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January 2010 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.

The Dollar Also Rises, Red Ink In the Shadows

Jan 29, 2010

 

Market Watch with Alan Brugler

January 29, 2010

 

The Dollar Also Rises, Red Ink In the Shadows

 

To compound the bearish attitudes triggered by the January USDA report data, the US dollar has been rallying rather smartly against the euro and some other developed world currencies. That decreases the buying power of those countries to a degree, making US goods look more expensive (and European vacations cheaper). Commodities priced in dollars also tend to be lower when the dollar goes further. The US dollar index has risen 3.5% from the low on January 14, and on  Friday posted the highest close since July 14, 2009.

 

There was a close contest for worst performing ag commodity market this week. Chicago wheat was the winner, down 4.91%, but lean hogs at -4.8% and soybean meal at -4.4% were not far behind.  The only black ink in the change column came from rice, which used a surge on Friday to get into the plus column.

 

Soybeans  were down 3.94% for the week, pressured by the sharp $12.60/ton decline and a companion decline of 1.53% in the bean oil. With the products dropping, it is tough to justify higher bean prices. A bear market generates more bearish news, such as upward revisions in South American production numbers and rumors of Chinese cancelations, origin switches and even a supposed cargo of US beans with seed beans mixed in. The hard news was bullish on the use side, with Census crush and weekly export sales still pretty bullish. Larger than expected Census meal stocks were one of the reasons the meal was dropping, as cash users saw little need to be aggressive.

 

Wheat futures have continued under pressure, with Chicago down 4.9% for the week. KC and MPLS were down less than 3%, as basis bids suggested the market wasn’t getting enough high protein wheat for domestic use at current futures prices. The export market is a different matter, with the US still not competitive into the Mediterranean. There is enough uncertainty about US and Canadian spring wheat plantings to keep the MPLS contract from totally falling apart.

 

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

 

Market Watch

 

 

 

 

Weekly

Weekly

01/08/10

01/15/10

01/22/10

01/29/10

Change

% Change

March Corn

$4.23

$3.72

$3.65

$3.57

-0.08

-2.26%

March CBOT Wheat

$5.69

$5.10

$4.99

$4.74

-0.25

-4.91%

March KCBT Wheat

$5.60

$5.12

$5.02

$4.87

-0.15

-2.99%

March MGEX Wheat

$5.75

$5.21

$5.13

$5.01

-0.12

-2.29%

March Soybeans

$10.22

$9.74

$9.52

$9.14

-0.38

-3.94%

March Soybean Meal

$298.30

$291.70

$286.40

$273.80

-12.60

-4.40%

March Soybean Oil

$39.91

$37.53

$36.71

$36.15

-0.56

-1.53%

February Live Cattle

$85.82

$87.35

$86.62

$85.80

-0.82

-0.95%

March Feeder Cattle

$96.65

$98.65

$99.60

$98.88

-0.72

-0.73%

February Lean Hogs

$67.25

$69.97

$69.85

$66.50

-3.35

-4.80%

March Cotton

$72.44

$72.08

$71.07

$69.03

-2.04

-2.87%

March Oats

$2.75

$2.31

$2.33

$2.28

-0.05

-2.15%

March Rice

$14.96

$13.98

$14.17

$14.20

0.03

0.21%

 

Corn fell 8 cents on the week, with most of that loss on Friday. Rumored end of month index fund buying, and profit taking by shorts, failed to materialize. Weekly export sales dropped off a little too hard from the high of the marketing year the previous week. Commitments are still running 19% above last year, however, vs. USDA projecting only a 10% increase in shipments.

 

Cotton futures were lower once again, suffering a double whammy of a stronger US dollar and a weaker stock market. USDA weekly export sales numbers were much stronger than the trade estimates at just under 500 thousand running bales. However, the market focus was on liquidating longs, not any future tightness. Besides, with wheat and beans surrendering, who needs to bid up for acres?

