Jul 12, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


November 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.

Chinese Takeout

Nov 26, 2010

brulogomed

Market Watch with Alan Brugler
November 26, 2010
Chinese Takeout
 
China raised bank reserve requirements a week ago, and now they have doubled the margin requirements for soybean futures, effective Monday. They have also told banks (who are otherwise being encouraged to slow down lending) to make more money available for agricultural production due to food shortages. They are trying to dry up the money in circulation and slow inflation, while also signaling they might need to import more food. They aren’t currently buying U.S. corn, but corn is an obvious target. Beans and cotton are still worried about slowing export sales due to the anti-inflation measures.
 
Corn prices were up 18 cents for the week, more than erasing the loss of the previous week. December options contracts expired on November 26th and there were several attempts to pin large groups of options traders in futures positions. The dollar was firmer all week. Corn export sales have been weak for the past month, but we’re starting to get indications of improved interest. Friday’s weekly total was 823,000 MT and up 54% from the previous week as export customers took advantage of the “pre-Thanksgiving sale” in the corn market.
 
Wheat futures were higher at all three exchanges for the week. Weekly export sales were strong at 745,200 MT. Egypt and Mexico were the two largest buyers. The International Grains Council sees a rebound in acreage globally in 2010/11, with more area for Russia and Canada and the United States. That would imply a lot more Russian spring wheat than usual, as fall plantings of winter wheat were down. U.S. winter wheat acreage won’t be tabulated and released by USDA until January.
 
Soybeans were up 3% for the week, with meal and oil also higher. There was a lot of negative news thrown at the market, mostly from China. However, the Census Crush report showed much smaller than expected soy oil stocks at the end of October, and meal was able to rally in tandem with corn despite a large Census stocks figure in excess of 500 thousand tons. Weekly soybean export sales for the week ending 11/18 were a solid 948,900 MT. China was the largest buyer as per usual, with the Netherlands, Taiwan and Spain next in line.
 
The cotton collapse continued. For the week, prices were down 9.26% following an 8.76% loss the previous week. For the second week in a row, that was the largest loss among the tracked commodities. Weekly export sales were very slow, at 311,800 running bales of combined pima and upland cotton. Speculative liquidation ahead of December delivery notices morphed into more selling as the Chinese continued to try to force their internal markets lower. Futures deliveries were larger than in October, but continue to be limited by tight cert stocks. Much of the U.S. cotton crop has already been sold or committed to either domestic mills or export merchants.
 
Cattle futures were up 77 cents for the week. Cash cattle prices were sharply higher, as packers moved early in the week to lock up cash cattle supplies. Cash was mostly $102-102.50. Many plants were dark on Thursday for the holiday, but that usually leads to catch up activity the following week.  USDA reported a pickup in beef export interest, with 13,700 MT sold the week ending November 18, along with another 3,800 MT for shipments in 2011. Wholesale prices were up 1% for the week.
 
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
11/05/10
11/12/10
11/19/10
11/26/10
Change
% Change
Dec
Corn
$5.88
$5.34
$5.21
$5.38
0.18
3.36%
Dec
CBOT Wheat
$7.29
$6.69
$6.45
$6.48
0.04
0.58%
Dec
KCBT Wheat
$7.86
$7.30
$7.10
$7.21
0.11
1.59%
Dec
MGEX Wheat
$7.97
$7.45
$7.26
$7.34
0.08
1.14%
Jan
Soybeans
$12.84
$12.69
$12.02
$12.39
0.37
3.08%
Dec
Soybean Meal
$348.00
$339.70
$325.80
$336.80
11.00
3.38%
Dec
Soybean Oil
$52.22
$52.53
$48.96
$49.90
0.94
1.92%
Dec
Live Cattle
$97.55
$98.40
$101.45
$102.23
0.77
0.76%
Jan
Feeder Cattle
$110.77
$114.40
$117.40
$118.75
1.35
1.15%
Dec
Lean Hogs
$66.95
$68.98
$69.13
$70.35
1.22
1.77%
Dec
Cotton
$142.23
$140.18
$127.90
$116.06
11.84
9.26%
Dec
Oats
$3.75
$3.40
$3.53
$3.44
0.09
2.55%
Jan
Rice
$14.98
$14.07
$13.90
$13.41
0.49
3.53%

