Jul 11, 2014
Home| Tools| Events| Blogs| Discussions| Sign UpLogin


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

Log In or Sign Up to comment

COMMENTS (1 Comments)

Anonymous
Thats the only thing a little disheartening when analysts say dollar rising commodities lower. Theres no way producers can win with technical factors. Now when economy takes off producers are still in check.
10:27 AM Jan 30th
 

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