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May 2009 Archive for Market Watch

RSS By: Alan Brugler, AgWeb.com

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

Take a Weak Dollar, Add Water

May 22, 2009

 

           

 

Market Watch Summary with Alan Brugler

May 22, 2009

 

Take a Weak Dollar, Add Water

 

All commodities in our survey, except for Lean Hogs, were higher this past week. That should suggest to you that there was an underlying variable that affects a wide spectrum of commodity prices. That variable was the US dollar index. It dropped all 5 days of the week, losing about 3.6% of its value for the week. The CRB Index was up 3% as it takes more dollars to buy the same amount of fundamental value if the dollar is weaker.

 

Corn futures got the bull talk on wet weather and planting delays, but basically could do no better than gain what they were given by the weaker dollar. They were up 3.1%. Planting clearly is behind the average pace, and there is potential for a yield drag from late planting. However, last year showed that we can make up for the late planting with favorable summer weather. Export sales were on the low end of trade expectations, as poor livestock profitability isn’t limited to the US. Ethanol use was a bright spot, with plant margins improving and several bankrupt plants being bought by firms who intend to get them back on line quickly and resume grinding corn.

 

The three wheat markets were all higher. Minneapolis lost its bull leader status as weather turned warmer and drier and allowed some late planting to progress. KC was the weakest of the three markets as harvest is now underway in Texas and there has been some test cutting as far north as Oklahoma. While the wheat crop in those two states will be much smaller than last year, producer sales to elevators can still generate hedge pressure. CHI futures were up the most, due to speculative buying concentrated there, and also concerns about fungus and disease risks tied to the wet weather in SRW country.

 

Soybeans were up another 36 cents per bushel, or 3.14% for the week. The advance has been orderly, and persistent, price rationing. We can project 2009 ending stocks as low as 75 million bushels if use doesn’t slow down. Since that is below pipeline stocks levels and in theory impossible, the market’s job is to slow down use and make stocks last. That can be done by dissuading further export purchases, delaying existing contracts into the new crop time slot, encouraging soy processors to take more down time due to poor margins, or by shrinking residual use. Meal futures were trying to encourage crushers to continue, rising 4.69% for the week. Soy oil prices lagged behind, however, up only 0.19%. That added only 2 cents to soybean value. Export Sales were strong for beans, but smaller than expected for bean oil.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Weekly

Weekly

 

05/01/09

05/08/09

05/15/09

05/22/09

Change

% Change

July Corn

$4.14

$4.21

$4.17

$4.30

0.13

3.12%

July CBOT Wheat

$5.70

$5.91

$5.78

$6.13

0.35

6.06%

July KCBT Wheat

$6.15

$6.33

$6.31

$6.61

0.30

4.76%

July MGEX Wheat

$6.85

$7.00

$7.05

$7.45

0.40

5.64%

July Soybeans

$10.91

$11.12

$11.31

$11.66

0.36

3.14%

July Soy Meal

$342.00

$341.50

$358.20

$375.00

16.80

4.69%

July Soy Oil

$37.75

$39.61

$37.90

$38.10

0.20

0.53%

June Live Cattle

$82.10

$82.97

$82.37

$82.53

0.16

0.19%

Aug Feeder Cattle

$98.45

$100.70

$101.65

$101.93

0.27

0.27%

June Lean Hogs

$58.48

$61.12

$66.52

$65.98

0.55

-0.82%

July Cotton

$57.20

$59.85

$56.30

$57.11

0.81

1.44%

July Oats

$2.07

$2.26

$2.28

$2.50

0.22

9.43%

July Rice

$13.24

$12.65

$11.94

$12.06

0.12

1.01%

 

 

Cotton futures advanced 1.4% for the week, getting a big boost from the weakness in the dollar and the rising value of field crops with which it competes for acreage.  The Acreage War may not be as obvious as it was last year, but there are still commodities that need acreage, and commodities that don’t want to get them up. China indicated that it will start offering price support cotton bought earlier in the year at prices roughly 2% above what the government paid for the cotton. This will represent an increase in domestic supply, but will only cut into imports if world prices plus freight are high enough to match or exceed domestic prices.

 

Live Cattle were up a whole 16 cents per hundred pounds for the week. For the most part, they were marking time and awaiting fresh info from the Cattle on Feed and Cold Storage reports to be released by USDA after the close of trading on Friday night. The COF report showed May 1 On feed numbers just slightly above the average trade estimate at 97.19% of year ago. Placements were a little lighter than the average guess at 104.17%, but April marketings were also smaller than anticipated at 93.1% when the average analyst estimate was over 94% of last year.