 

Cattle futures backed off another 82 cents ahead of the Friday night Cattle Inventory report. The report, typically not a market mover, showed about 600 thousand more head than anticipated for the All Cows and Calves category. Market steers were down 2% from year ago, with beef cows down 1%.  There were more dairy replacement heifers and “Other” heifers than expected. Wholesale prices were under pressure early in the week, but bounced back a little Friday on light to moderate packer offerings.

 

Hogs dropped hard on improved weather for hauling hogs, and a drying up of buying interest at the wholesale end. The pork carcass cutout was down 10% in a single week, losing more than $8 per hundredweight. That put a lot of pressure on cash hogs and thus on the nearby February futures.

 

Market Watch:  Livestock traders will begin the week reacting to the Cattle Inventory report, but probably focused more on the US dollar. Grain traders will mostly have the weekly Export Inspections and Export Sales reports to play with, along with South American weather forecasts. Friday will mark the expiration of February live cattle options, and March cotton options.


There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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 subscription content.

 

Copyright 2010 Brugler Marketing & Management, LLC

No Sun, No Glow

Jan 22, 2010

 

Market Watch with Alan Brugler

January 22, 2010

 

No Sun, No Glow

 

Much of the western and central Corn Belt continues to be mired in snow, fog, and ice. There have been very few sunny days, which reflects the disposition of the ag futures and cash markets this week. There was no warm and bullish glow, just declining prices and red numbers on the screen. The decline wasn’t limited to the ag commodities, with the Dow Jones Industrial Average posting the worse weekly loss in nearly 1 year (prior to the slide into the March low).

 

Nearby March corn futures dropped 52 cents during the crop report week. That slowed only 7 cents this past week, all of the net loss occurring on Friday. It is still a bear market, however, as bullish news (1.6 MMT weekly export sales, the largest total of the year) failed to boost the market on Friday.

 

Soybeans suffered the largest percentage loss of the ag markets we track, down 2.31% for the week. Soy oil was down 2.18%, with the 82 point drop equaling 9 cents of soybean value at current oil yields. The $5.30/ton drop in soybean meal accounted for the other 14 cents of loss in the March beans. The USDA showed 990,600 MT of combined old crop and new crop soybean export bookings. That was on the top end of private estimates heading into the report. Softness in gold and energy futures weighed on the soy complex to a degree, suggesting a little less speculative enthusiasm. Bigger South American crops can cause that as well!

 

Wheat futures have continued under pressure, with Chicago down 2.25% for the week. KC and MPLS were a little firmer as the trade works through the implications of the winter wheat acreage cuts, and the distribution of world demand for US wheat by class. On Friday, USDA showed weekly export sales that were double the size of the trade estimates; at 825,800 MT. Bulls see that as a hopeful sign of prices having reached market levels. They are clearly still too high to compete effectively in the Egyptian market, or in other markets where freight costs from the US are higher than those seen by the competitors.

 

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

 

Market Watch

 

 

 

 

Weekly

Weekly

12/31/09

01/08/10

01/15/10

01/22/10

Change

% Change

March Corn

$4.15

$4.23

$3.72

$3.65

-0.07

-1.82%

March CBOT Wheat

$5.42

$5.69

$5.10

$4.99

-0.11

-2.25%

March KCBT Wheat

$5.36

$5.60

$5.12

$5.02

-0.10

-1.95%

March MGEX Wheat

$5.45

$5.75

$5.21

$5.13

-0.08

-1.54%

March Soybeans

$10.49

$10.22

$9.74

$9.52

-0.23

-2.31%

March Soybean Meal

$306.10

$298.30

$291.70

$286.40

-5.30

-1.82%

March Soybean Oil

$40.78

$39.91

$37.53

$36.71

-0.82

-2.18%

February Live Cattle

$86.17

$85.82

$87.35

$86.62

-0.73

-0.84%

January Feeder Cattle

$95.87

$96.35

$97.97

$97.10

-0.87

-0.89%

February Lean Hogs

$65.60

$67.25

$69.97

$69.85

-0.12

-0.17%

March Cotton

$75.60

$72.44

$72.08

$71.07

-1.01

-1.40%

March Oats

$2.77

$2.75

$2.31

$2.33

0.02

0.87%

March Rice

$14.89

$14.96

$13.98

$14.17

0.20

1.40%

 

Cotton futures were lower once again, suffering a double whammy of a stronger US dollar and a weaker stock market with corresponding concerns about the broader economy and cotton demand. As was the case with corn and wheat, USDA weekly export sales numbers were stronger than the trade estimates, but the market focus was on liquidating longs, not any future tightness. The actual net sales for the week were 321,900 RB of upland and 11,300 RB of pima.

