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November 2012 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.

Attitude Determines Altitude

Nov 30, 2012

 

Brugler

Market Watch with Alan Brugler

November 30, 2012

 

Attitude Determines Altitude

 

World famous motivational speaker Zig Ziglar passed away this week. As with many who are successful in that occupation, he has a number of sayings credited to him. One of them was "Your attitude, not your aptitude, will determine your altitude." It doesn’t take much of a mental adjustment to adapt this quote to the markets.  Equate altitude to price. Equate aptitude to ability to properly reflect the supply/demand balance in the price. Attitude equals the level of bullish or bearish interest of the end users and the spec funds. Lots of bullish attitude is more important than the stocks/use ratio in setting the price.  Right now the attitude is confusion, as the trade watches the budget/fiscal cliff negotiations in Washington, fully realizing that multi-year trends are at stake depending on the outcome. You can have tight S&D balance sheets but not trade anywhere near the summer highs as long as the attitude is caution. Relative to the fiscal cliff debate, a quote attributed to Otto von Bismarck comes to mind, "If you like laws and sausages, you should never watch either one being made."

Corn futures were 0.34% higher this week, a second higher weekly close. As they say in sports, two in a row is a winning streak. Weekly export sales dropped sharply, to 236,140 MT. This should not have surprised anyone since it included Thanksgiving, but after a weeklong rally it was a good excuse to take short term profits. Weekly export sales for this coming week could also be light, as they will include the Thanksgiving weekend. Weekly ethanol production was down 8,000 bpd and contributed to a decline in US ethanol stocks. Stocks were lower despite also importing an average of 27,000 bpd. Corn use for ethanol is running at about a 4.35 billion bushel pace and down sharply from last year. Despite years of exhaustive testing by EPA, the American Automobile Association on Friday came out and suggested that EPA should discontinue sales of E-15 at the 15 pumps in the US that currently offer it. It is the same old engine damage and warranty voiding story that has been with us since the 1990’s. The spread between gasoline and ethanol futures is only 36 cents per gallon, and not sending a strong signal for blenders to use more.

The soy complex also rallied 1.4% this week to add to a 2.6% advance last week. Meal was up 3.2%. Soy oil got all the press due to a string of export sales announcements, but was up only 0.75% for the week after profit taking kicked in. Weekly soybean meal sales were the largest of the year. Soybean export bookings slowed for the simple reason that the US has already sold much of what it needs to sell prior to South American new crop harvest. Total commitments are now 75% of the USDA forecast for the full year, which extends until August 31. Soybean oil export commitments are now 106% of the USDA forecast for the year. They would typically be 38%, so USDA is expected to increase projected exports in the December WASDE report. US October biomass based biodiesel production was 98.37 million gallons, up from 96.77 million in September.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

11/02/12

11/16/12

11/23/12

11/23/12

Change

% Change

Dec

Corn

$7.39

$7.27

$7.46

$7.48

$0.03

0.34%

Dec

CBOT Wheat

$8.87

$8.38

$8.48

$8.45

($0.03)

-0.35%

Dec

KCBT Wheat

$9.22

$8.76

$8.78

$8.97

$0.19

2.13%

Dec

MGEX Wheat

$9.51

$9.10

$9.14

$9.19

$0.05

0.52%

Jan

Soybeans

$15.27

$13.83

$14.19

$14.39

$0.20

1.41%

Dec

Soybean Meal

$449.70

$424.60

$428.60

$442.40

$13.80

3.22%

Dec

Soybean Oil

$47.77

$47.05

$49.04

$49.41

$0.37

0.75%

Dec

Live Cattle

$125.75

$126.15

$128.95

$126.73

($2.22)

-1.73%

Jan

Feeder Cattle

$146.68

$145.60

$147.88

$145.63

($2.25)

-1.52%

Dec

Lean Hogs

$80.75

$80.33

$82.48

$84.08

$1.60

1.94%

Dec

Cotton

$69.58

$72.73

$69.83

$72.65

$2.82

4.04%

Dec

Oats

$3.64

$3.65

$3.69

$3.61

($0.08)

-2.24%

Jan

Rice

$15.01

$14.85

$15.04

$15.27

$0.23

1.56%

 

KC wheat futures were up more than 2% for the week, as HRW crop condition ratings declined and the weather forecasts for the next two weeks showed much below normal rainfall for the main Plains growing area. Chicago and MPLS were on the sell side of spreads with KC, and Chicago ended the week in negative territory because of a 24 ½ cent drop on Friday. Weekly wheat export sales were smaller than expected by the trade at 279,300 MT.