 

Hog futures were the sole loser for the week, down .82%. Pork cutout values declined after got past the main wholesale buying period for Memorial Day barbeques. They firmed up a little later in the week as the dollar dropped and export potential improved, but cash hogs were under pressure due to the drop in carcass value. Futures had been carrying a big premium to cash, and dropped to reflect the lack of progress in advancing cash hog prices.

 

Market Watch:  The markets are closed on Monday for the Memorial Day holiday in the US. There is also a bank holiday in the UK. Globex trading will resume on Monday evening.  USDA’s weekly Crop Progress report will be delayed until Tuesday afternoon due to the holiday. Tuesday is also the last trading day for May Pork Bellies. Thursday morning will feature Census Crush and Cotton Consumption reports along with macro economic reports like New Home Sales and Jobless Claims. On Friday, USDA will release the weekly Export Sales report for the period ending May 21. Since this will also be the end of the month, we can expect the usual asset allocation position adjustments by the managed money crowd.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 content, or visit the web site @ www.bruglermktg.com.

 

© 2009 Brugler Marketing & Management, LLC

Wet Blanket

May 15, 2009

 

           

 

Market Watch with Alan Brugler

May 15, 2009

 

Wet Blanket

 

Last week we talked about the wet weather in the central US and how the associated planting delays were beginning to be noticed by the grain markets. That was again true for most of the week, with new crop corn supported by ideas of smaller final acreage and wheat aided by severe and persistent wetness in some of the spring wheat areas of North Dakota. On Friday, the outside markets threw a wet blanket on the bullish fire, however. Crude oil was down more than $2/barrel and the dollar jumped to a one week high against the euro and the Swiss franc. The strength in the dollar (with rumors of Swiss bank intervention) seemed to trigger some profit taking in the admittedly overbought grain futures. That resulted in net losses for the week in corn, CHI and KC wheat, and soybean oil. Soybeans and MGE spring wheat were also down on Friday but held onto net gains for the week.

 

Soybeans got some bullish help from USDA on Tuesday, with projected ending stocks cut to 130 million bushels for old crop and 230 million for new crop. USDA didn’t add any 2009 soybean acres, lacking the hard data to do so. Most analysts do expect additional acres in the June report due to switched from corn or spring wheat. USDA does see an expansion in world production for 2009/10, and a bearish buildup of world stocks (close to 52 MMT) by mid-2010. However, new crop prices are for the moment are mostly being dragged around by old crop price rationing. Soy oil weighed on bean values for the week, with the NOPA report on Thursday showing a big accumulation in soy oil stocks during April to more than 2.7 billion pounds. Palm oil futures in China also weakened a little.

 

Corn looked a little stronger fundamentally on Tuesday, as USDA boosted projected export and ethanol use for old crop and trimmed the August 31 ending stocks estimate to 1.6 billion bushels. The new crop figure was cut to an even tighter 1.145 billion. Weekly export sales on Thursday were again comfortably over the million tonne mark. Weather forecasts on Friday showed a window for some of the drier areas of the ECB to get planting done, and we got a number of reports of progress in Ohio (mostly mudding it in). That weighed on prices a little and then the dollar rally got untracked and bulls headed for the sidelines ahead of the weekend.

 

Wheat futures were down in CHI and KC but up in MPLS for the week. The MPLS market took out technical resistance at $7.07 in the September contract and got as high as $7.23 ¼ before backing off on Friday.  Our estimate for ND spring wheat acres is now below 6 million, and average yield is also likely to be lower due to later than normal planting dates. Crop condition ratings for HRW and SRW changed little in the previous week, thanks to significant improvement in those reported by Arkansas. On Tuesday, USDA jumped projected world ending stocks for 2009/10 by 14.75 MMT from the 2008/09 level, despite smaller world production.

