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October 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.

Scary Story

Oct 30, 2009

 

Market Watch with Alan Brugler

October 30, 2009

 

Scary Story

 

The US dollar came back from the dead and scared everybody, from the stock market to grains to crude oil. While the dollar is still in a pronounced downtrend, month end position squaring and short covering ahead of the Fed meeting boosted the buck. Many commodities have been trading inversely with the dollar, so when it rallied they dropped.

 

Corn was down 8% for the week, erasing last week’s rally and part of the week before. Liquidation of speculative long positions caused some of the selling pressure, along with the US dollar reaction. Fundamentally, more open weather expected for this week should  make more corn available to the cash market. Bears also focused on the poor weekly export sales pace seen while corn was above $3.70, and expect some improvement over the next week or two with this break in prices. Bulls pointed to rising hog prices and excellent ethanol processing margins are reasons for prices to see some support.

 

Wheat showed once again that its bull was just a ghost of the 2007/08 market. As soon as the cover from higher corn prices disappeared, so did the bullishness in the wheat. Prices were down almost 10% in Chicago, and off 9.2 and 8.6 percent respectively in KC and MPLS. Testing of the spring wheat crop shows excellent grading results, i.e. external quality. It is the protein that is the problem. That doesn’t show up in futures prices unless you are afraid of futures being a dumping ground for unwanted quality bushels.

 

Soybeans held up better than the feed grains, losing 2.83% on the week. Soybean meal lost $6.30/ton for the week, and soy oil was also down more than 4%.Weekly export sales and shipments were both on the high end of trade estimates, and supported prices along with the well known large export shipping program and need to originate bushels.  Soy oil was hurt by sliding heating oil prices that threatened to undermine biodiesel use.

 

Unlike grains, cotton eked out a small gain of 0.39% for the week. The weakness in the dollar and the stock market proved to be a limiting factor, but harvest delays due to heavy rains in the Mid-South and Delta are clearly reducing both yield and quality every day. It is notable that the LDP for cotton dropped to only .02 cents. That means producers are getting price signals more directly from the market action than they have in months, and that futures price has to do all the work at triggering sales.

 

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

 

Market Watch

 

 

 

 

Weekly

Weekly

 

10/09/09

10/16/09

10/23/09

10/30/09

Change

% Change

December Corn

$3.62

$3.72

$3.98

$3.66

-0.32

-7.98%

December CBOT Wheat

$4.68

$4.99

$5.48

$4.94

-0.54

-9.77%

December KCBT Wheat

$4.85

$5.11

$5.50

$4.99

-0.51

-9.19%

December MGEX Wheat

$5.04

$5.26

$5.61

$5.13

-0.48

-8.56%

November Soybeans

$9.64

$9.78

$10.07

$9.78

-0.29

-2.83%

December Soy Meal

$297.30

$294.70

$303.30

$297.00

-6.30

-2.08%

December Soy Oil

$35.20

$36.94

$37.94

$36.40

-1.54

-4.06%

December Live Cattle

$84.95

$85.80

$87.40

$85.68

-1.73

-1.97%

November Feeder Cattle

$94.48

$94.60

$95.48

$94.80

-0.67

-0.71%

December Lean Hogs

$52.78

$54.10

$53.02

$56.70

3.68

6.94%

December Cotton

$63.02

$68.21

$67.38

$67.64

0.26

0.39%

December Oats

$2.40

$2.52

$2.50

$2.55

0.04

1.70%

November Rice

$13.40

$13.66

$13.43

$14.36

0.93

6.92%

 

Cattle futures initially ignored heavy deliveries against the October futures contract at yards in South Dakota and Nebraska, focusing on a surging cash cattle market that featured some $88 transactions for the first time in a while. Wholesale prices seemed to tire at mid-week, as the Taiwanese indicated an easing of their restrictions on imports of US beef. That would normally be seen as a bullish item. However, on Friday prices dropped sharply as October futures expired and the musical chairs game with deliveries came to an end.  

