Jul 28, 2014
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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.

Black Hole or Water Well?

Jul 25, 2014


Brugler

Market Watch with Alan Brugler

July 25, 2014

Black Hole or Water Well? 

There is a definite downward bias for commodity prices right now, with the CRB Index in retreat. There are exceptions such as cattle, but most markets are leaking lower. The question becomes this: Are we looking at a black hole or a dried up well? Black holes absorb everything around them (i.e. any bullish grain news quickly disappears off the radar). They keep gaining mass and destroying their surroundings. If you keep throwing things into a well on the other hand, it will eventually fill up and you no longer have the hole. While at times this current market has looked like a black hole (no bullish reaction for a huge 2.4 MMT of weekly soybean export sales) we suspect that it is really a well. We just haven’t had enough bullish grain news yet to fill up the well and start building a rally on the site.

Corn lost 8 cents for the week after slipping 7 cents last week. Nearby September is now down 46 cents since July 3. The highest early July weekly crop condition ratings since 1994 kept a lid on corn prices all week, as they make it easy to believe in upward revisions to the US yield forecast. That would presumably mean more burdensome ending stocks. New crop gloom and doom were fed by national average yield estimates from Lanworth and Allendale, with the latter at a bin busting 174.1 bpa. Old crop export sales were also disappointing in the Thursday USDA report. The one bright spot was ethanol production, consuming nearly 104 million bushels for the week and without a stocks buildup. RFA pointed out on Friday that there are 3,349 E-85 locations in the US now. EPA is only assuming 2,391 locations in their calculations about how much ethanol could be used over and above E10 blends.

Soybean futures ended the week 3% higher. Old crop export sales continue to be made, despite the need for the US to import beans from South America to offset the bushels being shipped.  Timing is everything! Gulf basis bids were firm in trying to attract export bushels away from crush plants. There were also phenomenal new crop bookings made as soon as November futures dropped below $11 per bushel. USDA confirmed 2.451 MMT of 2014/15 sales last week, with 1.2835 MMT slated for delivery to China. Chinese purchases of US new crop beans still lag the record 2013 pace by 2.47 MMT. Sales commitments to all destinations are slightly ahead of last year.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

07/03/14

07/11/14

07/18/14

07/25/14

Change

% Change

Sept

Corn

$4.09

$3.78

$3.71

$3.63

($0.08)

-2.22%

Sept

CBOT Wheat

$5.79

$5.26

$5.32

$5.38

$0.06

1.08%

Sept

KCBT Wheat

$6.87

$6.36

$6.33

$6.31

($0.01)

-0.20%

Sept

MGEX Wheat

$6.72

$6.28

$6.31

$6.28

($0.03)

-0.44%

Aug

Soybeans

$12.99

$11.95

$11.77

$12.12

$0.36

3.02%

Aug

Soybean Meal

$417.00

$387.00

$380.30

$398.00

$17.70

4.65%

Aug

Soybean Oil

$38.67

$36.77

$36.57

$36.09

($0.48)

-1.31%

Aug

Live Cattle

$155.00

$149.13

$151.63

$159.10

$7.47

4.93%

Aug

Feeder Cattle

$217.63

$210.38

$211.65

$218.25

$6.60

3.12%

Aug

Lean Hogs

$131.60

$128.68

$127.08

$123.63

($3.45)

-2.71%

Oct

Cotton

$71.79

$68.74

$68.63

$65.16

($3.47)

-5.06%

Sept

Oats

$3.51

$3.28

$3.32

$3.48

$0.17

4.98%

Sept

Rice

$13.58

$13.20

$13.13

$12.94

($0.19)

-1.41%

 

Wheat futures ended the week higher in Chicago for the second week in a row.  KC was down 0.2% for the week and MPLS was down 0.4% for the week.  The Spring Wheat Tour projected average yield of 48.6 bpa, an all time record. The 5 year average for the group is 44.7 bpa. That put a small bit of downward pressure on MPLS. They projected durum yield at 36.6 bpa. USDA reported that net weekly sales through July 17 totaled 443,200 MT.  The largest buyer s were Japan and Nigeria. The total was comfortably within the range of estimates, i.e. no bullish surpise. Australian sources are concerned about likely dry conditions over the next  60 days in eastern Australia. Canadian producers are still hoping to dry out, but draw some comfort from the yield numbers on the Spring Wheat Tour.