 
Hogs had a positive week, up 1.77%. Packers continue to keep an unusually fat chunk of the wholesale dollar, with the farm share declining. That wholesale price was up for the week, and some of it percolated down to the cash hog market. The pork carcass value was up $1.49 on a Friday/Friday basis, or 1.91%.
 
Market Watch:  The grain market will begin the week adjusting for all of the options exercises that occurred on Friday. The assumption is always that some of the new futures longs and shorts aren’t accustomed to big swings in prices as they come out of the options environment. Sometimes the trade tests the depth of their pockets, other times nothing happens. Tuesday is first notice day for deliveries vs. December grain futures contracts. USDA will have the regular weekly export sales report on Thursday morning. Friday will mark options expiration for December live cattle.
 
I look forward to seeing some of you at the Marketing Rally in St. Charles, Illinois on December 1-2. Be sure to identify yourself as a Market Watch reader!                                 Alan Brugler
 
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.
 
 Copyright 2010 Brugler Marketing & Management, LLC

Another Black Friday

Nov 19, 2010

 

Market Watch with Alan Brugler
November 19, 2010
Another Black Friday
 
For the second Friday in a row, futures were sharply lower. Corn was down 21 cents per bushel, and soybeans fell 40 ½. Cotton was again limit down, this time the expanded 600 point limit.. Behind the selling were concerns about the Chinese economy. China raised bank reserve requirements for the 5th time this year. They are trying to dry up the money in circulation and slow inflation, while likely also reserving against some of the bad loans on the books. The worry is that they will buy less cotton and fewer U.S. soybeans. They aren’t currently buying U.S. corn, but corn was guilty by association!
 
The soybean complex was hit hard by Chinese efforts to slow down food inflation. January bean futures were down 5.3% for the week, and soy oil plunged 6.8%. The price spreads between Chinese soybean futures and the U.S. futures narrowed, making imports potentially less attractive. Since China is currently projected to take over 59% of all global bean shipments, anything that slows their demand down is bearish at current price levels. As with the Fed QE2 program in the U.S., the question is whether the increased reserve requirements for Chinese banks and higher interest rates actually work as intended.
 
Corn prices were down 13 cents for the week, with all of the loss occurring on Friday. Get me out selling was the main feature, with December options contracts expiring November 26th and delivery notices beginning 4 days later. The dollar was firmer while corn was trading on Friday, adding to the bearish spin, but the buck faded and ended the day lower. Corn export sales have been weak for the past month, but we’re starting to get indications of improved interest. South Korea bought several vessels this week, after having relied on feed wheat purchases when corn was charging toward $6 prior to the crop report.
 
Wheat futures were down 2.5% for the week in MPLS, but down 3.7% in Chicago. Weekly export sales were strong at 986,900 MT, and Egypt was booking some business that should show up in next week’s report. However, wheat has the same problem that corn does, with upcoming options expiration and delivery notices. The fund type buyers were liquidating when given the opportunity.
 