 

Cattle futures backed off a little ahead of the Friday night Cattle on Feed report. The market had gained about $1.50 the week before, and gave back half of it after spiking to the new multi-month highs early in the week. Wholesale prices also fell back. USDA told us on Friday afternoon that the number of cattle in the feedlots on January 1 was 2% smaller than it was at the beginning of 2009. December marketings were 103.5% of year ago, while placements were only 93.9% of the previous December. All three numbers were a little more bullish than the average trade guesses, so a higher opening call for Monday is in place. Whether it has any legs will be determined by the general economic and political news over the weekend.

 

Hogs ended a string of strong up weeks, but just barely. February hogs were 12 cents lower than they had been on the previous Friday. The pork carcass cutout was down 17 cents on Friday at $77.18 after peaking at $78.63 on Wednesday.  The USDA Cold Storage report showed a sharp decline in total meat in Cold Storage, down 14%. However, pork bellies in Cold Storage were still above year ago levels at 57.954 million pounds (vs. 51.593 million a year earlier).

 

Market Watch:  Livestock traders will begin the week reacting to the Cold Storage and COF reports. They’ll end it with Friday’s semi-annual Cattle Inventory report, also from USDA.  Thursday the 28th will also be expiration day for January feeder cattle futures. Grain traders will have the usual Export Inspections report on Monday and weekly Export Sales numbers on Thursday morning.  In addition, Census Crush is scheduled for Thursday morning, along with Cotton Consumption.

 

There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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 subscription content.

 

2010 Brugler Marketing & Management, LLC

Melt Down

Jan 15, 2010

 

Market Watch with Alan Brugler

January 15, 2010

 

Melt Down

 

The snow in the Midwest wasn’t the only thing melting this week. Bullish confidence in grain and oil seed prices also eroded following USDA’s reports on Tuesday, and prices were also doing a good imitation of an ice sculpture that had been left out too long. On the other hand, livestock prices were rising while those producers were simultaneously benefitting from the reduced feed costs.

 

Nearby March corn futures dropped 52 cents for the week, a whopping 12% of its value. USDA surprised the trade by hiking projected 2009 production to 13.151 billion bushels on a record national average yield of 165.2 bushels per acre. First quarter use was large enough to require an upward revision in feed use projections, while ethanol and export use were left UNCH. Corn export commitments (shipments plus outstanding sales) are 19.4% larger than on this date a year ago, while USDA is conservatively looking for a 10% year over year increase. The larger production and limited change in consumption meant that USDA raised projected ending stocks to 1.764 billion bushels from 1.673 billion last year. Futures traders sold the market off hard on the news, with one NY based bank/spec house abruptly flipping from bullish to bearish following the report, and liquidating longs.

 

USDA trimmed projected soybean ending stocks to 245 million bushels from 255 million bushels, raising both projected crush and projected exports. The demand revisions more than offset an increase in projected US soybean yield (to a record 44.0 bushels) and production. The world market situation was more bearish, with USDA bumping up Brazilian production 2 MMT to 65 MMT and raising projected 2010 world ending stocks at more than 59 MMT. That would be the second largest world surplus on record. The biggest problem in terms of supporting prices is that production is seen rising more than 20% for the year, while world crush demand is up less than 6% and almost never expands more than 9% in a year. Soybean prices held up better than the feed grains, with March losing 4.7% for the week.