October Cotton futures plunged 5% this week.  The over arching concern in the market is a ballooning US ending stocks estimate coupled with large Chinese stocks that could further constrain US exports. USDA reported net weekly export sales of US cotton for last week totaled 373,200 RB, including 3,700 RB of upland.  2013/14 sales of Upland cotton were actually posted as a net reduction of 1,900 RB for this week due to cancellations and rollovers. The USDA marketing year for cotton ends July 31. Any unshipped sales at that point will be applied to 2014/15 outstanding sales. This Export Sales report was through July 17.  

Front month cattle futures were up 4.93% for the week, with nearby futures trading at a discount to the cash market and then seeing cash cattle prices skyrocket $6 or more. Cash cattle traded $165-166 on Friday as packers had money to spend and contracts to fill.  What they don’t have is enough ready cattle to buy. Wholesale beef prices hit record highs again this week. Weekly beef production was 10% smaller than the same week in 2013. Beef production YTD is down 6.3%, with USDA expecting the third quarter production to be smaller than even 2003. Average carcass weights are running about 7# above year ago.  The USDA Cattle Inventory report showed the combined beef factory (beef cows + heifers for replacement) down 2.5% from the July 2012 report. Most if not all of that decline likely occurred in 2013, the year USDA did not issue the report due to budget issues.  The monthly Cattle on Feed report showed fewer cattle placed in lots during June than had been expected, with marketings above estimate at 98.2%. That left July 1 inventory at 97.6% of year ago vs. ideas of 98.1%.

August Hog futures were down 2.7%  this week.  Pork production for the week was up 1.4% from the previous week, but down 1.6% from the same week in 2013. Year to Date production is now below year ago by 1.1% as the cumulative effect of reduced slaughter runs offsets the increase in average  carcass weights. Slaughter YTD is down 4.7% with the pork production down 1.1% . The difference is the extra pounds of pork per animal, with this week estimated at 213# vs. 203# a year ago (carcass). Pork carcass cutout values continued to rise, with the average at $131.79 on Friday vs. $137.56 a week ago.  

 Market Watch

Cattle traders will begin the week reacting to the Cattle on Feed report results from Friday evening. Grain traders will be dealing with any futures positions inherited via August options exercises at expiration.  USDA will give us updated crop condition and maturity ratings on Monday evening in the Crop Progress report. Not to be overlooked, the Fed OMC meeting is Tuesday and Wednesday.  In general they are expected to continue to wind down the QE3 program and send some additional warning shots about inflation, tightening labor markets  and the eventual need to start raising short term interest rates.

Thursday will feature the USDA weekly Export Sales report, with some large numbers already "known" via the daily reporting system. Thursday is also first notice day for August futures deliveries in the grains. Friday will turn the calendar to August and mark expiration of the August live cattle options. In the background we will have the usual end of month asset allocation trades with funds selling winners and buying losers.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

Shot Full of Holes

Jul 18, 2014

 Brugler

Market Watch with Alan Brugler

July 17, 2014

Shot Full of Holes

There is an old warning from the battle front that if you let your posterior get too high when crawling it will get shot off. The corn, wheat and soybean markets had a little bit of that feel this week, with modest short covering type rallies being shot full of holes on Friday. Wheat was as well ventilated as a pheasant crossing a full line of hunters. It had rallied on Thursday following the shooting down of a Malaysian airlines passenger plane in the Ukraine. By Friday, the markets had come to the conclusion that Russia would not be punished (grain export limitations being the concern) for its role in the incident until further evidence was gathered about who fired the missle and where they got it. The credit default swaps for Russia also relaxed on Friday after spiking on Thursday.

Corn lost 7 cents for the week after losing 17 cents the previous week. All of the loss was on Friday as the wheat market collapsed and took corn with it.  The highest early July weekly crop condition ratings since 1994 kept a lid on corn prices all week, as they make it easy to believe in upward revisions to the US yield forecast. That would presumably mean more burdensome ending stocks. USDA left the yield at a record 165. 3 bpa in the Friday WASDE report, but there are a number of estimates from 167 to 173 bpa floating around out there. US corn export sales are now at 100% of the USDA forecast for the marketing year. Ethanol stocks dropped 400,000 barrels last week, as production failed to keep up with consumption over the July 4 holiday weekend.  As of July 10, the large spec funds were still net long 93,101 corn futures contracts, trimming their position by 14,499 in the prior week.

