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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.

Memorial Day Meltdown

May 28, 2010

Market Watch with Alan Brugler
May 28, 2010
 
Memorial Day Meltdown
 
Corn was tooling along fine until Friday. The US dollar ran into overhead technical resistance and dropped on Thursday, favoring commodities priced in dollars. However, the euro dropped and the dollar rallied ahead of the weekend, and corn got caught in the downdraft. Coupled with month end fund liquidation and the thin trading population ahead of the 3 day weekend, prices dropped hard on Friday. Warmer and drier WCB weather conditions were seen as bearish, although cool and wet conditions continue to plague the ECB and crops there are yellow in some cases. The EIA showed record ethanol production in March (most recent official data) and by extension record corn consumption for ethanol use.
 
Wheat futures were down at all three exchanges, with Chicago the weakest by being 3.02% lower. Winter wheat crop condition ratings dropped 1 point on the Brugler500 index. They are still the highest for this date since 1999. The US average winter wheat yield in 1999 was 47.8 bushels per acre vs. 44.2 last year. The U.S. continues to lose out on Egyptian buying tenders, with the Egyptians buying 180,000 MT of Russian wheat.
 
Soybeans were down 3 cents for the week. As with corn they would have been up on the week if not for the sell off on Friday. Soybean meal was supported by the Census crush report on Thursday morning, which showed meal stocks dropping below 300 thousand tons as of April 30. However, the selling pressure in livestock and corn took meal $2.10 lower for the week on demand concerns. Soy oil was up on the week, as the House finally passed the jobs bill that includes the retroactive one year extension of the biodiesel tax credit. That promises to eventually result in some incremental increase in soy oil use. However, the Senate adjourned for the holiday before considering the bill and won’t be back in session until June 7.
  
Cotton continues to be volatile. This week, it lost 3.52%, with only rice a “bigger loser” for the week. Weekly export sales were neutral, but there was significant liquidation of long positions in the July contract ahead of month end. Cert stocks deliverable against July futures are still in excess of a million bales, and represent almost 1/3 of projected US ending stocks for July 31. Bulls had hoped to see those stocks being pulled out for mill or export demand. However, as long as they are in the warehouse they are a threat to a speculative long who doesn’t want to own physical cotton in Memphis or Galveston or another delivery location.
 
Hog futures were a bullish exception to the wave of selling coming through the ag commodities. They eked out a 40 cent gain for the week. That’s mostly because June futures were at a big discount to the CME Lean Hog Index, and they are going to expire in a couple of weeks. Prices need to converge with the cash index at expiration, so you saw situations where futures were higher while cash was lower, narrowing the gap. The wholesale market stabilized, losing only 0.8% for the week despite the strength in the U.S. dollar and the lull in wholesale demand around the holiday. Pork bellies were up 4.2% for the week.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
05/07/10
05/14/10
05/21/10
05/28/10
Change
% Change
July
Corn
$3.72
$3.63
$3.69
$3.59
0.10
2.71%
July
CBOT Wheat
$5.11
$4.72
$4.72
$4.58
0.14
3.02%
July
KCBT Wheat
$5.21
$4.91
$4.95
$4.82
0.14
2.73%
July
MGEX Wheat
$5.30
$5.13
$5.15
$5.06
0.09
1.65%
July
Soybeans
$9.60
$9.54
$9.41
$9.38
0.03
0.35%
July
Soybean Meal
$278.40
$276.80
$275.60
$273.50
2.10
0.76%
July
Soybean Oil
$38.44
$37.54
$36.96
$37.61
0.65
1.76%
June
Live Cattle
$95.90
$93.25
$91.37
$90.52
0.85
0.93%
Aug
Feeder Cattle
$114.87
$112.98
$110.15
$108.42
1.73
1.57%
June
Lean Hogs
$85.52
$83.55
$81.45
$81.85
0.40
0.49%
July
Cotton
$80.71
$80.72
$82.97
$80.05
2.92
3.52%
July
Oats
$2.06
$1.96
$1.96
$1.91
0.05
2.55%
July
Rice
$11.75
$11.81
$12.20
$11.64
0.57
4.63%
 
Cattle futures closed almost one percent lower. Cash cattle prices dropped to $93-94 during the week, influenced by sliding boxed beef prices. USDA reported solid export demand for beef in the week ending May 20, but the buying either dried up or was eclipsed by a lack of U.S. buying interest. The choice cutout dropped $3.17 for the week and select was down $4.99, Friday to Friday. There likely was less U.S. interest, as retailers already had Memorial Day product bought, and would typically wait for holiday clearance data before doing any massive re-ordering.
 
Market Watch: While 2004 sticks in everyone’s mind, most of the Tuesday’s after Memorial Day are a lot quieter, and not nearly as bullish. USDA’s weekly crop progress and condition report is expected to be delayed until Tuesday evening, with Export Inspections on Tuesday morning. USDA Weekly Export Sales will be delayed until Friday morning. The June live cattle and US dollar index options will expire on Friday as well. Other than that, the trade will continue to focus on the economic upheaval in Europe and speculate on whether it will result in or foreshadows another round of problems in the U.S. economy.
 
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 and consulting services.
 
                                                                                                                                     
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COMMENTS (1 Comments)


I can't believe I've been going for years wihtout knowing that.
9:09 PM Oct 27th
 

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