Cotton collapsed. For the week, prices were down 8.76%, the largest loss among the tracked commodities. Weekly export sales for the prior week held up well, but the longs were heading for the exits. They are nervous about Chinese efforts to tighten the money supply and credit, which have caused Chinese cotton futures to drop sharply. Shorts are nervous about December deliveries, given very tight cert stocks. Thus, they were willing to buy back when the spec longs wanted to sell back.
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
10/29/10
11/05/10
11/12/10
11/19/10
Change
% Change
Dec
Corn
$5.82
$5.88
$5.34
$5.21
0.13
2.48%
Dec
CBOT Wheat
$7.17
$7.29
$6.69
$6.45
0.25
3.70%
Dec
KCBT Wheat
$7.71
$7.86
$7.30
$7.10
0.21
2.81%
Dec
MGEX Wheat
$7.77
$7.97
$7.45
$7.26
0.19
2.55%
Jan
Soybeans
$12.36
$12.84
$12.69
$12.02
0.67
5.32%
Dec
Soybean Meal
$337.70
$348.00
$339.70
$325.80
13.90
4.09%
Dec
Soybean Oil
$49.30
$52.22
$52.53
$48.96
3.57
6.80%
Dec
Live Cattle
$98.83
$97.55
$98.40
$101.45
3.05
3.10%
Nov
Feeder Cattle
$110.33
$110.60
$112.40
$117.40
5.00
4.45%
Dec
Lean Hogs
$66.20
$66.95
$68.98
$69.13
0.15
0.22%
Dec
Cotton
$125.26
$142.23
$140.18
$127.90
12.28
8.76%
Dec
Oats
$3.68
$3.75
$3.40
$3.53
0.14
4.05%
Jan
Rice
$14.73
$14.98
$14.07
$13.90
0.18
1.24%

 
Cattle futures were up a smart $3.05/cwt. this week, a 3.1% gain that featured new life of contract highs for the February contract among others. Cash cattle prices were steady at $98-98.50, but that was firmer than some had expected a week ago. On a Thursday/Thursday basis, choice boxed beef was up 1% and select was up .7%. Those supported packer margins. After the close on Friday, USDA indicated that the number of Cattle on Feed November 1 was 103.2% of last year at the same time. October placements were 101.2% of year ago, while October marketings were smaller at 98.8%. That was as expected.
 
Hogs had a barely positive week, up 0.22%. On a Thursday/Thursday basis the cutout value of the hog was up an average of $.43. That gave packers a little more spending money, but the market runs are still large enough to allow the packers to be limited in their generosity. Estimated slaughter for the week was 2.326 million head, which would be .6% larger than the previous week and .2% above last year for the same week. Both packer and producer had incentive to get the hogs moved before the Thanksgiving holiday messed with the scheduling. Pork production year to date is still down 3.6%, which is helping to keep prices above last year’s levels.
 
Market Watch:  The trading population will be thinner this week, with the Thanksgiving holiday on Thursday in the United States. The CME Group will be trading on Friday, which is also the expiration day for December grain options. Weekly Export Sales will be delayed until Friday. Cattle traders will begin the week by reacting to Friday’s Cattle on Feed report. On Monday afternoon, USDA will release its monthly Cold Storage report.  Tuesday will be first notice day for December cotton deliveries. Census is due to release the monthly Census Crush report and Cotton Consumption report on Wednesday morning.
 
I look forward to seeing many of you at the Marketing Rally in St. Charles, IL on December 1-2.
 
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.
 
 Copyright 2010 Brugler Marketing & Management, LLC
 

Sailing on the Titanic

Nov 12, 2010

 brulogomed

Market Watch with Alan Brugler

November 12, 2010

Sailing on the Titanic

Last week we talked about the market sailing on the QE2, the Fed program intended to lower interest rates and stimulate the economy. The dollar spiked lower on the day QE2 was announced, and has rallied ever since. As we look this week’s price action, it looks more like we were sailing on the Titanic and hit a big ole iceberg. Even if we turned it into ice cubes it is cooling down the red hot bull markets in commodities. For that matter, the first tranche of the QE2 buying failed to have any impact. Interest rates on Friday night were higher than they were before the Fed went into the market.

Not to be ignored, China allowed the Yuan to rise this week and intervened again in the banking system in an attempt to cool off the bubbles they are seeing in real estate and commodities. China raised its reserve requirement for its banks 50 basis points. The Chinese market didn’t take it well on Friday, with the stock markets down by more than 5% and the commodity futures in some cases limit down. That weakness spilled over into the U.S. market on Friday.