Soybean futures ended the week  1.5% lower after a 6.6% drop the prior week. Futures had rallied due to a grain inspectors strike in Argentina and some continued old crop export interest.  USDA is calling for a 3.8 billion bushel US crop, and record loose global stocks/use ratio in 2015 unless South America cuts production.  US ending stocks would grow modestly to 415 million bushes but that assumption is based on sustaining this year’s export pace with the help of lower prices.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

06/27/14

07/03/14

07/11/14

07/18/14

Change

% Change

Sept

Corn

$4.42

$4.09

$3.78

$3.71

($0.07)

-1.79%

Sept

CBOT Wheat

$5.93

$5.79

$5.26

$5.32

$0.06

1.19%

Sept

KCBT Wheat

$7.21

$6.87

$6.36

$6.33

($0.04)

-0.55%

Sept

MGEX Wheat

$6.92

$6.72

$6.28

$6.31

$0.02

0.40%

Aug

Soybeans

$13.78

$12.99

$11.95

$11.77

($0.18)

-1.53%

Aug

Soybean Meal

$447.00

$417.00

$387.00

$380.30

($6.70)

-1.73%

Aug

Soybean Oil

$40.13

$38.67

$36.77

$36.57

($0.20)

-0.54%

Aug

Live Cattle

$151.12

$155.00

$149.13

$151.63

$2.50

1.68%

Aug

Feeder Cattle

$214.33

$217.63

$210.38

$211.65

$1.28

0.61%

Aug

Lean Hogs

$129.83

$131.60

$128.68

$127.08

($1.60)

-1.24%

Oct

Cotton

$74.30

$71.79

$68.74

$68.63

($0.11)

-0.16%

Sept

Oats

$3.27

$3.51

$3.28

$3.32

$0.04

1.07%

Sept

Rice

$13.55

$13.58

$13.20

$13.13

($0.07)

-0.57%

 

Wheat futures ended the week higher in Chicago and MPLS, but down 4 cents in KC. All three markets were rallying until Friday and then posted double digit losses.  US export sales continue to be soft, with sales last week at 320,700 MT. That did include 60,000 MT to China. Export commitments YTD are 35% of the USDA forecast for the year. That is better than the 5 year aveage of 30%, but lags the 39% booked last year.  The Commitment of Traders report showed the large spec funds adding another 2199 contracts to their net short position in Chicago, bringing it to 46,495 contracts (231 million bushels).

October Cotton futures were down a modest 0.16%.  USDA  raised projected US cotton acreage to 11.369 million acres and hiked projected US production by 1.5 million bales and put 2015 ending stocks at 5.2 million. That would be the largest surplus since 2008 for the US. Global ending stocks are seen record large at over 105 million bales. Weekly export sales on Thursday were the best (combined old and new crop) since May, as lower prices attracted some interest. A big 5 day gain in the US dollar index was a headwind for all of the field crops (and likely for meat export sales as well).

Front month cattle futures were up 1.7% for the week. August futures had traded as low as $147.27 on Monday, anticipating major weakness in cash cattle. Cash cattle traded at $155-157 this week, and wholesale prices were still firm albeit off of the record levels. Choice boxed beef was down 1.3% for the week after setting the all time record on July 10. Weekly beef production was 11.4% smaller than the same week in 2013. Beef production YTD is down 6.2%, with USDA expecting the third quarter production to be smaller than even 2003. Average carcass weights are running 2-3# above year ago.

August Hog futures were down 1.2%  this week.  Pork production for the week was down 1.7% from the previous week, and 4% below the same week in 2013. Year to Date production is now below year ago by 1% as the cumulative effect of reduced slaughter runs offsets the increase in average  carcass weights. Slaughter YTD is down 4.7% with the pork production down 1% . Pork carcass cutout values continued to rise, with the average at $137.56 on Friday.  It was only $134.85 on Monday.