Cotton futures were up 4% this week in the December contract, almost erasing the loss from the week before. There was a steady drumbeat of delivery notices against the Dec contract, mostly from one merchant to another. The USDA weekly Export Sales report showed net sales for last week of 300,000 running bales for 2012/13 shipment. Net American Pima sales were 10,600 running bales for 2012/13.

Cattle futures were down 1.7% this past week. Weekly estimated slaughter totaled 635,000 head (including estimated Saturday kill), up 52,000 from the previous week. Beef production was up 8.9% from the prior week, but was down 2.3% from last year. The YTD production is down 1.6% from last year. Weekly beef export sales for last week slowed to only 11, 800 MT. Wholesale prices were mixed this past week.  Choice boxes were down 0.7% for the week while Select boxes were up 3 cents or just barely above UNCH.  

Hogs were up nearly 2% for the week, with futures continuing to expect a sharp rally in cash hogs over the next two weeks. Estimated weekly slaughter was 2.399 million head, up 1.5% from the same week in 2011. Weekly pork production jumped 16.3% from the holiday week, but was down 0.5% from the same week a year ago. Estimated carcass weights are up 4# from last year, reducing the number of hogs needed.  Pork production YTD has still been 1.9% larger than last year. The pork carcass cutout rose 3.5% from last week. Ham prices surged 10.4% to lead the product values.

Market Watch:

The calendar turns to December, with the usual first of month position adjustments due to asset allocation programs. The Dec corn, wheat and soy products futures are in delivery, with large deliveries against Chicago Dec wheat a surprise because the CME failed to report 2000 delivery registrations from The Andersons and that wheat was put out. USDA is done with crop progress reports for the year, but will still have weekly Export Inspections on Monday and Export Sales on Thursday. Thursday will also mark the last trading day for December cotton, and Friday will be the last trading day for December live cattle options.

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

Turkey Day

Nov 23, 2012

 

 

Brugler

Market Watch with Alan Brugler

November 23, 2012

 Turkey Day

The meat consumption focus may have turned to turkey this week, but the commodity markets soared more like an eagle. Of the commodities we track, only cotton was down for the week, and several markets were up more than 2%. A weaker US dollar index this week aided most commodities priced in dollars, again with the exception of cotton.

Corn futures were 2.5% higher this week.  The demand picture was mixed, with ethanol production dropping and reported ethanol stocks climbing back after a drawdown during the aftermath of Hurricane Sandy. On the other hand, weekly export sales were stout at 958,600 MT, the strongest showing in a long time. The Japanese business (457,700 MT) was known but the total still suggests prices are low enough and wheat stocks tight enough to attract corn buyers back into the market. Low prices cure low prices!

The soy complex also rallied 2.6% this week. Meal was up nearly 1%. Soy oil was up 4.23% to lead all of the commodities we track. The big story in the complex is the large scale soybean oil export sales, both in the weekly USDA report and in additional sales reported under the daily reporting system. Some sources tied the buying to concern about a big US biodiesel program in 2013 and an interest in getting the BO which it was the cheapest since 2010. Weekly soybean export sales themselves declined to 543,600 MT for soybeans, but export commitments are already 74% of the USDA forecast for the year. They would typically only be 61% by this point.