The soy complex turned in a comparatively strong performance for the week. Beans were down 12 cents for the week as a whole, due to strong buying after USDA dropped projected ending stocks to only 185 million bushels and raised projected exports another 50 million bushels. If the Chinese actions ultimately reduce demand for soy products, that 50 million bushel increase could be in jeopardy. On the other hand, a successful cool down effort might mean more demand over time because of the demand destruction caused by high prices.  News out of South America was mixed. Dry weather is definitely a concern in southern Brazil and northern Argentina. However, USDA raised projected production for both countries in Tuesday’s WASDE report due to increased acreage attracted by the high global prices. Increased margin requirements didn’t help soybeans later in the week.

Corn prices were good until Tuesday morning, but collapsed a spectacular 9.15% for the week. USDA lowered projected ending stocks to only 827 million bushels, which is below pipeline requirements. However, a brief rally above $6 found little buying interest up there, and the macro issues discussed above encouraged a lot of profit taking type selling. December options expiration and delivery notices are rapidly approaching; liquidation of December positions was a theme all week. Weekly export sales came in above trade guesses but that couldn’t shake off the bears scared by Chinese markets.

Wheat futures were lower at all three exchanges. Earlier in the week condition ratings showed wheat good/excellent condition down a point. The USDA showed ending stocks 5 million bu lower with world ending stocks over 2 MMT lower due to mostly to increased use in China. Much needed moisture came in later in the week for KS and OK. Informa saw planting for 2011 down .9 million acres from previous forecasts at 56.1.

Cotton again set new modern era highs during the week on a US and international basis but succumbed to massive profit taking. The market got above the inflation adjusted high set back in 1995 but without a demand pull from China it is tough to justify prices at this level. Increased margin requirements also weighed on cotton later in the week. Cotton hit a record volume on Wednesday on a key reversal. Weekly export sales were down 71.8K from last week at 557K RB but still robust. This still puts exports at 78% of even the new USDA export estimate for the marketing year which ends in July, well above the 5 year average. Informa’s 12.2 million acre forecast for next year also put a damper on buying interest.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

10/22/10

10/29/10

11/05/10

11/12/10

Change

% Change

Dec

Corn

$5.60

$5.82

$5.88

$5.34

0.54

9.15%

Dec

CBOT Wheat

$6.71

$7.17

$7.29

$6.69

0.60

8.16%

Dec

KCBT Wheat

$7.19

$7.71

$7.86

$7.30

0.56

7.12%

Dec

MGEX Wheat

$7.28

$7.77

$7.97

$7.45

0.52

6.56%

Nov

Soybeans

$12.00

$12.26

$12.74

$12.63

0.10

0.82%

Dec

Soybean Meal

$330.90

$337.70

$348.00

$339.70

8.30

2.39%

Dec

Soybean Oil

$48.30

$49.30

$52.22

$52.53

0.31

0.59%

Dec

Live Cattle

$101.70

$98.83

$97.55

$98.40

0.85

0.87%

Nov

Feeder Cattle

$112.55

$110.33

$110.60

$112.40

1.80

1.63%

Dec

Lean Hogs

$70.65

$66.20

$66.95

$68.98

2.02

3.02%

Dec

Cotton

$119.71

$125.26

$142.23

$140.18

2.05

1.44%

Dec

Oats

$3.57

$3.68

$3.75

$3.40

0.36

9.53%

Nov

Rice

$14.24

$14.43

$14.70

$13.77

0.93

6.36%

 

Cattle futures were higher for the week even after a lower Friday with livestock the only ag sector producing gains. Cash cattle trade was scattered throughout the week, with most late week trade at $156-157 in Nebraska and $98.00-98.50 in Texas, Oklahoma and Kansas. On a Thursday/Thursday basis, wholesale prices were down 1.93% for the week, or $3.60 per hundred pounds. USDA weekly beef export sales were 12.8 TMT.