 Market Watch

The main USDA reports for the coming week will be Cold Storage on Tuesday and the monthly Cattle on Feed report on Friday afternoon. We’ll also have the regular weekly Export Inspections on Monday morning  and Export Sales on Thursday.   The crop condition ratings on Monday night will be closely scrutinized for their typical last half of summer drop off. Friday will mark the expiration of the August grain options.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

Gotcha!

Jul 11, 2014

 Brugler

Market Watch with Alan Brugler

July 10, 2014

Gotcha!

In seminars, I often warn producers about the Gotcha trade.  That is as in "I’ve got you over a barrel", a colloquialism for "You’re So Screwed." The Gotcha trade is a sell off in any ag commodity that occurs after the producers is fully financially committed to the production process and can do little or nothing about the outcome. For grains, this means after planting, for hogs this is after farrowing, etc. I am basically warning folks that regardless of how good prices were when they planned the production, if too many people raise the same thing you are going to see pricing pressure after you can’t change the production plan. It is a powerful argument for being a hedger, and for forward contracting enough bushels at profitable levels to at least cover your input costs. This week was a classic Gotcha sell off in the grains, with USDA delivering the expected bearish production news and the weather for at least the moment making record corn and bean crops look like a certainty.    

Corn lost 17  cents on the week,  a 4.1% drop following a 5.9% decline the previous week.  The highest late June weekly crop condition ratings since 2000 weighed on the market, as they suggest little incentive to lower projected national average yield. USDA left it at a record 165. 3 bpa in the Friday WASDE report. They did cut new crop production by 75 million bushels due to lower harvested acres. On the other hand, they had to trim old crop feed & residual use to reflect the "extra" corn found in the Grain Stocks report.

Soybean futures ended the week  6.6% lower. The old crop/new crop spreads were collapsing as there was no delivery squeeze against the July futures, and it became clear that crushers thought they had enough domestic and imported beans to make it to new crop.  On Friday, USDA confirmed that basis premise by raising old crop ending stocks to 140 million bushels. They boosted projected crush by 25 million and exports by 20 million, but showed a -69 million bushel resisdual use. As we teach, a negative residual means "we found it and we don’t know where it came from". USDA is likely to raise the 2013 crop production estimate, but usually won’t do that until they have the final use number from the September Grain Stocks report. For new crop, the theme is "too much", with a 3.8 billion bushel bean crop currently projected, and record large global ending stocks to go with it. The crop is not yet in the bin, but the market is trying to price "what if it is" and send the signal for more consumption.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

06/20/14

06/27/14

07/03/14

07/11/14

Change

% Change

July

Corn

$4.53

$4.43

$4.17

$4.00

($0.17)

-4.14%

July

CBOT Wheat

$5.85

$5.85

$5.68

$5.15

($0.53)

-9.38%

July

KCBT Wheat

$7.21

$7.26

$6.97

$6.34

($0.63)

-9.00%

Sept

MGEX Wheat

$6.94

$6.92

$6.72

$6.28

($0.44)

-6.55%

July

Soybeans

$14.16

$14.32

$13.88

$12.96

($0.92)

-6.63%

July

Soybean Meal

$459.20

$469.80

$447.00

$421.80

($25.20)

-5.64%

July

Soybean Oil

$40.04

$39.98

$38.56

$36.71

($1.85)

-4.80%

Aug

Live Cattle

$146.32

$151.12

$155.00

$149.13

($5.88)

-3.79%

Aug

Feeder Cattle

$206.88

$214.33

$217.63

$210.38

($7.25)

-3.33%

Aug

Lean Hogs

$129.15

$129.83

$131.60

$128.68

($2.92)

-2.22%

Oct

Cotton

$77.49

$74.30

$71.79

$68.74

($3.05)

-4.25%

July

Oats

$3.40

$3.32

$3.91

$3.49

($0.42)

-10.81%

July

Rice

$14.64

$14.59

$14.55

$14.50

($0.05)

-0.34%

 

Wheat futures ended the week more than 9% lower in Chicago and Kansas City.  Minneapolis was down more than 6%. USDA revealed last week that US producers had expanded spring wheat plantings to 12.709 millin acres since the March intentions report. On Friday they bumped up projected spring wheat production to 564.6 million bushels, 20 million more than the trade had expected. KC HRW is a substitute with MPLS HRS wheat, and took some of the selling pressure despite a USDA cut in projected HRW production to only 703 million bushels. USDA was forced to reduce projected US wheat exports by 25 million bushels because of slow export bookings YTD and the growing world ending stocks estimates. The average cash price estimate for the year was cut 40 cents to $6.60/bushel.