Chicago wheat futures were up 1.2% this week. The hard wheat contracts had a tougher time, with KC up ¼ percent and MPLS up 0.4%.   Weekly wheat export sales were a strong 657,400 MTs, or 24.15 million bushels. Trade estimates on Wednesday had been in the 8-15 million bushel range. Total commitments are still lagging the pace needed to hit the USDA forecast for the year. Commitments are 53% of the USDA annual projection. They would typically be 72% by now. Drought concerns continue in the US Plains HRW growing region, but traders also know there is a weak correlation between fall conditions and eventual spring yields. Winter wheat crop condition ratings dropped again. French winter wheat planting progress has lagged all fall, and is now 94% complete vs. the usual 100% done.

Cotton futures lost 4% this week in the December contract. Longs had to look forward to first notice day for December deliveries on Monday, and at rising cert stocks that make deliveries more likely. Thus, we had some significant long liquidation in the Dec contract. The USDA weekly Export Sales report showed net sales for last week of an impressive 626,600 Running Bales. That includes both old crop and new crop upland cotton, and 33,400 RB of 2012/13 crop pima.  

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

10/26/12

11/02/12

11/16/12

11/23/12

Change

% Change

Dec

Corn

$7.40

$7.39

$7.27

$7.46

$0.19

2.54%

Dec

CBOT Wheat

$8.65

$8.87

$8.38

$8.48

$0.10

1.16%

Dec

KCBT Wheat

$9.09

$9.22

$8.76

$8.78

$0.02

0.26%

Dec

MGEX Wheat

$9.40

$9.51

$9.10

$9.14

$0.04

0.41%

Jan

Soybeans

$15.64

$15.27

$13.83

$14.19

$0.36

2.57%

Dec

Soybean Meal

$475.90

$449.70

$424.60

$428.60

$4.00

0.94%

Dec

Soybean Oil

$49.26

$47.77

$47.05

$49.04

$1.99

4.23%

Dec

Live Cattle

$125.43

$125.75

$126.15

$128.95

$2.80

2.22%

Jan

Feeder Cattle

$147.08

$146.68

$145.60

$147.88

$2.28

1.56%

Dec

Lean Hogs

$77.75

$80.75

$80.33

$82.48

$2.15

2.68%

Dec

Cotton

$70.35

$69.58

$72.73

$69.83

($2.90)

-3.99%

Dec

Oats

$3.67

$3.64

$3.65

$3.69

$0.04

1.23%

Jan

Rice

$15.11

$15.01

$14.85

$15.04

$0.19

1.28%

 

Cattle futures finished 2.2%% higher for the week. Weekly estimated slaughter totaled 583,000, up  22,000 from the same week a year ago but down from last week. Beef production dropped 7.6% from the prior week, but was 5.4% larger than last year. The YTD production is down 1.6% from last year. Wholesale prices were higher for the week.  Weekly beef export sales for last week improved to 15,300 MT. That is 1% below the 4 week average but larger than last week.

Hog futures added 2.7% for the week.  Estimated weekly slaughter was 2.071 million head, matching the same week in 2011. Weekly pork production was down 1.4% from year ago, due to lower average carcass weight that is running 3 pounds below last year. Pork production YTD has still been 2.1% larger than last year. The pork carcass cutout value slipped 31 cents or 0.38% for the week. Cash hog prices were well supported, with packers first trying to increase kills ahead of the Thanksgiving holiday and then trying to line up hogs for early next week to fill in.

Market Watch:

We finally get back to a full trading week, following the Veterans Day and Thanksgiving week disruptions. Grain traders will first start out reacting to any surprise positions inherited with the expiration of the December grain options on Friday. We’ll get the usual Monday USDA Export Inspections and Crop Progress reports on Monday. Monday is also first notice day for December cotton deliveries. In the background, trading funds will be making month end asset allocation adjustments and getting out of most of their remaining long December positions to avoid being involved in taking deliveries. Friday is first notice day for December futures deliveries.