 

 Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Weekly

Weekly

 

04/24/09

05/01/09

05/08/09

05/15/09

Change

% Change

July Corn

$3.86

$4.14

$4.21

$4.17

0.04

-0.89%

July CBOT Wheat

$5.43

$5.70

$5.91

$5.78

0.14

-2.28%

July KCBT Wheat

$5.94

$6.15

$6.33

$6.31

0.03

-0.39%

July MGEX Wheat

$6.51

$6.85

$7.00

$7.05

0.05

0.75%

July Soybeans

$10.34

$10.91

$11.12

$11.31

0.19

1.71%

July Soy Meal

$318.30

$342.00

$341.50

$358.20

16.70

4.89%

July Soy Oil

$36.65

$37.75

$39.61

$37.90

1.71

-4.32%

June Live Cattle

$82.60

$82.10

$82.97

$82.37

0.60

-0.72%

May Feeder Cattle

$99.13

$97.45

$99.35

$99.00

0.35

-0.35%

June Lean Hogs

$69.00

$58.48

$61.12

$66.52

5.40

8.84%

July Cotton

$52.70

$57.20

$59.85

$56.30

3.55

-5.93%

July Oats

$2.02

$2.07

$2.26

$2.28

0.02

0.88%

July Rice

$12.98

$13.24

$12.65

$11.94

0.72

-5.65%

 

Cotton futures ended a dynamic run of up weeks with a loss of 355 points, or nearly 6%. Export sales continue to drag, with Chinese buying notably light compared to the last couple years. Retail sales data was negative for the apparel end of things, and the stock market (used as a proxy for the status of any economic recovery in the US) had a tough week. Planting delays were supportive, but with USDA showing a comfortable 5.6 million bales of 2010 ending stocks the weather bulls didn’t have much leverage.

 

Cattle futures lost 60 cents for the week, or less that ¾%. Cash cattle prices were higher for the week by $1-2, with June futures trading at a slight discount. Wholesale beef prices got a little boost from Memorial Day pipeline stocking, but lost momentum at mid-week. March beef exports were up 5.2%, making first quarter shipments 6.6% bigger than in 2008. This is helping to offset weakness in the domestic consumption caused by the recession.

 

Hogs rose dramatically, up 8.84% and showing the best weekly gain of any of the tracked commodities. Retailers had drained inventory following the H1N1 flu outbreak, but consumers came back as the education efforts expanded (showing that the virus was not spread by hogs or pork, but rather by human to human contact). Wholesale prices rebounded from late April levels, and cash hogs rallied sharply. May hog futures expired on Thursday at a premium to the CME Index, anticipating that it would rise over the next two days. March pork exports, pre-swine flu, were up 2.2% from March 2008 on a carcass weight basis.

 

Market Watch:  The main USDA reports for the week are the Cattle on Feed and Cold Storage reports, which are scheduled for Friday evening. Friday will also make the expiration of the June grain options. Not to be overlooked, USDA will release the weekly Crop Progress and Crop Condition ratings on Monday night, and the weekly Export Sales report on Thursday morning. The interest in the latter is focused on Chinese oilseed buying and whether the US is able to sell wheat after the recent rally. Last but not least, a week from Monday is the Memorial Day holiday, so Friday could be a thin trading day as the traders head out for the holiday or make it a 4-day weekend.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 content, or visit the web site @ www.bruglermktg.com.

© 2009 Brugler Marketing & Management, LLC

Wet Weather Starts to Matter

May 08, 2009


            

 

Market Watch Summary with Alan Brugler

May 8, 2009

 

Wet Weather Starts to Matter

 

After weeks of talking about wet weather in the southern and eastern portions of the Corn Belt, the futures market finally started to look like it cared.  Corn futures were up 8 cents net for the week, or 1.9%.  There were a couple large range days, and indications of some fresh speculative money entering the market.  The gain was limited by active old crop cash sales on up days, and by demand concerns.  As the hog market firmed, those concerns appeared to abate.

 

Wheat bulls also appeared to be getting some traction, at least in terms of pre-report buying interest.  The CHI futures were up 4.1% for the week, and KC was up 3.25%.  The Kansas Wheat Quality Tour put the crop there at 333 million bushels on a 40.8 bpa yield.  Those were both down from last year, suggesting that the crop isn’t good enough to offset losses in OK and Texas tied to drought and freeze damage.  Export sales are still a struggle, but the weaker dollar also offered hope there.