 

Hogs saw a nice bounce this week, up 6.94%. Pork cutout values have been rising for several weeks, with hams in the lead, but other cuts also firming. Slaughter is still at typically elevated October/November levels, but has been running a little below year ago. That has translated to less buildup in cooler stocks. The wild card behind the rally was a comment from Ag Sec Vilsack that the Chinese would soon lift their ban on importing US pork. That had been implemented during the H1N1 scare last spring. Chinese officials also indicated that an announcement could be forthcoming, but has not actually been made. China was a huge buyer of US pork prior to the Olympics, but is expected to be a smaller player now because of herd growth there since 2007.

 

Market Watch:  We’ll start the week with traders arriving at work early, due to the weekend time change! The calendar also flips to November, when we’d expect the weather we had in October. Of course, early November weather is supposed to be warmer and drier than normal, so call it October Delayed! November delivery notices or lack thereof will preoccupy bean traders. Monday night’s USDA crop progress report will also be of interest, with the trade expecting only limited progress was made nationally in corn and soybean harvest. The Fed is scheduled to meet on Wednesday, but is not currently expected to raise interest rate targets despite the flood of money chasing commodities.  USDA’s weekly Export Sales report is due out on Thursday morning. Friday will feature the expiration of November live cattle and currency options. 

 

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

40 Days and 40 Nights

Oct 23, 2009

 

Market Watch Summary

October 23, 2009

 

40 Days and 40 Nights

 

The wet weather in the Corn Belt hasn’t reached Biblical proportions yet, but there is definitely too much rain to permit harvesting corn and soybeans to catch up anywhere near the USDA 5-year average pace.  The ECB states did have a nice window for soybean harvest this past week, but are now for the most part shut down and awaiting drier weather.  The WCB is already in that condition.  Double crop SRW plantings are behind in the ECB states as a result of soybean harvest delays.  Cotton harvest throughout the Delta and Southeast so far this week are also well behind the USDA 5-year average pace.

 

Corn was up 6.92% for the week despite poor weekly export sales yesterday and weak export inspections on Monday.  Gains are attributed to the market’s reaction to harvest delays and an overall downward trend to the US dollar index.  Thursday’s open interest for the December corn futures was down 617 positions, leaving a total open interest in the December contract at 534,105 positions.  CFTC showed increases on Friday of about 3500 net long positions by Index Funds and an increase of about 24,000 contracts by Large Speculators.  The Small Speculators and Commercials offset in kind the increases by the Index Fund and Large Specs.

 

Wheat rose 9.82% in Chicago, 7.64% in Kansas City and 6.61% in Minneapolis for the week.  Strong weekly export sales of nearly 685,000MT as reported by the USDA on Thursday along with a down trending US dollar index for the week supported the rally in wheat futures.  SRW planting delays in the Midwest also brought a friendly tone to contracts.  Although, wheat production outlooks for Ukraine and Argentina may see a reduction, existing abundant global supply will offset any disruption in new crop stocks.

 

Soybeans were up 2.97% for the week, with strong gains in soy oil for both US futures and Dalian (China).  China is restricting rapeseed imports by requiring a new disease certification that will be hard for Canada to meet.  Bulls expect higher soy oil prices as a result.  Harvest delays due to wet weather this week throughout the Bean Belt and strong weekly export sales numbers for soybeans at 987,000 MT contributed to this week’s rally.  The US Census yesterday, indicated September soybean crushings at the high end of trade estimates at 113.97 Mbu and soymeal ending stocks at 239,179 short tons, which came out better than expected.  The Census oil mill data was friendly to both soybean and soymeal.  Soy oil received support from a $2 plus weekly gain in crude oil futures.

 

Unlike grains, cotton ended the week down 1.22%, but this week’s trading was range bound.  Marketing year lows in weekly export sales and shipments at 30,900 bales and 114,500 bales, respectively, offset some bullish tone to cotton futures.  Open interest at the ICE rising on speculative and investment buying by 1,917 positions at the close of trading Thursday, attributed to news of weather related harvest delays, lent a friendly tone to futures.  A sharp decline during Friday’s session in reaction to forecasted dry conditions this weekend over much of the Delta region, which will hasten harvesting quieted a weeks worth of rallies.