 

Wheat futures have also been under pressure, losing 8-10% of their value in a single week. USDA raised projected US ending stocks to 976 million bushels from 900 million. Most of the cut in use came in exports, which were lowered to 825 million bushels. Projected feed use was also reduced. World ending stocks continue to creep higher, as farmers all over the world have said “I can grow wheat for that”. The world stocks/use ratio is now seen at an 8 year high.

 

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

Market Watch

 

 

 

 

Weekly

Weekly

12/24/09

12/31/09

01/08/10

01/15/10

Change

% Change

March Corn

$4.09

$4.15

$4.23

$3.72

-0.52

-12.17%

March CBOT Wheat

$5.25

$5.42

$5.69

$5.10

-0.59

-10.29%

March KCBT Wheat

$5.22

$5.36

$5.60

$5.12

-0.48

-8.57%

March MGEX Wheat

$5.32

$5.45

$5.75

$5.21

-0.55

-9.48%

March Soybeans

$10.08

$10.49

$10.22

$9.74

-0.48

-4.70%

March Soybean Meal

$296.30

$306.10

$298.30

$291.70

-6.60

-2.21%

March Soybean Oil

$38.86

$40.78

$39.91

$37.53

-2.38

-5.96%

February Live Cattle

$84.75

$86.17

$85.82

$87.35

1.53

1.78%

January Feeder Cattle

$94.62

$95.87

$96.35

$97.97

1.62

1.68%

February Lean Hogs

$63.80

$65.60

$67.25

$69.97

2.72

4.04%

March Cotton

$73.43

$75.60

$72.44

$72.08

-0.36

-0.50%

March Oats

$2.60

$2.77

$2.75

$2.31

-0.44

-16.00%

March Rice

$14.97

$14.89

$14.96

$13.98

-0.98

-6.55%

 

 

Cotton futures had lost ground the prior week, and were also the beneficiaries of fundamentals that were friendlier. They still closed 36 points lower for the week. USDA trimmed projected US cotton ending stocks to 4.3 million bales while also reducing the crop size estimate to 12.4 million bales. Thursday’s weekly export sales report was also bull friendly at more than 400 thousand running bales.  Cotton prices were still dragged down by the weakness in the other field crops, with the market collectively assuming that the needed expansion in 2010 acreage can now be accomplished without any serious price increase needed to pull those acres away from the other crops.

 

Cattle feeders saw the best of both worlds this week. Cash cattle prices were higher because packers were able to receive more for the beef. The choice cutout price rose $3.34 for the week. That allowed futures to rise. At the same time, feedlots are able to lock in sharply lower feed ingredient prices than they were a week ago. Thus, operating margins are much more attractive than they were at the beginning of the year.

 

Hogs were also sharply higher, gaining 4.04% for the week. The pork cutout advanced $4.44/cwt., suggesting that the lean hog index could rise to $70 or more as long as those values are maintained. Futures were under that at mid-week, and rallied in anticipation of higher cash hog prices. Those cash hog prices appeared to suffer little from the improved road conditions and air temps. That is to say, any backlog of hogs from the holiday storms in the WCB appeared to be readily absorbed.

 

Market Watch:  The market will continue to work through the hangover from the January 12 crop reports. Monday will be a market holiday (ML King). The main USDA reports for the week will be on Friday, with Livestock Slaughter, Cattle on Feed, and the monthly Cold Storage report all due to be released. Grain traders will have the usual Export Inspections report and Export Sales reports. Those will be delayed until Tuesday and Friday respectively, due to the federal holiday on Monday.

 

There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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 subscription content.

 

2010 Brugler Marketing & Management, LLC

Welcoming In The New Year

Jan 08, 2010

 

Market Watch and March Corn Tech Talk with Alan Brugler

January 8, 2010

 

Welcoming In The New Year

 

Feed grain bulls welcomed in the New Year with some buying power. Corn open interest rose steadily throughout the week, and prices were up 2.05% for the week. Good margins for ethanol plants, improved profitability prospects for livestock, and export sales commitments that are 19% above last year all suggested steady to higher corn prices. Fund buying was also a definite factor. Wheat, which had been down the prior week, rebounded with gains of 4.4 to 5.5% at the three exchanges. Chart action was positive even though the known fundamentals continue to be poor (i.e. the loosest world stocks/use ratio since the turn of the century).

