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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.

Harvest Expanding

Aug 24, 2012

 

Brugler

Market Watch with Alan Brugler

August 24, 2012

 

Harvest Expanding

Judging by the drop off in phone calls to our office, harvest activity picked up sharply this week. Both silage harvest and corn combining were noted up into Minnesota and South Dakota. Missouri producers were hitting it hard, with much of their corn fully mature. Further north, harvesting was mostly focused on very early varieties planted in late March, or stressed corn that was in danger of going down in a storm. You expect low yield numbers in that stressed corn, and that is what we’ve been hearing. Aflatoxin has been a concern due to weather conditions, with mixed testing results from elevators. Soybean activity is still minimal, with much of the crop just starting to turn color or not even that far along.

Nearby corn futures eked out a 4 cent per bushel net gain for the week, despite losing 6 ½ cents on Friday. Weekly export sales for the prior week were very light, reinforcing bearish arguments that the current level of prices is sharply reducing consumption/disappearance as it needs to do. On the other hand, weekly ethanol production (and thus corn consumption) rose another 4,000 barrels per day. Ethanol stocks rose slightly, while Brazilian ethanol imports into the United States slowed from the previous week. At the current production rate corn use for ethanol would slow to 4.5 billion bushels per year, or 500 million below last year. Widespread pre-harvest downtime has not yet been seen, although a number of plants are running at less than full capacity. The Brugler Marketing Virtual Corn Tour projected US national average yield at 124.3 bushels and final (January) production of 10.826 billion bushels. Pro Farmer projected a 10.48 billion bushel crop on a national average yield of 120.25 bpa, using their Crop Tour as input for the estimate.

Soybeans were up nearly 4% for the week. Reporters on the widely followed Pro Farmer crop tour were finding a sharp decline in pod counts vs. last year. The drop off was consistent across all states in the Tour, although the severity varied by state. While seed size and the number of 2, 3 and even 4 bean pods heavily influences final yield, the assumption was that the crop was smaller than previous estimates. Pro Farmer projected a 2.6 billion bushel crop on 34.8 bushels per acre, emphasizing that the estimate is not directly tied to the Tour data. Weekly export sales were at or above expectations, with China and others continuing to buy when prices were around $16.50 in the futures. In our opinion, exports will fall off a cliff sometime in the spring. US stocks don’t have to last all year if South America in fact has a record crop in 2012. The US needs to meet world needs for 6-8 months and then have enough beans held back to run crush operations and meet domestic soybean meal needs from April or May through the end of the year. We are hearing of crushers in the US who are reluctant to commit to delivering meal in the last half of the 2012/2013 marketing year due to questions about soybean availability.

The three wheat markets were down this week, by 0.80 to 1.02%. Russia will have to limit exports because of a production short fall. The question is how soon. They were still selling this week at prices below prevailing market values because of the risk of a 2010 style embargo. Buyers willing to take the risk were scrambling to lock up cheap wheat. The US is eventually expected to sell to Egypt and other buyers currently dependent on Russia and Ukraine because of their historical tendency to sell wheat at below market rates. Here in the U.S. excellent rains were being received on Friday that should be very helpful to winter wheat planting in the southern Plains. Producers are expected to be aggressive with winter wheat planting due to a favorable crop insurance revenue guarantee level and the need for cash flow. Some in that area have also had a bad experience trying to diversify into the more water intensive corn and soybeans. Stats Canada reported production of more than 27 MMT is likely for Canada, the second largest crop in a decade.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/03/12

08/10/12

08/17/12

08/24/12

Change

% Change

Sep

Corn

$8.10

$8.00

$7.99

$8.02

$0.04

0.47%

Sep

CBOT Wheat

$8.91

$8.85

$8.75

$8.68

($0.07)

-0.80%

Sep

KCBT Wheat

$8.96

$8.93

$8.86

$8.77

($0.09)

-1.02%

Sep

MGEX Wheat

$9.45

$9.36

$9.28

$9.20

($0.08)

-0.81%

Sep

Soybeans

$16.36

$16.73

$16.71

$17.38

$0.66

3.98%

Sep

Soybean Meal

$509.80

$521.10

$522.70

$533.40

$10.70

2.05%

Sep

Soybean Oil

$52.28

$53.78

$53.11

$56.24

$3.13

5.89%

Aug

Live Cattle

$119.98

$120.60

$121.08

$119.88

($1.20)

-0.99%

Aug

Feeder Cattle

$138.95

$139.48

$140.43

$140.50

$0.07

0.05%

Oct

Lean Hogs

$75.85

$75.52

$76.20

$72.38

($3.83)

-5.02%

Oct

Cotton

$73.22

$72.90

$72.66

$74.45

$1.79

2.46%

Sep

Oats

$3.78

$3.88

$3.84

$3.89

$0.05

1.24%

Sep

Rice

$15.98

$15.95

$15.42

$15.41

($0.01)

-0.06%

 

Cotton futures were up 2.46% this week. Weekly net US export sales were 94,100 RB for the week ending August 16th for upland cotton. Net Pima sales were 9,700 RB for both marketing years. Cumulative commitments are at 39% of the USDA forecast for the year, keeping up with the 5 year average of 38%. A surge in India’s cotton exports is expected to lower cotton stocks by year end to 2.8 million bales. India is expected to export 12.7 million bales for the marketing year ending September 30. Last year India exported 7.6 million bales. Friday’s Commitment of Traders report showed a sudden surge of bullish enthusiasm from the large money managers. They bought 7,245 contracts in the week ending August 21, which put their net long position at 8,097 contracts of futures and options.

Cattle futures lost $1.20 for the week, as the upward momentum in wholesale prices slowed, as did reported weekly export sales for the prior week when announced on Thursday morning.  Estimated beef production for the week was down 1.2% from the same week a year ago, but was up 1.8% from the previous week on a late week bump up in slaughter. Estimated weekly slaughter was up 10,000 head from the previous week, including Saturday. Beef production YTD is down 2.1%. Average dressed weight is running 18-19 pounds above last year, despite the high feed costs. This is a function of the high feeder cattle prices and the need to put more pounds on them.

Hog futures were down more than 5% this week. Estimated pork production for the week jumped 4.5% from the previous week, and was up 7.2% from the same week in 2011. Slaughter was 6.7% larger than the same week in 2011, as producers aggressively moved hogs into the market channel so that they could focus on this year’s very early corn harvest. Estimated carcass weight wasn’t any lower than last week at 201 pounds, and is still above the 200# number from a year ago. Thus, it is hard to read much into the sales surge in terms of forced liquidation due to high feed prices. You would expect hog weights to decline if that were the case. Pork production year to date is up 2% from year ago. Sow slaughter is thought to be up as much as 6%, but the data lags.

Market Watch:

The trade is still interested in the weekly Crop Progress report on Monday night, and will be looking for any improvement in the crop condition ratings now that we are in a somewhat cooler and slightly wetter pattern. Weekly export sales on Thursday morning will also be of interest, as that is the timeliest gauge of the effect of price rationing. September grain futures expired on Friday the 24th, so there may be some folks with unexpected long or short futures positions to adjust on Monday. Thursday will be the last trading day for August Feeder Cattle, and Friday marks the expiration for August live cattle futures. Friday will also be FND (First Notice Day) for any deliveries vs. September grain futures contracts. Not to be overlooked, a week from Monday is the Labor Day holiday in the U.S., and the trader population can be expected to be down late this week as folks expand that into a 4 day weekend.

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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