 

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

 

Market Watch

 

 

 

 

Weekly

Weekly

 

10/02/09

10/09/09

10/16/09

10/23/09

Change

% Change

December Corn

$3.34

$3.62

$3.72

$3.98

0.26

6.92%

December CBOT Wheat

$4.41

$4.68

$4.99

$5.48

0.49

9.82%

December KCBT Wheat

$4.60

$4.85

$5.11

$5.50

0.39

7.64%

December MGEX Wheat

$4.78

$5.04

$5.26

$5.61

0.35

6.61%

November Soybeans

$8.85

$9.64

$9.78

$10.07

0.29

2.97%

December Soy Meal

$267.80

$297.30

$294.70

$303.30

8.60

2.92%

December Soy Oil

$34.07

$35.20

$36.94

$37.94

1.00

2.71%

October Live Cattle

$82.95

$82.62

$84.10

$86.35

2.25

2.68%

October Feeder Cattle

$93.55

$94.17

$94.55

$94.25

-0.30

-0.32%

December Lean Hogs

$48.55

$52.78

$54.10

$53.02

-1.08

-2.00%

December Cotton

$60.66

$63.02

$68.21

$67.38

-0.83

-1.22%

December Oats

$2.21

$2.40

$2.52

$2.50

-0.01

-0.50%

November Rice

$13.11

$13.40

$13.66

$13.43

-0.23

-1.65%

 

            Hogs were down 2% for the week.  Weakness in wholesale pork cutout prices since Monday weighed on futures.  Friday afternoon’s average pork carcass value was $1.37 lower at $55.35 per 100 pounds compared to Monday’s value.  Strength in cash hog direct market trading this week where hogs sold $1.81 higher on a carcass basis, limited some downside pressure.  Earlier this week December contracts were trading at a large premium to the CME lean hog index, which weighed on futures as well.

 

Live Cattle for the week ended 2.68% higher.  Cash cattle traded at $85.50 to $86.00 on a live basis which was up $1 to $1.50 for the week.  Afternoon boxed beef prices for Choice rose $2.25 from last Friday to this Friday in support of this week’s live cattle price.  There were heavy deliveries notices posted against the October futures contract this week, where total deliveries stand at 891.  A reallocation by one of the Deutsche Band index funds also brought fresh buying into livestock futures.

 

Market Watch:  November options expired on Friday, October 23 for corn, wheat and the soy complex with some surprises in or out of the money.  Friday, October 30 is the first notice day for November soybeans, as well as the last trade day for October live cattle.  Thursday, October 29 is the last trading day for options and futures on October feeder cattle.  The USDA will release its weekly export inspections and crop progress reports on Monday.  The latest consumer confidence will be released on Tuesday.  New Home Sales and the weekly EIA report will be released on Wednesday.  The latest 3rd Qtr GDP, weekly export sales, and jobless claims will be released on Thursday.  The latest personal income will be reported on Friday.

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

 

Rising Interest

Oct 16, 2009

 

Market Watch Summary with Alan Brugler & Kyung Ra

October 16, 2009

 

Rising Interest

 

Corn was up 2.69% for the week, despite a double digit sell off on Thursday and a weak Export Sales number on Friday morning.  They say a rising tide floats all boats.  Most of the commodity boats were floating this week on a tide of new money coming into commodities.  Open interest rose in many contracts as new buying shifted to short covering and then additional new buying.  Harvest progress is clearly lagging, and the physical corn market needs to get the bushels that are available.  That can be done via either higher futures or a stronger basis bid.  The debate will likely continue into November as to how much production might have been lost to the early October freeze event in the Corn Belt.