October Cotton futures were big losers this week, down 4.25%.  USDA  raised projected US cotton acreage to 11.369 million acres, but also reduced expected abandonment in the Southwest because of improved soil moisture conditions. They hiked projected US production by 1.5 million bales and put 2015 ending stocks at 5.2 million. That would be the largest surplus since 2008 for the US. Global ending stocks are seen record large at over 105 million bales. Old crop ending stocks were left UNCH at 2.7 million bales. The marketing year for cotton ends July 31.

Front month cattle futures were down 3.8% for the week, ending an amazing run  that covered $21.10 per hundred from the end of May to the peak. The news is always the most bullish at the top, and in fact wholesale beef prices set new record higs this week. Weekly export sales were also undeterred by the high prices, but there is considerable doubt about demand for late July and early August, a traditional soft spot ahead of Labor Day pipeline activity. Most of the selling was long liquidation, taking in some cases obscene profits out of cattle and feeder cattle futures longs and looking for an undervalued market to buy. Grain producers should be waving signs saying "Hot money welcome here".  Beef production YTD is still down 6.1%.

August Hog futures were down 2.2%  this week.  July futures were holding their ground pretty well ahead of expiration this coming Tuesday. The CME Lean Hog Index continues to climb, hitting $131.63 on Friday (actually the Wednesday data).  Pork production for the week was up 13.9% vs. the July 4th week, but down 4.2% from the same week in 2013.  Production YTD is down 4.5%. Carcass weights are still running an estimated 10# above year ago, but have dropped a little from their peak due to summer weather.  USDA is now projecting 2014 pork production will be down 1.9% from 2013, with the revised estimate for 2015 up 2.1% from the lower 2014 projection.

 Market Watch

The trade will begin the week dealing with the margin clerks, although producer short hedgers should be in really good shape. Any shifts in the weekend weather forecast will have to be toward both hot and dry to get folks excited. USDA will issue the regular Export Inspections and Crop Progress reports on Monday, along with Export Sales on Thursday. Monday will also mark the expiration of the July grain futures contracts. Hogs will expire on Tuesday. The NOPA crush report is also expected on Tuesday.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

The Trend is Your Friend, Really!

Jul 03, 2014

 Brugler

Market Watch with Alan Brugler

July 3, 2014

The Trend Is Your Friend, Really! 

Repeat after me the old trader’s axiom, "The trend is your friend". Big financial gains are made by being on the right side of a trending market. For a speculator, that is preferable to being chopped up in a sideways market. For us in agriculture, it is important to favor those trends as well. For livestock producers, the relentless uptrends in prices have simply meant remaining as unhedged as possible for cattle and hogs, and long hedged on feeders if you are a feedlot. Stand aside and let the money come in. Grain guys and gals may not be as keen on the current trend, depending on their hedge status. We had a number of individual Brugler producer clients who reported 6 digit gains in their hedge accounts this week following the sell off. If you were not hedged up with futures or options, keep in mind that other market axiom "Low prices cure low prices". As with other medicine you have to take all of it to achieve the cure.

Corn lost 26 cents on the week,  a 5.9% decline.  The highest late June weekly crop condition ratings since 2000 weighed on the market, as they suggest little incentive to lower projected national average yield in the July WASDE report. USDA also confirmed that nearly all of the intended acreage from March was in fact planted.  Old crop demand remains stout, although export shipments have not kept up with sales. Total commitments are 98% of the forecast for the year. They would typically be 100% by now. Outstanding (not yet shipped) sales are 9.252 MMT, the largest backlog since 2010.