 

Hogs had a 3% bounce for the week and are now up two weeks in a row. The cutout was down 1.33% on a Thursday/Thursday basis.  Hams were up 2.53% for the week, and picnics were up 6.41%. Pork production for the year to date is down 3.8%, but estimated production for the week ending November 12 was down .4% from the previous week. 

Market Watch:  Some things to watch for next week are the Cattle on Feed report Friday, the NOPA crush report on Monday, PPI on Tuesday, and CPI on Wednesday. We could also see some Turnaround Monday/Tuesday next week since everything sold off and the world’s piggy bank (T bills and shorter T notes) don’t pay hardly anything right now.

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.

 Copyright 2010 Brugler Marketing & Management, LLC

Sailing on the QE2

Nov 05, 2010

 

Market Watch with Alan Brugler
November 5, 2010
Sailing on the QE2
 
The market was afraid to make much of a move on Tuesday and Wednesday, waiting first on the Tuesday elections in the United States and then on the Federal Reserve to announce its decision on whether to implement its second quantitative easing campaign (a.k.a. QE2. The election was a Republican landslide created a divided Congress that will greatly limit the Administration’s ability to make sweeping legislative changes. The QE2 decision was for the Fed to buy $600 billion of U.S. Treasury debt, effectively pumping up the money supply and driving down interest rates. That was expected to weaken the dollar, since other countries have been raising rates and making it more attractive to invest elsewhere. While not the main driver in the value of commodities, prices in dollar terms are higher if the dollar is lower. On Thursday, that fueled massive asset allocation buying in commodities.
 
The soy complex flexed its bullish muscles this week and led the ag markets higher. Export demand continues to be stout, with USDA reporting 1.6 MMT of combined old and new crop export sales for the week ending October 28. China again was the major buyer at 927,100 MT (25.2 million bushels including destination switches on previous sales).  Soy oil had the biggest jump, up 5.92%. It wasn’t due to US export sales, which were a negative 32,600 MT because of three large cancellations. Tightening world veg oil stocks are primarily responsible, with strong biodiesel use in South America and elsewhere. The Census Fats & Oils report showed that little U.S. soy oil is being used for biodiesel, less than 45% of what was being used a year ago. This is, of course, due to Congress failing to renew the blend credit and forcing biodiesel plants to shut down.
 
Corn prices continued to advance, up another 6 cents per bushel for the week. Memphis cash corn hit the magic $6 number this week according to USDA. The Fed move to buy $600 billion in bonds pushed the dollar lower and nudged prices higher in dollar terms. Weekly corn export sales were 461,600 MT. Shipments were better than the last four week average at 880,300 MT. The average trade estimate for corn ending stocks is 840 million, vs. USDA’s 902 million figure in October.
 
Wheat futures were higher at all three exchanges. Unwinding of inter-market spreads resulted in buying of wheat futures. Ongoing dryness in the southern Plains and the worst fall crop condition ratings since 1991 also supported the 2011 contracts. The trade is looking for a modest drop in projected world wheat ending stocks on Tuesday, with one wire service putting the average trade guess at 173.53 MMT vs. USDA’s 174.66 MMT figure in October. USDA is expected to make a small upward revision in projected ending stocks for the U.S. on Tuesday, either due to a cut in projected exports or an upward revision in production. It depends on who you talk to!
 
Cotton again set new modern era highs during the week, peaking at 144.60 before succumbing to profit taking and some mill resistance to paying these breathtakingly high prices. The market is still below the inflation adjusted high set back in 1995, but in nominal prices is near Civil War era levels. The all time high according to the Mississippi Historical Society is just under $1.89. Weekly export sales were up 20 percent from the four week average at 560,800 RB, and also above pre-report estimates.
 