 

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

The Commodity Cliff

Nov 16, 2012

 

Brugler

Market Watch with Alan Brugler

November 16, 2012

The Commodity Cliff

 

Much of the discussion for the week centered on the so called fiscal cliff negotiations in Washington, and the various ripple effects depending on the outcome. Traders concluded that an increase in capital gains taxes and/or dividend taxes was likely to be part of any solution. That spurred some selling of stocks, and also of commodities (where capital gains taxes are based on mark to market value on December 31). The money appeared to be parked in low yielding cash instruments, and won’t stay there long. A few corn traders had seen the EPA ruling on the requested RFS2 waiver as another potential cliff. However, EPA found that in the overwhelming majority of cases run, the mandate itself does not cause severe harm to the economy. By law, that is the only standard they can apply, not the Clean Air Act as one anti-ethanol group suggested. Consistent with our own research, reducing the blend requirement was found likely to result in little or no drop in corn prices, because the market is not currently ‘bound’ by the requirement. If it were, RIN prices would be a lot higher than they are.

Corn futures lost 12 cents for the week, a 1.6% loss. World ending stocks increased to 118 MMT. Export interest continues to be weak, but with a pick up in interest for 2013/14. 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 to a multi-month low in the weekly report EIA report, despite rising US production and imports that averaged 53 thousand barrels per day. Downsizing is still occurring in the livestock sector, as shown by the Cattle on Feed report (see below) and reduced egg sets and chick placements.

The soy complex posted the largest losses for the week. Soybeans plunged 9.4%. Meal was down again, losing 5.6% after losing 5.5% the prior week. NOPA showed very strong US crush of 153 million bushels in October, with plenty of meal available for the domestic and export market. The USDA weekly export sales report on Friday morning was bullish for all three legs of the complex, on paper, but liquidation of summer drought longs continued to provide pressure to the market. South American weather conditions improved, letting bears presume that combined Brazilian, Argentine and Paraguayan production will be over 140 MMT or 5.14 billion bushels. For comparison, US production is seen at 2.97 billion bushels. Argentine planting is thought to be 22% completed (BAX).

Wheat futures were down at all three exchanges. The highest priced wheat in the world, MPLS spring wheat, showed the smallest loss for the week at 4.3%. KC was down 5%, and Chicago lost nearly 5.5%. EU futures set new contract highs on the MATIF. The USDA net weekly export sales were 50 percent higher than the previous week at 314,600 MT for the 2012/13 marketing year. Exports were 298,500 MT with the primary destinations being Nigeria and Mexico. The US Drought Monitor update on Thursday showed extensive dryness in the Plain States including Kansas and Oklahoma, where crop conditions have been in decline for the winter wheat crop. Winter wheat crop condition ratings saw a loss of 3% out of the good/ex categories. The market failed to sustain a reaction, however, because there is only a weak correlation between fall conditions and final yields next summer.

Cotton futures rallied 4.5% for the week. It wasn’t due to a sudden lack of world 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.  However, it is possible for prices to get too cheap, resulting in a corrective rally. December options expired last week with a large number of in-the-money put options being exercised. Those newly minted short futures were being bought back this week ahead of December futures delivery notices.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

10/19/12

10/26/12

11/02/12

11/16/12

Change

% Change

Dec

Corn

$7.38

$7.40

$7.39

$7.27

($0.12)

-1.59%

Dec

CBOT Wheat

$8.64

$8.65

$8.87

$8.38

($0.48)

-5.47%

Dec

KCBT Wheat

$9.09

$9.09

$9.22

$8.76

($0.46)

-5.01%

Dec

MGEX Wheat

$9.40

$9.40

$9.51

$9.10

($0.41)

-4.26%

Jan

Soybeans

$15.37

$15.64

$15.27

$13.83

($1.44)

-9.40%

Dec

Soybean Meal

$483.40

$475.90

$449.70

$424.60

($25.10)

-5.58%

Dec

Soybean Oil

$50.96

$49.26

$47.77

$47.05

($0.72)

-1.51%

Dec

Live Cattle

$125.25

$125.43

$125.75

$126.15

$0.40

0.32%

Jan

Feeder Cattle

$150.23

$147.08

$146.68

$145.60

($1.08)

-0.73%

Dec

Lean Hogs

$78.90

$77.75

$80.75

$80.33

($0.42)

