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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.

Scrooged!

Dec 21, 2012

 

Brugler

Market Watch with Alan Brugler

December 21, 2012 

Scrooged!

Charles Dickens is best known (at least in the 21st Century) for his novella A Christmas Carol, featuring Tiny Tim, Bob Cratchit and Ebenezer Scrooge. Scrooge was famously tight fisted until seeing the ghosts of Christmas past, present and "Yet to Come". For most of this week, it seemed like Scrooge was trading the grain markets, with January soybeans down a full $1 per bushel in three days. Gold (a Scrooge favorite) was down pretty hard as well. By Friday, it looked like maybe Scrooge had had his famous conversion and switch to a more generous nature. Soybeans bounced 1.5% on Friday, and corn was also higher.

Corn futures lost 3.9% this week after being down 1.9% the prior week. There was yet another poor weekly export sales report on Thursday. Old crop bookings were only 134,400 metric tonnes. Weekly ethanol production fell back 2,000 bpd from the previous week. However, ethanol stocks and imports rose. A Memphis based firm threw out a 2013 acreage estimate of 99 million, which would be the largest since the 1930’s. At trendline yields, that would likely create a couple billion bushel surplus, so the market took it badly.

The soy complex was down 4.36% this past week, as some of the bloom came off of the export rose. The sales pace is still well ahead of that needed to meet the USDA forecast, with 83% of the export bushels already committed. The problem was the 540,000 MT of cancellations announced by the Chinese in the press several weeks ago and finally showing up in the official USDA reports. Even with the cancellations, commitments would be over 81% of the USDA forecast for the year. Weekly soybean meal sales were strong once again. Unfortunately, soy oil export sales were net negative, due to a 27,000 MT cancellation. Brazilian growing weather continues to be mostly favorable for vegetative growth. Argentina remains on the wet side, but planting there is now estimated to be 77% complete vs. last year’s 81%.

KC and CHI wheat futures continued to leak lower, down 2.5 and 2.7% respectively. Minneapolis was also lower, but supported by expectations for larger corn plantings in traditional spring wheat areas in 2013. The ongoing drought in the central US is a threat to US production in 2013, but heavy snows closed I-80 and made it hard to be bullish in the near term. Old crop export sales for the week ending December 13 were larger than the trade expected. Low prices also cure low prices, with the US successful in a number of export tenders this week. There is a fairly narrow window for the US to make big sales before new crop Argentine and Australian wheat become common in the world market. The US is competitive right now. The drop in prices this week should help move some additional business forward.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

11/30/12

12/07/12

12/14/12

12/21/12

Change

% Change

Mar

Corn

$7.53

$7.37

$7.31

$7.02

($0.29)

-3.93%

Mar

CBOT Wheat

$8.64

$8.61

$8.14

$7.92

($0.22)

-2.70%

Mar

KCBT Wheat

$9.13

$9.10

$8.64

$8.42

($0.22)

-2.55%

Mar

MGEX Wheat

$9.19

$9.18

$8.85

$8.82

($0.03)

-0.34%

Jan

Soybeans

$14.39

$14.72

$14.96

$14.31

($0.65)

-4.36%

Jan

Soybean Meal

$442.40

$450.50

$460.10

$433.80

($26.30)

-5.72%

Jan

Soybean Oil

$49.41

$50.82

$49.63

$48.71

($0.92)

-1.85%

Dec

Live Cattle

$126.73

$125.88

$126.90

$129.28

$2.38

1.87%

Jan

Feeder Cattle

$145.63

$148.78

$153.08

$152.15

($0.93)

-0.60%

Feb

Lean Hogs

$86.93

$83.48

$85.40

$86.98

$1.57

1.84%

Mar

Cotton

$73.91

$73.79

$75.13

$76.22

$1.09

1.45%

Mar

Oats

$3.79

$3.98

$3.90

$3.65

($0.25)

-6.41%

Jan

Rice

$15.27

$15.27

$15.42

$15.21

($0.22)

-1.39%

 

 Cotton prices were up 1.45% for the week, adding to a 1.8% gain from the prior week. Cotton export sales were within trade expectations at 330,900 RB in 2012/13. China was by far the biggest customer with increases of 171,700 RB. China, Turkey, and Mexico were the top destinations. US cotton export sales commitments are 76% of the USDA projection for the year. That is running ahead of the 71% average for this date. US cotton acreage is expected to decline in 2013/14 due to high prices for competing field crops. That is also supportive for deferred futures. The group in Memphis estimated US acreage would be just over 10 million, compared to more than 12 million this past season.

Cattle futures were up 0.8% for the week, with most of the gain on Friday. Weekly beef export sales for the week ending December 6 slowed. Weekly estimated slaughter was 633,000 head including Saturday. That would be 1,000 head larger than the previous week, and 36,000 larger than the pre-Christmas week in 2011. Estimated carcass weight this week was 21 pounds larger than the actual number from last year. Wholesale prices were mixed this week. Choice boxes were down $1.60, but lower quality Select was up $2.45/cwt. for the week on a Friday/Friday basis. The Choice/Select spread narrowed from $19.35 to $15.30.  In recent years it has dropped close to zero in the March time frame. Weekly beef production was up 8.9% from the same week in 2011, but total YTD production has still been 1.2% smaller and broadly price supportive. Cash cattle trade on Thursday was mostly $126, about $1.50-2.00 higher than the previous week. Friday night’s Cattle on Feed report showed larger November placements than expected and thus we had the larger Dec 1 on feed totals. The latter was 93.9% of year ago, so we are still talking smaller beef supplies in 2013. The Cold Storage report showed beef in the cooler 1% below year ago.

Hogs were down 0.36% this week. Estimated weekly slaughter is 2.348 million head, up 44,000 from the previous week.  Weekly pork production was up an estimated 2.2% from the light week before it. YTD pork production has been up 2.1% from 2011. Estimated carcass weights are now even with year ago, thanks mostly to declining corn costs. The pork carcass cutout rose 0.77% from last week. Ribs and loins showed the largest gains for the week. The Cold Storage report showed pork supplies in the cooler had dropped 8% from last month, but were still 13% larger than in 2011. Pork belly stocks typically rise this time of year, and were up 30% vs. October. They were still 8% smaller than year ago.

Market Watch:

Cattle traders will start off the week reacting to the Cattle on Feed and Cold Storage report numbers from Friday afternoon. Grain traders will be reacting to any surprise positions acquired as a result of the January options expiration. Grain trading will begin as normal on Sunday night, but end at noon CST on Monday for the Christmas holiday. Volume is expected to be light, with many traders making it either a 4 day weekend or taking off for the rest of the year. USDA Grain Inspections will be delayed until Wednesday as President Obama issued an executive order giving the agencies Monday off. Weekly Export Sales will be delayed until Friday by the Christmas holiday. The main reports this week will be in the livestock sector, with USDA releasing Milk Production on Wednesday, and both Cattle on Feed and Cold Storage on Friday. The USDA quarterly Hogs & Pigs report will be released on Friday, December 28.

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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