Soybean futures ended the week  3.1% lower.  Old crop exports have slowed, but commitments are still 105% of the USDA full year export forecast.  They would typically be 102%, so USDA is either still low on exports or there will be an unusually large carryover of unshipped business into the new crop slot on September 1. Of course the sell off this week was a double whammy in the June 30 USDA reports. June 1 stocks were larger than expected at 405 million bushels. More significantly, the 2014 planted acreage of 84.839 million was up more than 2 million from the March intentions.  On Friday, consultant Informa lowered projected national average yield to 44.5 bpa, using 83.228 million harvested acres.  Census also told us on Thursday that May soybean imports were 8.3 million bushels, bringing the 9 month total to 38.8 million.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

06/13/14

06/20/14

06/27/14

07/03/14

Change

% Change

July

Corn

$4.48

$4.53

$4.43

$4.17

($0.26)

-5.87%

July

CBOT Wheat

$5.85

$5.85

$5.85

$5.68

($0.17)

-2.95%

July

KCBT Wheat

$7.11

$7.21

$7.26

$6.97

($0.29)

-3.99%

July

MGEX Wheat

$6.82

$6.90

$6.83

$6.51

($0.32)

-4.68%

July

Soybeans

$14.27

$14.16

$14.32

$13.88

($0.44)

-3.09%

July

Soybean Meal

$467.20

$459.20

$469.80

$447.00

($22.80)

-4.85%

July

Soybean Oil

$39.73

$40.04

$39.98

$38.56

($1.42)

-3.55%

June

Live Cattle

$147.60

$147.55

$152.25

$155.00

$2.75

1.81%

Aug

Feeder Cattle

$208.15

$206.88

$214.33

$217.63

$3.30

1.54%

Aug

Lean Hogs

$131.27

$129.15

$129.83

$131.60

$1.78

1.37%

July

Cotton

$86.95

$88.16

$80.89

$76.69

($4.20)

-5.19%

July

Oats

$3.47

$3.40

$3.32

$3.91

$0.60

17.95%

July

Rice

$14.51

$14.64

$14.59

$14.55

($0.04)

-0.27%

Wheat futures ended the week 3% lower in Chicago, and 4% lower in KC. MPLS drpped 4.7% after USDA revealed that US producers had expanded spring wheat plantings to 12.709 millin acres since the March intentions report instead of switching to soybeans as the trade had believed was the case.  KC HRW is a substitute with MPLS HRS wheat, and took some of the selling pressure despite continued poor yield reports.  On Thursday, USDA reported better than expected weekly export sales of 567,500 MT.   US export sales commitments are currently 31% of the projected total for the year. The 5-year average pace would be 25%, so bookings to date would be regarded as strong.

July Cotton futures were big losers this week.  USDA  raised projected US cotton acreage to 11.369 million acres. That was up from 10.407 million last year. Cotton export sales commitments are 104% of the USDA forecast for the year. The average for this date would be 108%. There has been a marked slowdown in export sales in recent weeks, particularly to China.  USDA pegged weekly export sales for Cotton at 101,300 RB, including 94,600 RB of Upland, and 6,700 RB of Pima.   The marketing year ends July 31.

Front month cattle futures were up 1.8% for the week after a 3.2% advance the previous week. August feeder cattle shot up another 1.5%.  Cash cattle trade was reported mostly $2-3 higher than last week at $157-158.  Wholesale beef prices were sharply higher this week, setting new all time highs. USDA reported weekly beef export sales at only 5,700 MT for this past week, the worst performance of the year. Price rationing may be starting to affect foreign buyers.

August Hog futures were 1.4%% higher this week.  The Hogs & Pigs report a week ago was bullish, and market action reflected that confirmation of tighter hog numbers. Weekly pork export sales were OK at 12,300 MT, but down from 17,100 MT the prior week.  Week to date slaughter through Thursday was 1.626 million head vs. 1.57 million a week earlier. The total was well above the 1.274 million from 2013, but that is due to the timing of the July 4 holiday.