 

Soybeans slowed down a little, but posted a significant technical marker by closing the week above the 38.2% Fibonacci retracement on the weekly chart.  May futures saw very little interest in deliveries against the contract, due to tight old crop supplies.  Traders are looking for USDA to raise exports and cut ending stocks on Tuesday.  New crop soybean futures were higher for the week, but traded more cautiously because of the potential for 2-4 million acres of intended corn and spring wheat to be planted to soybeans if the weather continues wet into the end of the month.  Soy futures also got a lift from crude oil. Soy oil bounced 5% in part because of the rising value of veg oils as biodiesel feedstock.  With Malaysian palm oil supplies at 20 month lows, and Indonesia likely to impose an export tariff, soy oil became a hot commodity and added to product value for the beans.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Weekly

Weekly

 

04/17/09

04/24/09

05/01/09

05/08/09

Change

% Change

May Corn

$3.76

$3.77

$4.06

$4.14

0.08

1.91%

May CBOT Wheat

$5.23

$5.32

$5.57

$5.80

0.23

4.13%

May KCBT Wheat

$5.72

$5.86

$6.07

$6.27

0.20

3.25%

May MGEX Wheat

$6.36

$6.65

$6.95

$6.93

0.02

-0.32%

May Soybeans

$10.51

$10.40

$11.02

$11.34

0.32

2.90%

May Soy Meal

$326.60

$325.40

$353.70

$359.50

5.80

1.64%

May Soy Oil

$36.77

$36.34

$37.43

$39.30

1.87

5.00%

June Live Cattle

$84.53

$82.60

$82.10

$82.97

0.87

1.06%

May Feeder Cattle

$99.53

$99.13

$97.45

$99.35

1.90

1.95%

May Lean Hogs

$72.25

$69.00

$58.48

$61.12

2.65

4.52%

July Cotton

$50.69

$52.70

$57.20

$59.85

2.65

4.63%

May Oats

$1.89

$1.93

$2.00

$2.22

0.22

11.00%

May Rice

$12.84

$12.87

$13.02

$12.58

0.44

-3.38%

 

Cotton futures were up 4.6% for the week despite an upward revision by a Memphis based forecasting firm in projected 2009 production and acreage.  The largest weekly export shipments of the year helped boost the market, along with some improvements in retail sales statistics that suggest consumers might again begin to nibble at textiles.  Speculative fund buying for the most part contributed to rallies in cotton futures hitting new highs in this week’s sessions.  Recent sharp drops in the US dollar index this week also lent support.

 

Live Cattle were up 1% for the week despite dropping wholesale and cash cattle prices for the week.  Net weekly change in choice and select cutout were -2.44% and -2.29% respectively.  Rally in live cattle is attributed to a recovery in hogs futures, and ideas that tighter pork and poultry supplies could help beef.  Renewed trade sentiment that consumer beef demand will increase with the onset of grilling season beginning Memorial Day weekend.  Feeder cattle were up near 2% for the week though trade sentiment that demand for feeders has eased.  Cash feeders sales were steady to lower and trading slow.  Rains in the southeastern parts of the Plains hampered movement, but will further improve grass pastures.

 

Hog futures staged a big 4.5% rally.  Pork cutout was up for week as indicated by a 6.5% increase in carcass value.  Despite May futures closing limit down and nearly closing limit down few times this week, futures have recovered some.  This is in part due to trade sentiment that the H1N1 “swine” flu hasn’t been proven to be transmitted to humans via pork consumption.  Pork carcass values also recovered after reaching a low of 54.67 for the week which also stemmed from reaction to the flu outbreak.  Cash hogs traded near $1.67 higher for the week.  Outlook for the recent ban of US pork is seen as temporary, as indicated by news that Russia, a major importer of US pork, is likely to resume trade by June 1.

 

Market Watch:  The big reports for this week will be in Tuesday morning.  That’s when USDA will release the monthly Crop Production and WASDE reports.  The former will have winter wheat production estimates, with the trade expecting something a little above 1.5 billion bushels.  The latter will include the first official S&D estimates for 2009/10 for both the world and the US grains.  Acreage and yield will still be “armchair” estimates for corn and soybeans, but the trade is very interested in the demand assumptions.  The weekly Export Sales report on Thursday morning will be of interest given rumors of Chinese cancellations.  NOPA will also release its monthly soybean crush report on Thursday morning.  May grain futures options also expire on Thursday.

 

There is a risk of loss in futures and options trading.  Past performance is not necessarily indicative of future results.  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 content, or visit the web site @ www.bruglermktg.com.

 

© 2009 Brugler Marketing & Management, LLC

Bean Bulls Run Rampant, Hogs Just Dead

May 01, 2009

 

           

 

Market Watch with Alan Brugler

May 1, 2009

 

Bean Bulls Run Rampant, Hogs Just Dead

 

Livestock producers didn’t have a very good week, with H1N1 Influenza A spreading around the world and unfortunately named swine flu. At least 16 countries are now limiting imports of either hogs or pork from the U.S. due to the misconception that it is being spread via hogs. Hog futures aborted their usual spring cash market rally and turned due south because of shrinking retail consumption by nervous consumers and shrinking export interest. Beef prices were also dragged down at the wholesale level by the competition from cheap pork, which resulted in June cattle futures trading about 50 cents lower for the week. Cash cattle trade for the week was at a depressed $85-86, mostly $2 below the previous week.

