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April 2011 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.

April Showers, May Flowers?

Apr 29, 2011

brulogomed

Market Watch and November Soybean Tech Talk with Alan Brugler
April 29, 2011
April Showers, May Flowers?
 
Rain, makes grain, but first makes pain if you haven’t planted. And if you haven’t seen any rain, it is painful indeed...... Texas locations run from 2 to 9 inches below normal accumulations since January 1, and of course were in deficit before that. Cincinnati and Youngstown, Ohio are on opposite ends of the Buckeye state, but both are more than 8” above normal rainfall for the year. South Dakota locations were 111 to 162% of normal rainfall YTD through April 24. So, you have areas that are too dry to grow a good crop without irrigation, and areas that are 10 days to two weeks away from being able to plant even if it quits raining. The markets are trying to gauge the impact on production, but there are a LOT of variables in that equation.
 
Corn ended its losing streak at two games, posting a net gain of 17 cents for the week, up 2.27%. That all happened on Friday, when futures rallied 31 cents (margins were expanded to 45 cents because of the limit down moves on Thursday).  Large scale liquidation selling was seen in the May contract, which was eligible for delivery notices on Friday. However, many of those longs and shorts were not entering back month positions, just getting out. There were zero delivery notices against May on Friday, perhaps one reason buyers came back in at month end. The weather forecasts offer some planting progress potential in the western Corn Belt, with drier than normal conditions in the NWS 6-10 and 8-14 day forecasts. The eastern Corn Belt is expected to be wetter than normal, as is the northern spring wheat area. Corn export sales slowed, and more than 180 poultry barns were destroyed by the tornados in the South. Bulls noted tightening ethanol inventories and a rebound in weekly ethanol production.
 
The soybeans followed corn higher, perhaps reflecting their mutually tight old crop ending stocks and their competition for 2011 acreage in the United States. Nearby beans were up 12 cents per bushel for the week, a sparse 0.89% advance. It wasn’t due to the products, which were fractionally lower. There wasn’t a lot of fundamentally supportive news for beans, with Chinese domestic prices under pressure, and US livestock prices in decline. Export sales were nothing to write home about. However, the projected ending stocks are still only 140 million bushels and that means tight 4th quarter supplies. Census reported smaller than expected March 31 meal stocks. Soy oil stocks were larger than expected, but soy oil is used for biodiesel, and nearby May heating oil/diesel futures hit $3.25 per gallon on Friday. That’s the highest monthly closing price since July 2008. The weakest US dollar index since 2008 also supported dollar denominated commodities in general.
 
Wheat was down at all three exchanges, ending a spectacular bounce. Minneapolis was down only 0.66%, as planting progress is well behind the average pace and it is likely that final acreage will be under 13.7 million. KC futures were down more, 4.24%, due to rain hitting part of the HRW growing area. A perhaps larger factor was the rumbling out of Ukraine and Russia about potential resumptions of exports. The Ukraine is more likely to resume, with Russian spring wheat planting still seriously delayed and the winter wheat crop never fully planted. Outstanding wheat export commitments at 6.08 million tonnes are 26% larger than usual, and combined contracts and shipments are now at 100% of USDA’s projection for the year. All that has to happen is that 6.029 MMT needs to be shipped between April 21 and May 31. That’s an average of 40.2 million bushels per week but also includes the differential between USDA numbers and official Census exports.
 
Cotton futures continued to slide, losing 4.19% after being down 4.5% the previous week and 3.7% in the week before that.   Global demand for textile products is improving with the economy, but China is trying to rein in price jumps through various means and cancelled another purchase that was reported in the USDA weekly Export Sales report. There are also big jumps in availability from Brazil, Argentina and Australia as they complete new crop harvesting. There is little old crop US cotton for sale, but availability of Southern Hemisphere new crop supplies has taken the edge off of the world market. USDA again reported net negative old crop sales in the weekly export sales report, as foreign buyers cancel purchases or delay them into new crop time slots because they can’t get enough out of the yarn to pay for the cotton. New crop futures were supported by the combined too dry and too wet weather across the southern US. Where is Goldilocks when you need her for that just right weather? Probably long gold and sitting somewhere in the south of France......
 
Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
04/08/11
04/15/11
04/21/11
04/29/11
Change
% Change
May
Corn
$7.68
$7.42
$7.37
7.54
0.17
2.27%
May
CBOT Wheat
$7.98
$7.44
$8.00
7.6925
0.30
3.78%
May
KCBT Wheat
$9.33
$8.66
$9.33
8.93
0.40
4.24%
May
MGEX Wheat
$9.53
$8.89
$9.52
9.4525
0.06
0.66%
May
Soybeans
$13.92
$13.32
$13.81
13.9275
0.12
0.89%
May
Soybean Meal
$357.20
$345.20
$358.80
358.1
0.70
0.20%
May
Soybean Oil
$59.77
$56.84
$58.27
58.13
0.14
0.24%
Apr
Live Cattle
$118.83
$117.40
$118.40
117.05
1.35
1.14%
Apr
Feeder Cattle
$134.60
$132.15
$132.28
131.9
0.38
0.28%
May
Lean Hogs
$100.97
$102.42
$102.05
95.275
6.77
6.64%
May
Cotton
$202.97
$195.52
$186.67
178.78
7.89
4.23%
May
Oats
$3.94
$3.83
$3.90
3.425
0.47
12.12%
May
Rice
$13.69
$13.64
$14.00
14.805
0.81
5.79%

 
 Cattle futures were down $1.35 for the week after gaining $1.00 the previous week. Wholesale prices were under pressure. Choice boxed beef was down 2% for the week, and select beef was down 1.7% on a Friday/Friday basis. Cash cattle were also under pressure, with a lot of trade in the $116 vicinity.
 
Hogs plunged more than 6.6% in a single week, losing $6.77 in the nearby May contract. Pork carcass cutout value was down $3.30 per cwt. on a Thursday/Thursday basis. Hams are typically down after Easter, but the surprise was the 5% drop in pork bellies. Belly stocks do not appear to be particularly large, but it is a little early for the seasonal BLT (bacon, lettuce, tomato sandwich) boost. Cash hog prices were down in tandem with the slipping product prices and chart sell signals. May futures have narrowed their premium to cash hogs from more than $6 to $1.23 on Friday.
 
Market Watch:  The calendar turns to May, and the ag markets step up the focus on growing conditions. USDA will feed the need with the weekly Crop Progress report on Monday evening. There will be routine weekly export inspections and Weekly Export Sales reports on Monday and Thursday mornings respectively. There are no major monthly USDA reports scheduled for this week. Cotton traders will see May futures expire on the 6th. That will also be the last trading day for May live cattle serial options. Wheat traders will be interested in the Wheat Quality Tour results at mid-week.
 
There is a risk of loss in futures and options trading. Such trading is not appropriate for all individuals. Past performance is not necessarily indicative of future results. Comments made in this article are in no way to be seen as an endorsement of futures and options trading. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited. Call 402-697-3623 for information on our individualized subscription and consulting services.
 
 Copyright 2011 Brugler Marketing & Management, LLC

98 Pound Weakling

Apr 21, 2011

brulogomed

Market Watch with Alan Brugler

April 22, 2011

98 Pound Weakling 

We are, of course, referring to the US dollar. The US dollar index dropped below the 2009 low on Friday, settling at the lowest reading since June 2008. That means US consumers have lousy purchasing power for imported goods, but does help the US in the export arena for countries that float their currency. China allowed the yuan to rise to the highest level in modern times as it again took tightening steps in the banking system. Against this weak dollar backdrop, gold set new all time highs in nominal dollars, and silver climbed to $46.27. It hasn’t been that high since the Hunt Brothers era.

Corn had the second down week in a row, losing 5 cents per bushel in the front month May futures. December futures were a different story, up 9 ½ cents on the week. That tells you what you need to know. There were signs of old crop demand rationing, including the smallest weekly ethanol production number since last fall. Wheat had been briefly below corn for the first time in 15 years, and soybean meal was also historically cheap vs. corn. That made it easy to assume that less corn was being fed. Exports weren’t worth writing home about, either. For new crop, the story was weather, specifically wet weather across the entire Corn Belt. The 8-14 day forecast offered some hints of dryer weather in the western fringe of the CB by early May, but weather premium was being put into the market.

