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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.

Market Madness II

Mar 28, 2013

Brugler

Market Watch with Alan Brugler

March 28, 2013

Market Madness II

 

This weekend marks the next two rounds of the NCAA college basketball tournament, popularly nicknamed the Sweet 16 and Elite 8 games. March Madness continues in that arena, with number 1 and 2 seeded teams being upset. Our Market Madness also continues, and the March 28 Grain Stocks report triggered a crazy sell off in corn, soybeans and wheat on Thursday. USDA pulled off the bearish upset by surprising the trade with the largest corn stocks figure relative to trade expectations in modern history. The surprisingly large March 1 stocks figure of 5.4 billion bushels strongly suggests that the USDA World Outlook Board was just plain wrong in raising projected feed & residual use two weeks ago. The soybean stocks number was also larger than expected, implying negative residual use in the second quarter. We explain negative residual use as "we found it and we don’t know where it came from".

Corn futures lost 31 cents for the week, all of it on Thursday with the limit down move following the USDA reports. Corn stocks were 10% smaller than last year at this time, but not as tight was the trade (and the WAOB within USDA) had believed. Second quarter use was nearly 1 billion bushels smaller than the same three months in 2011/12. Not to be ignored, USDA also released a Planting Intentions report, with corn at 97.282 million acres. If actually planted, that will be the largest area since 1936. The EIA showed increased slower average daily ethanol production for last week, but dropped US ethanol stocks to the lowest reading since December 2011. West Coast stocks rose thanks to imports, but the East Coast was very tight. Weekly corn export sales continue to lag the pace needed to meet the USDA forecast for the year. Cumulative commitments are 72% of the USDA forecast, compared to 80% in an average year.

Soybeans fell 36 cents per bushel for the week, a 2.5% drop that also occurred entirely on Thursday. Soy oil was down less than 1% for the week, but soybean meal took a 3.5% hit due to the sliding feed grain prices and perhaps some surplus production. Meal basis was sloppy despite continued solid export sales. USDA reported smaller than expected soybean acreage intentions of 77.126 million. Weekly export sales also released on Thursday morning were 674,100 MT, including 607,700 MT of new crop. Old crop export sales commitments total 97% of the USDA forecast for the year, running ahead of the 90% average for this date.

Wheat was sharply lower at all three exchanges this week. The frost/freeze damage to HRW wheat was ignored, since USDA showed larger carryover stocks from last year than had been anticipated. The March 1 wheat stocks were 1.234 billion bushels. That was up from 1.2 billion a year ago. US all wheat acreage is expected to creep higher to 56.440 million acres from 55.736 million a year ago. That is contingent on 12.7 million acres of Other Spring wheat being planted compared to 12.3 million last year. Given the expansion in other crops in that growing area, it isn’t a sure thing. Weekly US export sales were very good at 580,800 MT of old crop and 248,300 MT of new crop.

Cotton was up 1.34% this week after a huge 5.7% decline the week before. US cotton producers were not convinced to expand planned acreage despite an 18% rally in December futures. USDA confirmed on Friday that intentions were still only 10 million acres vs. 12.3 million last year. Weekly export sales were 246,000 RB for upland cotton. Overall commitments are 92% of the USDA figure for the year. The five year average pace would be 93% for this date. Global ending stocks remain burdensome, but much of that cotton is locked up in China, and China indicated that it would continue to be an active buyer past the end of the marketing year on July 31.  

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

03/08/13

03/15/13

03/22/13

03/28/13

Change

% Change

May

Corn

$7.04

$7.17

$7.26

$6.95

($0.31)

-4.27%

May

CBOT Wheat

$6.97

$7.23

$7.30

$6.88

($0.42)

-5.76%

May

KCBT Wheat

$7.34

$7.52

$7.62

$7.27

($0.35)

-4.53%

May

MGEX Wheat

$7.92

$7.96

$8.07

$7.80

($0.26)

-3.25%

May

Soybeans

$14.71

$14.26

$14.41

$14.05

($0.36)

-2.48%

May

Soybean Meal

$435.25

$418.80

$419.30

$404.60

($14.70)

-3.51%

May

Soybean Oil

$50.34

$49.91

$50.43

$50.11

($0.32)

-0.63%

Apr

Live Cattle

$127.55

$125.78

$126.20

$128.90

$2.70

2.14%

Mar

Feeder Cattle

$138.98

$136.68

$134.65

$135.53

$0.88

0.65%

Apr

Lean Hogs

$82.03

$79.68

$78.05

$80.60

$2.55

3.27%

May

Cotton

$86.75

$92.57

$87.29

$88.46

$1.17

1.34%

May

Oats

$3.88

$4.02

$3.96

$3.96

($0.01)

-0.19%

May

Rice

$15.37

$14.68

$14.90

$15.38

$0.48

3.22%

 

Cattle futures rallied 2.1% in this holiday shortened week. Boxed beef had a weekly change of -3.91% or $3.91 for Choice. That was the second consecutive week of big losses following the Japanese purchase. The Select boxes were down harder, losing $4.40 on a Thursday/Thursday basis, or 2.28%. Weekly beef export sales were solid at 17,300 MT, with exports matching the new sales total. Japan, Canada and Mexico continue to be the main buyers.

Hog futures jumped 3.3% for the week, triggering technical buy signals after an extensive price decline while the market looked for demand and/or a slowdown in slaughter runs. Carcass weights are still running about a pound below year ago, helping to offset the larger slaughter.   The pork carcass cutout value was a little higher on Thursday, but was down 0.82% for the week on a Thursday/Thursday basis. That kept some pressure on packer margins. The Thursday evening USDA Hogs & Pigs report showed an increase in hog numbers. The All Hogs figure was 101.5% of year ago, and the Market Hogs were 101.6% of last year. Sow numbers crept up slightly, with the Kept for Breeding at 100.2%. That was actually slightly smaller than the trade average guess. Farrowing intentions for Mar-May were larger than expected at 99.1% of last year. Pigs per litter hit a new all time high as expected, up 1.1% from last year.

Market Watch: The market is closed on Friday for Good Friday and the Easter holiday weekend. Trading will resume at the normal 5 pm CDT on Sunday evening. Monday is, of course, April Fool’s Day. It is also the start of the second calendar quarter, and we can expect to see some asset allocation adjustments tied to the price moves in the first quarter.  USDA will release the usual Weekly Export Inspections report on Monday and the Export Sales report on Thursday. Friday will mark the expiration of the April 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.  Visit our web site at https://www.bruglermarketing.com or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

Copyright 2013 Brugler Marketing & Management, LLC

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