-0.53%

Dec

Cotton

$72.42

$70.35

$69.58

$72.73

$3.15

4.53%

Dec

Oats

$3.90

$3.67

$3.64

$3.65

$0.01

0.28%

Jan

Rice

$15.35

$15.11

$15.01

$14.85

($0.16)

-1.07%

 

Cattle futures dropped more than a dollar for the week. Estimated beef production for the week was up 1.8% from the same week in 2011, and tonnage for 2012 YTD is 1.7% below last year. Those numbers are actually a little firmer. Wholesale beef prices were mixed. Choice boxed beef was up 1.15% for the week, while Select boxes dropped .48%. US weekly beef export sales for last week were the poorest in some time, at 11,300 MT. The USDA Cattle on Feed report on Friday afternoon confirmed an expected contraction, with marketings at 102.3% of year ago and placements 87.3% of last year. The combination resulted in a 5.5% drop in November 1 cattle on feed and is supportive from the supply side.  The demand side has to deal with the export slowdown, and seasonal competition from turkey and ham.

Hog futures were $1.15 lower for the week. Estimated pork production for the week was up 0.4% from the previous week, and down 1.9% from the same week in 2011. Pork production YTD is up 2.1%. The pork carcass cutout value still plunged 5.1% this past week. The ham primal fell more than 10% and pork bellies were down more than 9%. Estimated carcass weights are rising seasonally, but still down 4 pounds from last year. Cash hog prices on Friday were mixed, with the Western Corn Belt (WCB) quoted higher while the ECB was lower.

 Market Watch:

Last week was a short week in the government and banking industry, due to the Veterans Day holiday. Just about everyone else was still working. That will not be the case this week, as Thanksgiving Day on Thursday is a broad based holiday for just about everyone except retail workers. Several retailers are attempting to open on Thanksgiving night to pull dollars away from retailers not opening until 5 or 6 am! There are also reports that employees may strike in protest. In our view the best solution would be for the public to boycott the stores opening on the holiday. That would put a stop to it.  Regardless, the ag markets will be closed, and then have a "why bother" trading session from 9:30 am to 12 pm CST on Friday. That does allow elevators and end users to get needed hedge orders in, and perhaps some international traders to have a normal business morning. We expect volume to be thin, which can mean no price move or a big price move.

USDA will release their normal Export Inspections and Crop Progress reports on Monday.  The monthly Cold Storage report is scheduled for Wednesday.  Weekly export sales will be delayed until Friday. Friday will also mark the expiration of December grain options, a potential source of market volatility.

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

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

The More the Merrier?

Nov 02, 2012

 Brugler

 

 

 

Market Watch with Alan Brugler

November 2, 2012

 The More the Merrier???

 

Corn futures eked out a gain of 2 cents for the week. Ongoing poor export sales have limited price advances, along with competition from feed wheat and Brazilian corn.  Brazilian corn exports during October were record large at 3.6 MMT. US Weekly export sales were again very weak at only 167,900 MT. China also cancelled another 60,900 MT. Unknown destinations also cancelled 124,500 MT. Average US daily ethanol production rose last week, but demand was not up to the combination of increased production and imports. Ethanol stocks rose to 19.215 million barrels.

 

Soybeans lost about 2% for the week, all of that on Friday. They posted several strong days but again gave back a little on Friday due to profit taking and also some "risk off" selling that came through most of the commodity markets on Friday. Weekly export sales were stronger than expected at 741,200 MT, stirring talk once again about overselling available supplies. China is still the dominant soybean buyer, taking 382,600 MT of the weekly total. US export shipments are ramping up sharply, as has been expected since the extent of the South American drought became obvious back in the spring. Export shipments have been over 60 million bushels for each of the past two weeks. The bears had the upper hand on Friday, in part due to larger US crop production estimates from FC Stone and Informa. The latter was at 2.952 billion bushels.   