The soybean complex was back in the bull camp, posting a 49 cent gain. Meal appeared to be getting some of its oversupply issues handled, and meal futures were up 3.94% for the week. Soy oil got a lift from rising energy futures, rising 2.5%. The weak US dollar has definitely helped to support the beans, which were also getting bearish feedback about Chinese demand and rising crop estimates out of South America. The newest Argentine figure is 50.4 MMT from the Ministry of Agriculture.  USDA is still below 50 MMT.

Wheat was up sharply at all three exchanges, advancing more than 7%.  The drought continued in the Southern Plains, with trade estimates for the Texas crop now below 45 million bushels. Oklahoma numbers in the 60-70 million range are also built into the bullish price move this week. MPLS futures were up on continued wet conditions that are presumed to continue into May, delaying planting of the 14.4 million acres of spring wheat shown in the March intentions report. Trade estimates are universally below 14 million acres now, although there is still plenty of time to plant the crop if the weather improves. Chicago futures got a boost from some feed buying interest, which in turn boosted basis bids sharply in some areas. At the end of the week, spot wheat futures were no longer a bargain compared to corn. Trade estimates for weekly export sales ranged from 400 to 850 thousand MT. Actual sales were disappointing; at 303,200 MT.

Cotton futures continued to slide, and in fact accelerated. They lost 4.5% this past week, vs. 3.67% for the previous week. Much of that was "get me out" trade after May options expired, and before May futures deliveries began. There is little old crop US cotton for sale, but availability of Southern Hemisphere new crop supplies has taken the edge off of the world market. USDA again reported net negative old crop sales in the weekly export sales report, as foreign buyers cancel purchases or delay them into new crop time slots because they can’t get enough out of the yarn to pay for the cotton.

Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

Commodity

 

 

 

 

Weekly

Weekly

Month

04/01/11

04/08/11

04/15/11

04/21/11

Change

% Change

May

Corn

$7.36

$7.68

$7.42

$7.37

0.05

0.64%

May

CBOT Wheat

$7.60

$7.98

$7.44

$8.00

0.55

7.42%

May

KCBT Wheat

$9.07

$9.33

$8.66

$9.33

0.67

7.74%

May

MGEX Wheat

$9.23

$9.53

$8.89

$9.52

0.63

7.03%

May

Soybeans

$13.94

$13.92

$13.32

$13.81

0.49

3.66%

May

Soybean Meal

$360.90

$357.20

$345.20

$358.80

13.60

3.94%

May

Soybean Oil

$58.68

$59.77

$56.84

$58.27

1.43

2.52%

Apr

Live Cattle

$122.08

$118.83

$117.40

$118.40

1.00

0.85%

Apr

Feeder Cattle

$138.10

$134.60

$132.15

$132.28

0.13

0.09%

May

Lean Hogs

$103.07

$100.97

$102.42

$102.05

0.37

0.36%

May

Cotton

$195.55

$202.97

$195.52

$186.67

8.85

4.53%

May

Oats

$3.75

$3.94

$3.83

$3.90

0.07

1.76%

May

Rice

$13.81

$13.69

$13.64

$14.00

0.36

2.64%

 

 Cattle futures were up $1.00 for the week, offsetting most of the $1.43 they lost the previous week. On a Thursday/Thursday basis the choice boxed beef value was down another $1.60 or 0.85%. The product weakness limited the ability of packers to pay up for cattle. Nebraska cattle did trade late on Thursday at $120 live and $190-193 in the beef. USDA released the Cattle on Feed report on Thursday afternoon. March placements were a little lighter than the average trade guess, at 103.3% of last year. Marketings during March were strong, at 104.5%. In fact, USDA said that was the largest March slaughter run in 11 years. That makes the March strength in the wholesale market all the more remarkable. April 1 on feed numbers were 105% of last year.

Hogs lost a modest 37 cents for the week, with May at $102.05. Wholesale pork prices continue to be record high for this time of year, but did drop 94 cents for the week on a Thursday/Thursday basis. That was 0.98%.  The USDA Cold Storage report on Thursday afternoon showed 52.5 million pounds of pork bellies in storage on March 31. That was up only 3% from February, and down 11% from year ago. Total pork in storage was 12% above last year, but up only 1% from last month. Ham inventory was 73% larger than the year before, but may have been affected by the late Easter this year.