 

Wheat has been trying to insert itself into feed rations all around the world, due to surplus inventory.  USDA reported 854 million bushels of projected ending stocks a week ago, but futures treated that news as already in the market.  The rally in wheat was aided by higher prices for its corn competitor.  SRW planting delays are also noted, as you can’t plant into soybean stubble if the soybeans haven’t been harvested yet.  It’s also not a good idea to mud the seed in.  Hard wheat prices were also firm, aided by an Iraqi purchase of 200,000 MT of US HRW that firmed up the cash basis while the trade worked to source the bushels.

 

Soybeans also had an up week, albeit with a smaller % gain at 1.4% than in the feed grains.  The rally was oil led rather than meal led, literally.  Crude oil traded above $78 and pulled heating oil/diesel prices up.  That supported soybean oil through the prospect of increased biodiesel consumption.  NOPA reinforced this idea by showing smaller than expected October 1 soy oil stocks.  Soybean meal continues to struggle with demand issues, as US livestock numbers are down and ethanol plant production of distillers dried grains (DDGs) is up.  That creates more price competition for protein in the feed ration.

 

Cotton posted the largest percentage gain at 8.24% on our list this week.  Export sales are still nothing to write home about, not even reaching 100,000 RB this week.  Projected ending stocks are also comfortable at 5.4 million bales.  The bull story stems from an inflation/weak dollar play, combined with ideas that the US and world economy are both improving.  Over time, that suggests more textile demand not only for clothes but for household goods like drapes and sofas.  Speculative buying was substantial, with open interest rising for both futures and options.

 

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

 

Market Watch

 

 

 

 

Weekly

Weekly

 

09/25/09

10/02/09

10/09/09

10/16/09

Change

% Change

December Corn

$3.34

$3.34

$3.62

$3.72

0.10

2.69%

December CBOT Wheat

$4.50

$4.41

$4.68

$4.99

0.31

6.57%

December KCBT Wheat

$4.69

$4.60

$4.85

$5.11

0.26

5.26%

December MGEX Wheat

$4.87

$4.78

$5.04

$5.26

0.22

4.37%

November Soybeans

$9.26

$8.85

$9.64

$9.78

0.14

1.40%

December Soy Meal

$283.90

$267.80

$297.30

$294.70

-2.60

-0.87%

December Soy Oil

$34.44

$34.07

$35.20

$36.94

1.74

4.94%

October Live Cattle

$86.05

$82.95

$82.62

$84.10

1.48

1.79%

October Feeder Cattle

$96.60

$93.55

$94.17

$94.55

0.38

0.40%

December Lean Hogs

$49.03

$48.55

$52.78

$54.10

1.33

2.51%

December Cotton

$61.94

$60.66

$63.02

$68.21

5.19

8.24%

December Oats

$2.19

$2.21

$2.40

$2.52

0.12

4.79%

November Rice

$13.09

$13.11

$13.40

$13.66

0.25

1.90%

 

            Hogs were up 2.51% for the week.  The weak dollar appeared to stimulate some export interest, particularly in hams.  Actual data on pork export sales lags by several weeks, but the primal was up sharply on days that the dollar was weak.  The pork carcass cutout ended the week at $56.50, and was up $3.55 from the previous Friday.  Slaughter continues to run near the highest levels of the year, but this was expected and the trade is looking past the big numbers toward tighter 1Q10 supplies.  Carcass weights are still running a couple pounds above last year, “creating” hogs in terms of the amount of pork that must be sold.

 

Live Cattle rallied for the first time in three weeks.  There were heavy deliveries of heavy cattle against the October futures contract, but they eventually found a packer who wanted them and that stabilized the cash prices.  Late week cash cattle sales were as much as $2 higher than the previous week, but not uniform.  USDA reported that the number of cattle on feed October 1 was 100.57% from a year ago.  That was above the average trade estimate.  Placements were 104.69% of year ago and September marketing were 96.36% of last year.