 Market Watch

USDA will issue the regular Export Inspections and Crop Progress reports on Monday, along with Export Sales on Thursday. CFTC will issued a delayed weekly Commitment of Traders report on Monday. Wednesday will mark the expiration of the July cotton futures contract. The main USDA reports this week will be the July Crop Production and WASDE supply/demand reports on Friday morning.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 
Copyright 2014 Brugler Marketing & Management, LLC

Residual Use is Key

Jun 27, 2014

Brugler 

Market Watch with Alan Brugler

June 27, 2014

Residual Use Is Key

 

We have the quarterly USDA Grain Stocks report on Monday. The report has a reputation for creating surprises in the market, in both directions. In our opinion, part of that is timing, since the March, June and September stocks reports all fall on fiscal quarter deadlines when traders are already moving money around for asset allocation and performance reasons. The new data just aggravates the volatility. The other factor here is that everyone, including the analysts at the World Outlook Board (creators of the monthly WASDE supply/demand reports) is waiting to see what the NASS division of USDA finds in the bins.  The market, and WAOB have a pretty good handle on exports, ethanol use and soybean crush. What is unknown is residual use, the things not directly measured via surveys. For corn that is shown as Feed & Residual use, and can be up to 35% of total annual use. There is plenty of room for a surprise there. For soybeans, the seed & residual category is smaller, typically only 100 million to 150 million bushels for the whole year, but crush has also taken on a residual use component since Census quit surveying crush plants a few years ago and NOPA only surveys members. All this is to say that the Stocks report gives us hard numbers as of June 1, and those allow a more accurate computation of residual uses.  The changes will be made in the July WASDE report, so implied residual use is the key.  What about acres? Also important, but easier to rationalize away any surprise by changing your yield assumption.

 

Corn lost ten cents on the week, down 2.26% since last Friday.  Weekly export sales were large, coming in  at 321,400 MT for 2013/14, and  232,100 MT for 2014/15.  The report showed some cancellations for unknown destinations, but Japan, Vietnam, Spain, and the Netherlands all picked up tonnage that was switched from unknown destinations.  The CFTC Commitment of Traders report this afternoon showed managed money decreasing their net long position in corn by 22,104 contracts as of June 24, giving them a net long position of 115,176 contracts.  Reports from much of the Corn Belt describe a very good looking crop.  A fairly large pocket surrounding the area where the four states of SD, MN, IA, and NE come together that is very wet.  Extremely severe weather has reportedly damaged more than 700 pivot irrigation systems in Nebraska.   

 

Soybean futures ended the week 16 cents higher, up 1.15% in the July contract.  Weekly export sales were large, and the amount of fresh old crop bookings helped the old crop rally on Thursday. Bookings for the 2013/14 marketing year totaled 317,200 MT, and were 457,700 MT for 2014/15, with most of the new crop sales slated for China and "unknown" destinations.  As of the close on June 24, CFTC shows managed money accounts decreasing their net long position for soybeans from the previous week by another 5,403 contracts, bringing their overall net long position down to 41,221 contracts.  That is the least-long net soybean position reported for managed money accounts since January 31, 2012.  Soybean oil lost 6 cents on the week, but soybean meal rallied $10.60 this week, gaining 2.31% after losing more than $8.00 during the previous week. 

 

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

06/06/14

06/13/14

06/20/14

06/27/14

Change

% Change

July

Corn

$4.59

$4.48

$4.53

$4.43

($0.10)

-2.26%

July

CBOT Wheat

$6.18

$5.85

$5.85

$5.85

$0.00

0.00%

July

KCBT Wheat

$7.36

$7.11

$7.21

$7.26

$0.05

0.76%

July

MGEX Wheat

$7.09

$6.82

$6.90

$6.83

($0.06)

-0.91%

July

Soybeans

$14.57

$14.27

$14.16

$14.32

$0.16

1.15%

July

Soybean Meal

$487.60

$467.20

$459.20

$469.80

$10.60

2.31%

July

Soybean Oil

$39.01

$39.73

$40.04

$39.98

($0.06)

-0.15%

June

Live Cattle

$140.13

$147.60

$147.55

$152.25

$4.70

3.19%

Aug

Feeder Cattle

$200.52

$208.15

$206.88

$214.33

$7.45

3.60%

Aug

Lean Hogs

$129.30

$131.27

$129.15

$129.83

$0.67

0.52%

July

Cotton

$84.78

$86.95

$88.16

$80.89

($7.27)

-8.25%

July

Oats

$3.57

$3.47

$3.40

$3.32

($0.09)

-2.50%

July

Rice

$14.18

$14.51

$14.64

$14.59

($0.04)

