record), but the private firm suggested that final yields in January could be as large as 168 bushels per acre. This is all corn the market doesn’t need based on known fundamentals, although it would certainly make an increase in the ethanol blend percentage a lot easier decision for the EPA.

 

Soybean yield estimates were also creeping higher this week, running between 42.6 and 44 bushels per acre. In most cases, that put the crop estimate around 3.3 billion bushels. Export business has been excellent, with well over 500 million bushels already on the books for new crop shipment. There is a saying that inverses are infinite, but sometimes they can disappear in a heartbeat. September soybeans and soybean meal saw their huge premiums evaporate as scattered new crop harvest began in IL, NE, LA, and other states. September beans were down nearly 16% in one week. Soybean meal was down 14%. Crushers and exporters wanted more beans than they were getting, but the new crop availability erased the scarcity premium. A major soy meal buyer also passed at its weekly tender, leaving the potential sellers with some high priced inventory to dump in the market. USDA indicated that 87 million bushels of old crop purchases had not been shipped as of the 27th, which also took a little of the starch out of the old crop bull argument. The marketing year ended on the 31st.

 

Wheat futures have already been a train wreck, but lost another 4 to 7% of their value this week. The spring wheat crop, having avoided yield limiting summer heat, is huge but also deficient in protein. Since high protein is why you raise spring wheat, the discounts for not making the numbers are huge. In North Dakota, 11% protein wheat was being discounted $3/bushel from the posted price for typical 14% protein wheat. Besides quality issues, world trade is a problem. Egypt bought some US SRW this week, and Japan has been buying DNS and white, but the overall commitments (shipments plus outstanding sales) are down 41% from last year at this time. There is just too much wheat in too many other countries to compete with the US.IGC put projected world production at 662 MMT.

 

Cotton futures rallied 2.18% for the week. Total upland cotton export commitments are down 32% from last year at this time, at 3.039 million bales. That’s a fairly normal 32% of projected USDA exports for the year, however, and in fact matches the 5 year average. The bullish news was that weekly sales were over 300 thousand running bales, and that China was back as the largest buyer.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 

Market Watch

 

 

 

 

Weekly

Weekly

 

08/14/09

08/21/09

08/28/09

09/04/09

Change

% Change

September Corn

$3.19

$3.22

$3.21

$3.01

-0.21

-6.39%

September CBOT Wheat

$4.82

$4.60

$4.67

$4.44

-0.23

-4.93%

September KCBT Wheat

$5.09

$4.94

$5.00

$4.77

-0.23

-4.60%

September MGEX Wheat

$5.49

$5.32

$5.22

$4.84

-0.38

-7.29%

September Soybeans

$10.23

$10.23

$11.36

$9.61

-1.75

-15.39%

September Soy Meal

$319.40

$333.00

$387.00

$332.20

-54.80

-14.16%

September Soy Oil

$37.18

$36.33

$36.07

$33.65

-2.42

-6.71%

October Live Cattle

$88.55

$88.60

$86.70

$86.65

-0.05

-0.06%

September Feeder Cattle

$100.20

$100.70

$98.15

$98.95

0.80

0.82%

October Lean Hogs

$44.65

$47.85

$48.07

$50.50

2.43

5.06%

October Cotton

$59.21

$56.45

$56.30

$57.53

1.23

2.18%

September Oats

$2.01

$2.05

$2.11

$1.96

-0.15

-7.12%

September Rice

$13.30

$13.13

$13.51

$13.93

0.42

3.07%

 

Cattle futures fought to a near draw for the week, losing 5 cents per hundred or .06%. Wholesale interest was slack, with holiday pipelines already filled the week before. Thus, the prices drifted lower. There was a pickup in buying interest on Thursday for choice, with 105 loads reported.  Cash cattle trade for the week ranged from steady money to $2 lower.

 

Hogs extended and accelerated their rally from the previous week, gaining more than 5%. Rib and ham prices retreated from where they were last week, and the pork cutout was lower for the week at $54.04. However, long time bears in the hogs are taking profits, and that buying is fueling the rally. The CME Lean Hog index also rose back above $50, with the packers trying to get hogs lined up to offset their Monday downtime and to meet the orders that drove the product rally from the two weeks before.

 

Market Watch:  Monday will be a market holiday. Electronic trading will resume on Monday evening. With the three day weekend and the selloff in the grains ahead of it, traders will be keenly interested in any shift to colder than normal temps in the extended forecasts that occurs over the weekend. If it doesn’t happen and things still look benign, weather premiums will continue to leak out of the market. However, there are also USDA Crop Production and Supply/Demand reports on Friday morning that will keep the bears from getting too comfortable due to the potential for a surprise. The normal USDA crop progress and Export Inspections reports will be delayed until Tuesday because Labor Day.  Weekly Export Sales will be delayed until Friday.  Friday will also be the last trading day for October cotton options.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 more extensive paid content, or visit the web site @ www.bruglermktg.com.

© 2009 Brugler Marketing & Management, LLC

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