 
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
10/15/10
10/22/10
10/29/10
11/05/10
Change
% Change
Dec
Corn
$5.63
$5.60
$5.82
$5.88
0.06
0.99%
Dec
CBOT Wheat
$7.05
$6.71
$7.17
$7.29
0.11
1.60%
Dec
KCBT Wheat
$7.45
$7.19
$7.71
$7.86
0.15
1.95%
Dec
MGEX Wheat
$7.54
$7.28
$7.77
$7.97
0.20
2.61%
Nov
Soybeans
$11.85
$12.00
$12.26
$12.74
0.48
3.87%
Dec
Soybean Meal
$328.20
$330.90
$337.70
$348.00
10.30
3.05%
Dec
Soybean Oil
$47.77
$48.30
$49.30
$52.22
2.92
5.92%
Dec
Live Cattle
$100.13
$101.70
$98.83
$97.55
1.28
1.29%
Nov
Feeder Cattle
$109.38
$112.55
$110.33
$110.60
0.27
0.25%
Dec
Lean Hogs
$68.90
$70.65
$66.20
$66.95
0.75
1.13%
Dec
Cotton
$109.87
$119.71
$125.26
$142.23
16.97
13.55%
Dec
Oats
$3.70
$3.57
$3.68
$3.75
0.07
1.97%
Nov
Rice
$13.59
$14.24
$14.43
$14.70
0.27
1.91%

 
Cattle futures were down again, by 1.3%. Cash cattle trade broke out early in the week at $98, about $2 weaker than the prior week. On a Thursday/Thursday basis, wholesale prices were down 2% for the week, or more than $3.25 per hundred pounds. USDA weekly beef export sales were even slower than the previous week, despite a sliding U.S. dollar. The sluggish demand is a problem, with beef production YTD now 0.2% larger than last year.
 
Hogs had a bit of a dead cat bounce after several weeks of free fall. They were up 1.1%.
The cutout was up 4.68% on a Thursday/Thursday basis, a stealth rally that supported the rebound in the cash hogs and the futures. Hams were up 15.7% for the week, and picnics were up 16.8%. The Thanksgiving and Christmas periods are historically strong for ham demand. Of course, the ham price used in the cutout is a raw ham, not the smoked or wet cured finished product seen in the stores. Pork production for the year to date is down 3.9%, but estimated production for the week ending November 6 was up 1.7% from the previous week. Estimated slaughter was 2.338 million head compared to 2.299 million head in the same week a year ago.
 
Market Watch:  Market attention for the grains is solidly on the November 9 USDA crop report and accompanying WASDE estimates. On average the traders are expecting USDA to cut both U.S corn production and ending stocks, while raising soybean production and still cutting soybean ending stocks. Thursday is a government holiday, for Veteran’s Day. That will delay the weekly USDA Export Sales report until Friday. Friday will be the last trading day for November soybean and rice futures. It will also mark the expiration of December cotton options.
 
Alan Brugler will be a featured analyst at the Farm Journal Marketing Rally in St. Charles, Illinois. If you plan on attending, call our office for a special registration discount created for Brugler clients. The number is 402-289-2330.
 
Join Alan Brugler for a National Ag Marketing Strategy Group webinar on Tuesday, November 9 at 7 pm CST. The online meeting will feature updated analysis and forecasts for corn, soybeans, wheat, cattle and hogs, utilizing the fresh USDA numbers from Tuesday morning. Membership dues are $45, and registration must be completed prior to the meeting. Go to http://bruglermktg.webexcom to register. Your invitation code is “harvest”.
 
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.
 
 Copyright 2010 Brugler Marketing & Management, LLC
Log In or Sign Up to comment

COMMENTS

Receive the latest news, information and commentary customized for you. Sign up to receive Dairy Today's eUpdate today!

 
 
 
The Home Page of Agriculture
© 2014 Farm Journal, Inc. All Rights Reserved|Web site design and development by AmericanEagle.com|Site Map|Privacy Policy|Terms & Conditions