-0.31%

 

Wheat futures ended the week pretty much steady to last week.  The July CBOT wheat posted its third Friday in a row with $5.85 as the closing price; a market in need of direction!  KC wheat added a nickel in the July contract after gaining a dime last week.  In Minneapolis, July wheat lost six cents this week on overall favorable growing conditions.  Winter wheat harvest progress was slowed again this week by the additional precipitation.  USDA reported the export sales figure for this week at 359,400 MT.  As of the close last Tuesday, managed money increased their net short position in CBT wheat by 11,494 contracts over the past week.  They are now net short -40,436 contracts.  The managed money accounts added another 205 contracts to their net long position in HRW wheat, giving them a net long position of 24,949 contracts as of the close on Tuesday.

 

July Cotton futures were big losers this week.  July14 cotton was down 727 points, or 8.25% posting its lowest closing price since the first week in December. Global cotton trade is forecast by USDA to reach only 35.6 million bales in 2014-15, down 13% from 2013-14 and the lowest in four years. Chinese imports are seen lower as they try to work down domestic supplies.  The weekly Commitment of Traders report showed managed money accounts decreasing their net long position in cotton by 562 contracts bringing their overall net long on June 24 to 24,702 contracts.  Weekly export sales reported by the USDA were weak, showing net sales of only 3,600 RB of Upland cotton for 2013/14, and 1,000 RB of Pima.  2014/15 Upland bookings were for 24,100 RB.  

 

Front month cattle futures were up 3.2% for the week tacking on $4.70 since last Friday.  August feeder cattle shot up 3.6% despite some profit taking on Friday.  Cash cattle trade was reported mostly $5 higher than last week at $154-$155 in the South, and $7 to $8 higher at $243-$245 in the North.  Wholesale beef prices were sharply higher this week.  Choice boxed beef gained $5.09 or 2.1%, and select boxes increased $4.38 or 1.9% from Friday to Friday.  The grocers should be stocked up for the 4th of July holiday demand by now, so a dip in boxed beef prices next week would be typical.  USDA reported weekly beef export sales at 17,100 MT for this past week, up 1,000 MT from the previous week. Weekly FI slaughter was estimated to be 615,000 head vs. 613,000 the prior week and 654,000 head a year ago.  The weekly Commitment of Traders report showed managed money accounts increasing their net long position in cattle by 3,247 contracts, bringing their overall net long on June 24 to 127,647 contracts.

 

August Hog futures were 0.52% higher this week.  The pork carcass cutout value was sharply higher again this week, gaining $5.51 or about 4.32% from Friday to Friday.  Ribs notched out a whopping 10.08% gain on the week, and loin cuts were up 5.65% since last Friday.  Weekly pork export sales surged from 6,500 MT to 17,100 MT, thanks to a bid sale to Mexico.  The weekly Commitment of Traders report showed managed money accounts expanding their net long position in lean hogs by 3,531 contracts, bringing their overall net long on June 24 to 58,844 contracts.  Pork production YTD is down 0.6% from year ago despite slaughter being down 4.2%. Estimated hog carcass weight at 215# would match last week, but be 11# higher than year ago.  The hogs and pigs report released today after the close was quite bullish.  All hogs on June 1 came in at 95.3% of a year ago.  Those kept for breeding were reported at 99.5% of a year ago, and those kept for market were 94.9% of a year ago.  All three of these figures came in smaller than the lowest end of the pre-report trade estimate.

 

Market Watch

 

We start the week off with a bang and end it with a whole bunch of bangs. USDA will release the quarterly Grain Stocks and Planted Acreage reports at 11 am CDT on Monday morning. These reports have a reputation for stirring up big price moves, particularly in corn. Monday is also first notice day for July grain futures contracts. There were only 21 delivery receipts registered for soybean delivery heading into the weekend. USDA will issue the regular Export Inspections and Crop Progress reports on Monday, along with Export Sales on Thursday. Thursday will also be the last trading day for July live cattle serial options.  Friday is the July 4th Independence Day holiday in the US and all markets are closed. The bangs to end the week will of course be from the fireworks!

 

 

 http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

 

 

Copyright 2014 Brugler Marketing & Management, LLC

 

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