Market Watch:  The main focus for grain traders this coming week will be the USDA crop progress reports on Monday night. Little planting progress is assumed to have been made over the past week, but there is an interest in quantifying the situation. Mid-range weather forecasts will also get a lot of scrutiny. The usual Export Inspections and Export Sales reports will be out on Monday and Thursday respectively. Census will also release their Crush report and Cotton Consumption report on Thursday morning. Cotton traders will be dealing with May futures deliveries, which begin on Monday. Friday will mark first notice day for May futures deliveries in the grains, and also the expiration of the April Live Cattle contract.


There is a risk of loss in futures and options trading.  Such trading is not appropriate for all individuals. Past performance is not necessarily indicative of future results.  Comments made in this article are in no way to be seen as an endorsement of futures and options trading. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited.  Call 402-697-3623 for information on our individualized subscription and consulting services.

 Copyright 2011 Brugler Marketing & Management, LLC

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 

 

 

Taxing Markets

Apr 15, 2011

 brulogomed

Market Watch with Alan Brugler
April 15, 2011
Taxing Markets?
 
April 15th is the traditional day when tax filings are due in the United States, along with any money due for last year. Due to a quirk in the schedule, taxpayers have until April 18th this year. However, the futures markets for agricultural markets have been taxing in their own way. The volatility continues, with 5 of the commodities we track moving 4% or more for the week.
 
Corn had a down week, losing 26 cents of the 32 cents it had gained the week before. A sell off in crude oil got the bearish ball rolling, putting some pressure on gasoline and ethanol. The biggest bearish variable was the sharp decline in old crop wheat futures, with May CBT wheat dropping below May corn for the first time since the 1990’s. That fed a lot of discussion about wheat feeding in place of corn. USDA says it will happen, and the price ratios are now in line. The question is whether livestock feeders will actually make the switch en masse, or only in a few selected situations where they have experience feeding a wheat based ration and are close to the rail lines or local SRW production.
 
The soybean complex was sharply lower, with soybeans losing 4.35% for the week. Meal fell 3.4% and soy oil dropped 4.9%, collectively putting a lot of pressure on product value and what the processors could afford to pay for the beans. South American crop production estimates also continue to rise, and basis at export ports weakened. There were rumors of Chinese cancellations and/or deferrals, due to negative crush margins for imported beans and also a Chinese government program to sell some subsidized reserve beans to crush plants forced to maintain a price cap on the veg oil they are selling. China’s sharp rise in first quarter inflation also fed talk of further tightening moves to come.
 
Wheat was down sharply at all three exchanges. The presumed bull leader, KC HRW, fell the furthest. It lost 7.2% for the week. It is unlikely to see major feed use due to the premium to SRW, and traders also convinced themselves that Russia and/or Ukraine would get back into the export business this summer and offer the wheat at bargain basement prices. In my view, neither of those is assured. Russian winter wheat plantings did not meet intentions last fall, and the “make up” spring wheat plantings are running behind schedule due to spring weather. Prices would also be presumed to move closer to world levels if/when those countries actually have wheat approved for export. Winter wheat crop condition ratings were the worst since 2002 for mid-April, at 291 on the Brugler500 index. That was all HRW, however, with SRW ratings above last year at this time. Rain and snow on Thursday and Friday helped improve moisture levels in about 2/3 of the Plains wheat area, with TX being missed for the most part.
Cotton futures were down 3.67% for the week, as opposed to being up 3.79% the previous week. USDA Weekly Export Sales below trade estimates were the main culprit for the weakness, along with concerns about high fuel costs squeezing consumer discretionary spending. Those fuel costs did drop a bit as the week went on. Old crop export sales were reduced by 96,300 RB as increased sales did not offset cancellations from China, Viet Nam, Turkey, Indonesia and Pakistan. Sales for 2011/12 were 165,800 RB for upland cotton. Shipments were down 41 percent from last week and 27 percent from the four week average.
 