 

Market Watch:  Cattle traders will begin the week reacting to Friday’s Cattle on Feed numbers from the USDA.  Grain traders will be keeping a close eye on the US dollar, which keeps threatening to go higher but doesn’t seem to have any traction.  There will be interest in harvest progress as reported by USDA on Monday afternoon, and also in any drop in crop condition ratings due to last weekend’s freeze.  Census will release its monthly Oilseed Crush and Cotton Consumption reports on Thursday morning.  USDA will put out the monthly Cold Storage numbers on Thursday afternoon with attention focused on any buildup in pork supplies.  Grain traders will see November options expire on Friday, October 23.

 

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

Another Day, Another Crop Report

Oct 09, 2009

 

Market Watch and Soybean Tech Talk with Alan Brugler

October 9, 2009

 

Another Day, Another Crop Report

 

The week was all about the crop reports from USDA, which were released by USDA at 7:30 am CDT on Friday. Traders were, and are, struggling with final crop size for the U.S. USDA shed a little light on the subject with its 13.018 billion bushel corn production figure and 3.25 billion bushel soybean estimate. There is a trade axiom that big crops get bigger, and the yield projections for both were larger than the September figures. The national average corn yield was put at a record 164.2 bushels per acre, with soybeans at a more pedestrian 42.4 bushels. USDA did in fact trim harvested acreage numbers as it synched up the FSA data with the regular NASS data. The higher yield numbers nullified the impact.

 

Now the second guessing begins. The biggest question mark is how the weather affects final yields. Heavy rains are slowing harvest and increasing field losses of mature crops from OK to IN.  A hard freeze was expected this weekend as far south as Kansas, putting an end to the growing season in the western Corn Belt. Some fields weren’t ready for it to end, and some limited yield losses are likely. Quality will be a bigger problem, as dry down has been a real problem.

 

The soybean complex was higher for the week, as Export Sales bookings continue to be quite stout, and the market needs to entice soybeans out of producer hands and into the export and crush channels. Soybeans were up 9%, with soon to expire October meal up 14% and bean oil up 3.5%. Beans got an extra kick on Friday as USDA tightened up the supply/demand scenarios for soy oil and meal, boosting the product value of the beans. Not to be overlooked, speculators and long term investors have been accumulating soybeans and other grains as a counterbalance to the decline in the US dollar. Bears will note that USDA hiked projected Argentine production next spring by another 1.5 MMT and boosted anticipated world ending stocks to 54 MMT for 2009/10.

 

The wheat market was higher at all three exchanges. It wasn’t because of the USDA report. USDA cut projected exports by 50 million bushels, and boosted projected ending stocks to 868 million. That’s the most burdensome excess inventory since 2000/01. It appeared to be more of a relief rally, with prices having perhaps gone down further than necessary to discount the excess supply. With corn on the rise, there was room for wheat to rally. A flurry of export deals helped support the advance. World ending stocks were very close to last month’s estimate, with offsetting adjustments around the world. Australia’s estimated crop size was increased to 23.5 MMT, and Canada was raised 2 MMT.  

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

 

Market Watch

 

 

 

 

Weekly

Weekly

 

09/18/09

09/25/09

10/02/09

10/09/09

Change

% Change

December Corn

$3.18

$3.34

$3.34

$3.62

0.29

8.62%

December CBOT Wheat

$4.57

$4.50

$4.41

$4.68

0.27

6.06%

December KCBT Wheat

$4.72

$4.69

$4.60

$4.85

0.26

5.55%

December MGEX Wheat

$4.97

$4.87

$4.78

$5.04

0.26

5.44%

November Soybeans

$9.41

$9.26

$8.85

$9.64

0.79

8.93%

October Soy Meal

$290.00

$289.20

$272.00

$310.30

38.30

14.08%

October Soy Oil

$34.68

$34.04

$33.73

$34.91

1.18

3.50%

October Live Cattle

$85.55

$86.05

$82.95

$82.62

-0.33

-0.40%

October Feeder Cattle

$97.03

$96.60

$93.55

$94.17

0.62

0.66%

October Lean Hogs

$50.80

$49.95

$49.25

$50.85

1.60

3.25%

December Cotton

$64.60

$61.94

$60.66

$63.02

2.36

3.89%

December Oats

$2.13

$2.19

$2.21

$2.40

0.20

8.84%

November Rice

$13.47

$13.09

$13.11

$13.40

0.30

2.25%

 

