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Market Watch

RSS By: Alan Brugler, AgWeb.com

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

Dubai-ous Price Movement

Nov 27, 2009

 

Market Watch with Alan Brugler

November 27, 2009

 

Dubai-ous Price Movement

 

The US dollar index traded at the lowest level since August of 2008, but avoided the “bad trade” of a weekly close below the 78.6% Fibonacci retracement by virtue of a rally on Friday. The dollar rally came because of a problem with the Dubai World projects and a request to restructure payments and delay payments for 6 months. For a change, the dollar was a safe haven against such a default risk. The stock market used it as an excuse to take profits on a large number of stocks around the world, even as most analysts were expecting that the deep pockets in Abu Dhabi and the rest of the region would eventually forge a deal with Dubai to prevent an actual default. Crude oil was lower on the firmer dollar, and on ideas that perhaps additional oil would have to be pumped to generate cash to fix the problems. This all happened in a thin holiday market, and action this coming week will likely be more indicative of true market sentiment.

 

Corn managed to extend its rally for a fourth consecutive week, gaining 1.6%. It shook off the dollar rally (typically a bearish influence over the past month) on Friday morning, with early price weakness in corn futures shown to be a bear trap. USDA reported strong weekly export sales on Friday morning, which helped support the market. Net sales were 1.223 million metric tonnes, with an additional 402,900 MT booked for 2010 crop. This was the largest weekly export sales total for the marketing year which began on September 1. Mexico was the lead buyer for both, as their production has been impaired by poor weather and other issues. End users appear to have accepted the idea that the fall low is in place, and are now buying dips.

 

The soybean complex was higher in all three legs. Meal led the % gains at 3%, despite much larger than expected Census meal stocks released on Thursday. The higher corn price for the week proved supportive. Weekly soybean export sales were down from the previous week, but still a robust 1.135 MMT. Export shipments for the week ending November 19 were the largest of the year at 2.434 MMT. That’s 89.43 million bushels in one week, or well over 6% of the expected shipments for the entire year. The third largest monthly Census crush on record was supportive to soybeans, and emphasizes the competition between exporters and crushers for beans in the country. Both industries need the bushels sooner rather than later. Soy oil stocks were not as large as the crush might have indicated, since soy oil yield dropped below 11.2 pounds per bushel. This had been telegraphed to a degree by the NOPA report a week earlier, but is definitely supportive to the BO.

 

Wheat futures were down on all three exchanges, never fully recovering from the selling on Monday and Tuesday. The US is still not competitive in the world export market, at least not for “commodity” type sales going to the cheapest bidder. Egypt bought 300,000 MT of EU and Russian wheat for January delivery. It had a freight cost advantage that US offerings were unable to overcome despite the weak US cash wheat basis. The US did score sales of 351,200 MT of old crop and 42,400 MT of 2010 production in the week ending November 19. The largest old crop buyers were the Philippines, Japan and Mexico.

 

Below is our table showing the net weekly changes and 4 week history of selected agricultural futures Friday closing prices:

 

Market Watch

 

 

 

 

Weekly

Weekly

 

11/06/09

11/13/09

11/20/09

11/27/09

Change

% Change

December Corn

$3.67

$3.91

$3.91

$3.97

0.063

1.60%

December CBOT Wheat

$4.97

$5.39

$5.60

$5.49

-0.110

-1.97%

December KCBT Wheat

$5.01

$5.41

$5.57

$5.43

-0.140

-2.51%

December MGEX Wheat

$5.18

$5.56

$5.64

$5.54

-0.103

-1.82%

January Soybeans

$9.55

$9.87

$10.46

$10.53

0.070

0.67%

December Soy Meal

$288.80

$301.10

$317.10

$326.50

9.400

2.96%

December Soy Oil

$36.77

$38.61

$39.71

$40.10

0.390

0.98%

December Live Cattle

$85.00

$83.32

$83.95

$83.20

-0.750

-0.89%

January Feeder Cattle

$91.73

$91.83

$92.68

$92.50

-0.175

-0.19%

December Lean Hogs

$55.70

$55.00

$57.60

$59.02

1.420

2.47%

December Cotton

$66.54

$67.10

$70.41

$69.74

-0.670

-0.95%

December Oats

$2.54

$2.27

$2.58

$2.55

-0.030

-1.16%

January Rice

$15.16

$14.86

$15.17

$15.40

0.230

1.52%

 

Cotton futures were down .95% for the week, interrupting a string of up weeks. Seasonally adjusted mill use for October was better than the abysmal September number, but US mills are clearly still struggling with both weak consumer buying of textile and import competition. After a couple stronger than expected export sales weeks, the higher prices finally began to hurt. Weekly export sales dipped to 163,300 RB of upland and 21,100 RB of pima cotton. Turkey was the biggest buyer, with China dropping back to only 29,200 MT.

 

Cattle futures were down 75 cents for the week, reacting to the Cattle on Feed report the previous week, as well as to the volatility of the outside markets and pending expiration of the December options. Wholesale prices rallied, anticipating a rebound in beef demand in the post-Thanksgiving period and ahead of the Christmas pipeline filling period. Cash cattle prices were also firmer, with Texas trade at $85. A sharp drop in cattle weights helped support the market. Weekly beef export sales were a ho-hum 8,300 MT. There were some 3,200 MT sold for 2010/11 shipment, however, perhaps implying nervousness about higher prices down the road on the part of the buyers.

 

Hogs were up 2.47% for the week, adding to a 4.73% from the week before. Pork cutout values rallied back above $61, allowing packers to boost what they were paying for hogs out in the country. Ham prices were notably firm. Pork production for the year to date is 1.7% below year ago. Estimated production for this past week was down 11.7% from the prior week because of the holiday, but up 0.5% from the same week in 2008.

 

Market Watch:  Monday will be the first day for delivery notices vs. the December grain contracts, as well as gold and other financials.  USDA will also release the weekly crop progress report, with corn harvest expected to be in the 75-80% range.  Census will release the monthly Fats & Oils report on Thursday morning, December 3. This report adjusts the stocks numbers released in the Crush report, and also contains monthly data on DDGs and biodiesel. The regular USDA Export Sales report will also be out on Thursday, with trade expectations lower because it will cover the holiday week. Friday will be the last trading day for December live cattle futures options, as well as most currency futures.

 

 

 

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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COMMENTS (1 Comments)

Anonymous
Get out while you still can!!
9:06 PM Nov 29th
 

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