 

Soybean futures were up 62 cents for the week, dropping hard on Monday and Tuesday, but rallying sharply on Wednesday through Friday and taking out the January high.  Beans were up 6% for the week, but led by soybean meal rising 8.7%. That raises an interesting question, i.e. with hog producers going broke worldwide, who is buying the soybean meal besides the speculators? The USDA report showed strong export sales of soybean meal for the week prior to the swine flu outbreak hitting the news. This week’s report will be more indicative about the impact of the H1N1 on meal and corn demand outside the United States. Soy oil was up 3% in support of the beans, aided by a recovery in palm oil prices ahead of the May 1 holiday in China (and several other countries). China has continued to be a strong buyer of US beans to offset diminished Argentine availability and perhaps with a secondary benefit in using up US dollars parked in low yielding US government debt instruments.

 

Corn futures rose 29 cents per bushel, or 7.76%. Producer selling dried up because a) they were busy planting and b) in areas where they couldn’t plant they were hanging onto old crop supplies just in case they never get the new crop planted.  Export sales for the pre-H1N1 week were strong at more than 1.22 million tonnes. The other motivator was of course the planting delays. While the WCB made good progress and Iowa is likely over 60% done, the ECB was mired in mud and flooded fields. As we get into May the planting window gets smaller and nervousness about a short fall in corn acreage gets more pronounced. Of course, any land not planted to corn is likely to end up as extra soybean acres since they can be planted well into June.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

 

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Weekly

Weekly

 

04/09/09

04/17/09

04/24/09

05/01/09

Change

% Change

May Corn

$3.90

$3.76

$3.77

$4.06

0.29

7.76%

May CBOT Wheat

$5.22

$5.23

$5.32

$5.57

0.25

4.75%

May KCBT Wheat

$5.71

$5.72

$5.86

$6.07

0.21

3.63%

May MGEX Wheat

$6.45

$6.36

$6.65

$6.95

0.30

4.51%

May Soybeans

$10.07

$10.51

$10.40

$11.02

0.62

5.96%

May Soy Meal

$311.20

$326.60

$325.40

$353.70

28.30

8.70%

May Soy Oil

$35.42

$36.77

$36.34

$37.43

1.09

3.00%

June Live Cattle

$84.60

$84.53

$82.60

$82.10

0.50

-0.61%

May Feeder Cattle

$98.93

$99.53

$99.13

$97.45

1.68

-1.69%

May Lean Hogs

$73.45

$72.25

$69.00

$58.48

10.53

-15.25%

May Cotton

$48.41

$49.94

$51.70

$56.52

4.82

9.32%

May Oats

$1.96

$1.89

$1.93

$2.00

0.07

3.63%

May Rice

$13.40

$12.84

$12.87

$13.02

0.15

1.20%

 

Wheat futures posted gains of 3.6 to 4.8% at the three exchanges. The entire rally in Chicago came on Friday, when May advanced 33 cents per bushel. Minneapolis was an obvious bull play given delays in planting spring wheat. KC got to play because of drought and frost damage. CHI could rationalize bullish behavior on ideas that the constant wet weather will create fungal disease problems as well as various yield depressing plant diseases. While the US offers were not accepted by Egypt in this week’s tender, prices were getting close to world levels –until Friday’s rally.

 

Cotton futures rose 9.32% for the week, the biggest percentage advance in the tracked commodities. Wet weather and forecasts for up to 6” accumulations over the next few days boosted prices because of the threat to planting progress. Export sales have also been running above the diminished pace USDA is predicting for the year, and cotton is having to defend its intended planted acres against incursions from the soybean market.

 

Market Watch:  Monday is Greenery Day in Japan, a suitable start to the main planting and growing season for US row crops. Typically, April planting delays are taken with a grain of salt, but lingering delays into mid-May start to raise more concerns about whether the stuff will “ever” be planted. USDA’s Crop Progress report on Monday night will be closely scrutinized. Thursday will have the usual USDA Export Sales report, with interest in any additional contra-seasonal Chinese purchases out of the US.


 

 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.  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 content, or visit the web site @ www.bruglermktg.com.                                                

 

© 2009 Brugler Marketing & Management, LLC

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