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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.

Cash in the Parking Lot

Sep 30, 2011

Market Watch

September 30, 2011

Cash in the Parking Lot

 

Investors, speculators, commercials were all leaving the financial markets this week. They were leaving just about everything and parking the cash in US treasuries. Bond yields set a record low below 3%. The money won’t stay there long at that rate of return. There appears to be confidence in US dollar but not much else at the moment. The dollar was up, which of course makes it more difficult to make export sales to countries who float their currency vs. the dollar. There was some good news on the economic front, with US GDP growth revised upward, and a continued shrinkage of the shadow inventory (foreclosure supply) of houses. The CRB Index of commodity prices was down hard. Many commodity ETF’s and hedge funds had double digit losses for the third calendar quarter, which ended on Friday. There was a tendency to "get that loser off my sheet". Cotton was down 38% for the quarter.

 

Corn was down the fifth week in a row, losing nearly 7.2% of its value this week. USDA cut projected feed & residual use for the year by 200 million bushels in the September crop report, but will have to trim it further based on the September 30 Grain Stocks report. Export sales continue to be soft, and the chicken industry is still downsizing based on the egg sets data.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

09/09/11

09/16/11

09/23/11

09/30/11

Change

% Change

Dec

Corn

7.365

6.92

6.385

5.925

0.4600

7.20%

Dec

CBOT Wheat

7.2975

6.8825

6.4075

6.0925

0.3150

4.92%

Dec

KCBT Wheat

8.325

7.84

7.3125

7.04

0.2725

3.73%

Dec

MGEX Wheat

9.0725

8.5625

8.51

8.9225

0.4125

4.85%

Nov

Soybeans

14.2675

13.555

12.58

11.79

0.7900

6.28%

Oct

Soybean Meal

370.3

348.7

326

304.7

21.3000

6.53%

Oct

Soybean Oil

58.34

56.55

52.4

49.95

2.4500

4.68%

Oct

Live Cattle

118.45

118.5

116.825

122.15

5.3250

4.56%

Oct

Feeder Cattle

134.85

137.475

134.825

140.525

5.7000

4.23%

Oct

Lean Hogs

87.25

87.35

88.8

93.375

4.5750

5.15%

Oct

Cotton

110.3

109.08

99.99

98.71

1.2800

1.28%

Dec

Oats

3.4825

3.455

3.315

3.28

0.0350

1.06%

Nov

Rice

18.33

17.89

16.485

15.95

0.5350

3.25%

 

Wheat futures took a hit this week, down 4.92%. Prices rallied at mid-week in anticipation of USDA cutting projected spring wheat acreage and production in the Small Grains report on Friday. That assumption was correct, with harvested acres cut 1.6% for Other Spring wheat and down 1.9% for durum when compared to the September WASDE report. However, the September 1 Wheat stocks were larger than expected at 2.15 billion bushels. It appears that much less wheat was fed in the Jun-August quarter than would normally be fed, despite wheat prices being below corn for much of the period. That resulted in more burdensome wheat stocks despite the reduced production number.

 

Soybeans were down 6.28% The USDA soybean stocks were not a shocker, at 215 million bushels. That was actually 10 million tighter than the average trade guess. The problem was with the soybean meal. The sharply lower corn and wheat prices drove a double digit decline in soybean meal on Friday, with October as low as $304.70. That put tremendous pressure on product value, aggravated by a 155 point slide in soy oil. For the week, soy oil was down 4.68%.

 

Cotton was down 1.28% and December flirted with the dollar mark once again closing at 100.19 points. There were no cotton reports on Friday. It was guilty by association. That is, you could sell it to meet margin calls in other investment areas. Global slowdown concerns persist, which also doesn’t help cotton demand. Weekly export sales data on Thursday showed improved global buying interest, and outstanding commitments are right on track to hit USDA’s forecast for the year. Speculative liquidation is the biggest concern, with most commodities related spec funds and ETF’s losing money in the 3rd calendar quarter.

 

Cattle futures were $5.32 higher for the week, up 4.56%, with October challenging the all time highs of $122.87 on Friday. The October high was $122.30. Cash cattle finally traded on Friday at $120-121, with packers forced to hit the feedlot asking prices. Estimated slaughter for this week was actually up 2.1% with beef production seen up the same amount. Show lists for packers to buy this week were smaller, however. YTD beef production is up 0.3% for the year.

 

Lean Hog futures were up the limit on the spot contract and up $4.57 for the week. The quarterly Hogs & Pigs report showed All Hogs as of September 1 at 101.0% of year ago, Kept for Breeding at 100.6%, above the high end of estimates and Kept for Marketing at 101.0%. These were larger than expected numbers. Those numbers were ignored, however, with the market posting triple digit gains on both Thursday and Friday. There is an old saying that ‘the bear market is over when bad news fails to make it go down’. Estimated pork production for the week was 1.4% smaller than last week, but up 3.1% from the same week in 2010.

 

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 

 

Market Watch: The calendar turns to October, and none too soon for grain traders and stock market types. September was brutal unless you were a short. This week has a fairly light report lineup for commodities. USDA will give us Export Inspections and Crop Progress reports on Monday. The market will also be dealing with the aftermath of the big Friday sell off triggered by the USDA Grain Stocks report. USDA weekly Export Sales will be out on Thursday. Friday will mark the last trading day for the moribund October cotton futures contract, and is also last trading day for October 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.

 

 Copyright 2011 Brugler Marketing & Management, LLC

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