 Cotton futures rose 3.9% for the week. USDA did cut estimated US production to 13 million bales, but the ending stocks figure of 5.4 million bales was right at the average trade guess. Chinese production was trimmed 1 million bales, but USDA made no change in expected imports from other countries. The larger story was the extremely limited interest in delivering cotton against October futures. That made it save for spec longs to stay in the market. More was also willing to commit to owning cotton as an inflation or economic recovery play.

 

Cattle futures were the sole loser for the week among the ag commodities we track. There was no mystery. Wholesale beef prices continue to be depressed by the poor performance of the restaurant industry. US consumers are staying home, and they tend to eat cheaper cuts there than they do in restaurants. Cash cattle were down $1 to $1.50 for the week. There were also heavy deliveries of “tanks” (1450-1500 pound cattle) against October futures. That kept a lid on the nearby futures. Export interest has picked up with the weaker US dollar and some limited economic recovery overseas, but a lot more tonnage is needed to get prices into a more positive sloping trend.

 

Hogs were up 3.25% for the week. The pork cutout dropped to $52.95 on Friday, with hams down $4.63 for the week. October futures were keeping close to the CME Lean Hog Index ahead of expiration, however, and didn’t need to go down much. Back month hogs were able to look past the current big market runs to the tighter numbers at the end of the year and into 2010. The weak dollar also offered hope of improved export sales. There is no weekly export data from USDA for pork, however, so any improved sales trend could only be confirmed or denied by a few key wholesale outfits.

 

Market Watch:  US government offices are closed on Monday, which will delay routine weekly reports like Export Inspections and Crop Progress until Tuesday. NOPA will issue its monthly soybean crush report on Wednesday morning. That will also be expiration day for October meal, soy oil and Lean Hogs. The weekly Export Sales numbers will be delayed until Friday morning, with USDA’s monthly Cattle on Feed report to be released on Friday afternoon.  

 

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

Probing For A Harvest Low

Oct 02, 2009

 

Market Watch and Dec Corn Tech Talk with Alan Brugler

October 2, 2009

 

Probing For A Harvest Low

 

Corn  had a pretty good rally going at mid-week, thanks to solidifying export interest and an increasing number of locations where the growing season was ended by cold weather before the crops were fully mature. Most of the “fat counties” were missed, but additional freezing weather is expected to move into the western Corn Belt by mid-week and move to the ECB by the weekend. The Wednesday morning Grain Stocks report showed better than expected 2008 disappearance and lower ending stocks. July ethanol production was also at the highest daily rate in history. Selling intensified on Friday, however, with longs reluctant to risk profits over the weekend and commercials doing a little pre-hedging selling to cover weekend harvest receipts.

 

The wheat market lost another 1.8 to 2% for the week. USDA’s All Wheat production number was in line with trade estimates, but large enough to spur talk of 800 million bushel carryover numbers. Export shipments were the largest of the marketing year, but only 43% of USDA’s projected sales for the year have been committed. We’re usually at 59% by now, and USDA is likely to reduced projected exports in Friday’s WASDE report. Would be bulls were also spooked by news that the index funds operated by DB Powershares would be selling off wheat contracts at the end of the month to bring them in line with exchange speculative limits. Based on their known positions, much of the selling would have to be in the July 2010 contract.