Chicago wheat futures were higher 1 cent higher for the week, while the two hard wheat exchanges finished nearly unchanged in the nearby December contracts. Weekly export sales were smaller than the previous week, at only 362,900 MT. The US is still a little too expensive to compete with EU wheat into the North African and Middle East markets after freight is included. Egypt bought 300,000 MT of wheat for late December and early January shipment, but sourced it from Russia, Romania and France rather than the US. The Dow Jones- UBS index indicated that it will include KC hard wheat futures in the index for 2013.  Winter wheat condition ratings were worse than last year for the first report of the growing season, and the poorest in 20 years or more depending on how you compare the data. There is, however, a fairly weak correlation between fall conditions and spring yields.

Cotton futures sank nearly 3% on the reality of burdensome global cotton supplies. A little less than half of the global projected ending stocks will be located in China, and thus presumed to be out of world trade. However, at current usage rates the Chinese don’t have to be back in the market for quite some time. US export sales reflect that reality. Weekly export sales for the week ending October 25 were a net 96,800 RB for upland in 2012/13 and another 3,700 RB for 2013/14 to Mexico and Thailand.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

10/12/12

10/19/12

10/26/12

11/02/12

Change

% Change

Dec

Corn

$7.53

$7.62

$7.38

$7.40

$0.02

0.24%

Dec

CBOT Wheat

$8.57

$8.73

$8.64

$8.65

$0.01

0.09%

Dec

KCBT Wheat

$8.90

$9.06

$9.09

$9.09

($0.00)

-0.05%

Dec

MGEX Wheat

$9.24

$9.38

$9.40

$9.40

$0.00

0.03%

Nov

Soybeans

$15.23

$15.34

$15.61

$15.27

($0.34)

-2.19%

Dec

Soybean Meal

$465.20

$463.80

$483.40

$475.90

($7.50)

-1.55%

Dec

Soybean Oil

$50.67

$51.58

$50.96

$49.26

($1.70)

-3.34%

DEC

Live Cattle

$125.50

$127.28

$125.25

$125.43

$0.17

0.14

NOV

Feeder Cattle

$144.23

$148.38

$145.33

$144.90

($0.42)

-0.29%

Dec

Lean Hogs

$78.37

$79.63

$78.90

$77.75

($1.15)

-1.46%

Dec

Cotton

$71.36

$76.88

$72.42

$70.35

($2.07)

-2.86%

Dec

Oats

$3.92

$3.94

$3.90

$3.67

($0.23)

-5.84%

Nov

Rice

$15.03

$15.02

$14.80

$14.71

($0.08)

-0.57%

 

Cattle futures finished higher for the week. The cash cattle market was mostly steady on light demand. Wholesale beef prices were higher initially, but ran into resistance as the Choice quote neared the $200 mark. They then sold off and ended the week lower. Choice boxed beef was down 2.1%. Select product was down 0.4% on a Friday/Friday basis. Estimated beef production for the week was up 2.0% from the same week in 2011, and tonnage for 2012 YTD is 1.9% below last year. Weekly export sales at 14,600 MT were lower than the previous week.

 

Hog futures were $1.15 lower for the week. Estimated pork production for the week was down 0.6% from the previous week, and down 1.4% from the same week in 2011. Pork production YTD is up 2.3%. Estimated carcass weights are rising seasonally, but still down 3 pounds from last year. The pork carcass cutout value gained 0.46% for the week on a Friday/Friday basis, with gains in bellies and losses in pics. The CME Lean Hog Index is $83.52, a $5.77 premium to nearby futures. The spread had been $6.32 last week, so some convergence is in fact taking place.

 

Market Watch:

 

The main USDA reports for the week will be the monthly NASS Crop Production and WASDE Supply/Demand reports, both to be issued on Friday morning, November 9. With most of the US crop now harvested, emphasis is shifting to demand, so the weekly Export Inspections on Monday and the Export Sales report on Thursday will also get attention. Harvest progress will be reported on Monday night in the Crop Progress report, with corn expected to be in the 95-98% complete range. Winter wheat condition ratings will also be of interest since they have been so poor thus far. Friday will also mark the last trading day for December cotton options.

 

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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