 

The soybean market has been on pins and needles for a while, knowing that there is a large South American crop coming, but uncertain as to when foreign customers will be comfortable enough with supplies to stop buying US origin and wait for the Brazilian or Argentine vessels to show up. That question still isn’t resolved, but demand questions popped up this week from the main world buyer. China raised interest rates in an attempt to slow a developing bubble. A new requirement to obtain import licenses for soybeans, and a warning to corporations to end speculative trading in equities and futures also weighed on the bean market because it seemed like maybe the Chinese thought they had purchased enough. Product values were also under pressure, with both BO and SM lower.

 

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

 

Market Watch

 

 

 

 

Weekly

Weekly

12/18/09

12/24/09

12/31/09

01/08/10

Change

% Change

March Corn

$3.98

$4.09

$4.15

$4.23

0.09

2.05%

March CBOT Wheat

$5.28

$5.25

$5.42

$5.69

0.27

4.99%

March KCBT Wheat

$5.24

$5.22

$5.36

$5.60

0.24

4.43%

March MGEX Wheat

$5.35

$5.32

$5.45

$5.75

0.30

5.50%

January Soybeans

$10.12

$10.00

$10.40

$10.13

-0.27

-2.57%

January Soy Meal

$305.40

$301.40

$313.90

$306.80

-7.10

-2.26%

January Soy Oil

$38.33

$38.46

$40.35

$39.53

-0.82

-2.03%

February Live Cattle

$84.85

$84.75

$86.17

$85.82

-0.35

-0.41%

January Feeder Cattle

$94.72

$94.62

$95.87

$96.35

0.48

0.50%

February Lean Hogs

$65.12

$63.80

$65.60

$67.25

1.65

2.52%

March Cotton

$75.28

$73.43

$75.60

$72.44

-3.16

-4.18%

March Oats

$2.60

$2.60

$2.77

$2.75

-0.02

-0.72%

March Rice

$15.23

$14.97

$14.89

$14.96

0.06

0.44%

 

 

Cotton futures had a bad week, losing 4.18%. They may be a victim of the asset allocation adjustments being made by the index funds. Cotton prices rallied 54% in 2009, potentially requiring fewer contracts to maintain a fixed proportion of the portfolio. Routine profit taking also kicked in ahead of Tuesday’s USDA production and ending stocks estimates.  Weekly export sales are showing more business from China, and the average trade guess for Tuesday shows a further decline in US ending stocks is anticipated.

 

 Cattle futures lost 35 cents for the week. Marketing disruptions and poor rates of gain resulted in less beef tonnage and a jump in the wholesale beef market. Prices were up another $1.40 on Friday for the choice boxes, taking them to $142.14. That was a gain of $3.39 for the week. Select beef quotes were also higher. Cash trade was up $1-2 from the previous week. Estimated carcass weights were UNCH vs. year ago, but down 3# from the previous week.

 

Hogs rose 2.5% on continued strong ham demand that boosted the pork carcass cutout. Cash hogs were also difficult to originate in the western half of the Corn Belt, due to icy road conditions and a number of roads that were just plain closed by snowdrifts. Packers paid up to get the hogs to move where they could, and the tighter pork supplies forced wholesale prices higher. Estimated hog weights for the week were 3# below the same week in 2009.

 

Market Watch:  Most of the excitement for the week will be on Tuesday. That is when USDA will release the Crop Production, Grain Stocks, Rice Stocks, Winter Wheat Seeding, WASDE supply/Demand and Cotton Ginning reports. There will be plenty of opportunity for surprises, either additive or canceling each other out. The routine reports will include Export Inspections on Monday and Weekly Export Sales on Thursday. In the background will be the monthly index fund rolling out of the February futures contracts in livestock, and re-allocating money to underperforming commodities from those with large gains in 2009.

 

There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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 subscription content.

 

Brugler Marketing & Management, LLC

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