 

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

 

Market Watch

 

 

 

 

Weekly

Weekly

 

09/11/09

09/18/09

09/25/09

10/02/09

Change

% Change

December Corn

$3.20

$3.18

$3.34

$3.34

0.00

-0.15%

December CBOT Wheat

$4.67

$4.57

$4.50

$4.41

-0.09

-1.89%

December KCBT Wheat

$4.78

$4.72

$4.69

$4.60

-0.10

-2.08%

December MGEX Wheat

$4.94

$4.97

$4.87

$4.78

-0.09

-1.80%

November Soybeans

$9.03

$9.41

$9.26

$8.85

-0.41

-4.43%

October Soy Meal

$280.50

$290.00

$289.20

$272.00

-17.20

-5.95%

October Soy Oil

$33.52

$34.68

$34.04

$33.73

-0.31

-0.91%

October Live Cattle

$87.22

$85.55

$86.05

$82.95

-3.10

-3.60%

October Feeder Cattle

$99.33

$97.03

$96.60

$93.55

-3.05

-3.16%

October Lean Hogs

$52.47

$50.80

$49.95

$49.25

-0.70

-1.40%

October Cotton

$59.31

$63.18

$60.60

$59.26

-1.34

-2.21%

December Oats

$2.08

$2.13

$2.19

$2.21

0.02

0.68%

November Rice

$13.52

$13.47

$13.09

$13.11

0.02

0.15%

 

The soybean complex was lower for a variety of reasons. The main one was the 6% drop in soybean meal prices. Financial problems in the livestock industry are well advertised, and appear to be cutting into consumption or at least the pricing power of the crushers. Increased DDG production and the lower prices for that product are also pulling market share away from soy meal. So, prices have adjusted downward. Soybean oil dropped less than 1%, with Census confirming that soy oil use for biodiesel is still running at very low levels and that more than half of the biodiesel for August was created using other feedstock besides bean oil. The lower product prices pressured beans, as did larger production estimates from FCS and Informa (compared to the September USDA number). Export sales interest is strong, with new crop commitments already at 741 million bushels. On the other hand, only 27 million bushels were shipped in the first 24 days of the month.

 

Cotton futures struggled for most of the week, and in fact lost another 58 points on Friday. Weekly export sales were again very small (76,600 RB of all types) despite more than ample carryover and new crop  inventory. World demand for cotton is still punky, and Asian mills appear to be sourcing more of it from countries that have a freight advantage (closer to the end user). US cotton export commitments YTD are down 38% from this point in 2008. ICAC expects US sales will run 20% below last year for the full year. ICAC did raise projected mill use in China, India and Pakistan from their prior month report.

 

Cattle futures melted down on Thursday, and continued the sell off on Friday. The loss for the week was 3.6%. Cash cattle prices dropped $1.50 from the previous week, with packers under pressure from sliding beef prices at the wholesale level and feedlots caving in because of currentness concerns and also because of momentarily favorable basis relationships on hedges. October options expired on Friday, and some of the selling was likely tied to puts that were suddenly and unexpectedly in the money, and calls that were suddenly out of the money. Nobody wants to come in on Monday morning with a surprise futures position!

 

Hogs were down a more modest 1.4% for the week after chewing through the implications of the prior week’s Hogs & Pigs report. Carcass cutout values were very choppy as various primals attracted export demand. That demand also appeared to be affected by the daily gyrations in the value of the US dollar. The one constant for the week was the seasonal rise in hog slaughter and the corresponding increase in the amount of pork the system has to move. Despite downsizing in the industry, USDA reported weekly slaughter of 2.329 million head, which was 0.1% LARGER than the same week in 2008. Pork production for the year to date is down 1.9%, vs. cuts of 3.7% in beef and 4.5% in lamb/mutton.

 

Market Watch:  Cattle traders will begin the week adjusting for positions obtained via options expiration on Friday in the October contract. They’ll also be looking for signs of improvement in suddenly weak beef demand. Grains will pay close attention to crop maturity levels in Monday night’s USDA Crop Progress report. With more areas getting hit by freezing temps this past week, and colder weather expected again later this week, the quantity of the crop still vulnerable to damage is still important to final production estimates. The main action for the week will be the USDA Crop production and Supply/Demand reports on Friday morning. Some of the numbers were telegraphed via the September 30 reports, but USDA will still be issuing new corn and soybean production numbers. A wild card will be whether USDA makes acreage adjustments utilizing FSA data, which is often done in the October report.

 


 

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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