 
Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
03/25/11
04/01/11
04/08/11
04/15/11
Change
% Change
May
Corn
$6.90
$7.36
$7.68
$7.42
0.26
3.39%
May
CBOT Wheat
$7.33
$7.60
$7.98
$7.44
0.53
6.68%
May
KCBT Wheat
$8.55
$9.07
$9.33
$8.66
0.67
7.21%
May
MGEX Wheat
$8.81
$9.23
$9.53
$8.89
0.64
6.74%
May
Soybeans
$13.58
$13.94
$13.92
$13.32
0.60
4.35%
May
Soybean Meal
$357.20
$360.90
$357.20
$345.20
12.00
3.36%
May
Soybean Oil
$56.84
$58.68
$59.77
$56.84
2.93
4.90%
Apr
Live Cattle
$118.60
$122.08
$118.83
$117.40
1.43
1.20%
Apr
Feeder Cattle
$133.73
$138.10
$134.60
$132.15
2.45
1.82%
May
Lean Hogs
$101.72
$103.07
$100.97
$102.42
1.45
1.44%
May
Cotton
$204.49
$195.55
$202.97
$195.52
7.45
3.67%
May
Oats
$3.49
$3.75
$3.94
$3.83
0.11
2.67%
May
Rice
$14.30
$13.81
$13.69
$13.64
0.05
0.37%

 
Cattle futures were down $1.43 per cwt. for the week, off 1.2%. On a Thursday/Thursday basis the choice boxed beef value was down $2.97 or 1.6%. The product weakness limited the ability of packers to pay up for cattle. Beef production for the year to date is up 1.3% from last year. Slaughter is up 0.4%, but average carcass weights are also running about 13 pounds higher than last year. Feedlot operators have so much money tied up in the animals and the corn that they need every last pound to improve the ROI.
 
Hogs were the only bullish commodity in our list this week. April futures were supported by pork cutout values in the mid-90’s and rising cash hog prices. April expired on Thursday and left a huge chart gap to the upside with June trading at $102.62. Futures dropped on Friday in an attempt to close some of that chart gap. The parts value of a hog carcass rose $1.72 or 1.8% for the week on a Thursday/Thursday basis.  Estimated pork production for the week was 422 million pounds, which would be down 2.1% from the previous week, but 2.5% larger than the same week in 2010.
 
Market Watch:  This is a short trading week, with the markets closed on Friday for Good Friday and the Easter weekend. That moves up the usual Friday release of the monthly USDA Cattle on Feed and Cold Storage reports to Thursday afternoon. The other regular USDA reports will be as usual, with Grain Inspections on Monday morning, Crop Progress on Monday afternoon, and Weekly Export Sales on Thursday morning. April feeder cattle futures and options are also scheduled to expire on April 21. April Live Cattle will trade until April 29. May grain options will also expire on Thursday, including some heavily traded corn and soybean options.
 
 
There is a risk of loss in futures and options trading. Such trading is not appropriate for all individuals. Past performance is not necessarily indicative of future results. Comments made in this article are in no way to be seen as an endorsement of futures and options trading. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited. Call 402-697-3623 for information on our individualized subscription and consulting services or visit our web site at www.bruglermarketing.com.
 
 Copyright 2011 Brugler Marketing & Management, LLC

Crude Realities

Apr 08, 2011

 

brulogomed
Market Watch with Alan Brugler
April 8, 2011
Crude Realities
 
The crude oil market surged to the highest prices since 2008 this week, aided by instability in what seemed like half the countries in the Middle East. Word that some of the Libyan oil production facilities had been directly attacked made the loss of the Libyan production look more permanent, even in a week where a cargo of Libyan oil was successfully shipped out by the rebels. The US dollar also sank to the lowest level since November of 2010 after the ECB raised interest rates in Europe to 1.25%. The US target rate is still 0.25%, so the hot money is selling dollars and buying euros. With the dollar weakening, gold set new all time highs and silver rose over $40 per ounce. All of this is a crude reality, that there is a lot of printing press money chasing a fixed quantity of commodities. That helped buoy most of the agricultural commodities we track, whether they are fuel molecule sources like soy oil and corn, or substitute feeds like SRW wheat. 
 
Corn posted a fourth higher weekly close, up 32 cents on the week. USDA tried to slow down the bulls on Friday morning, suggesting that large quantities of SRW wheat would be fed after harvest in lieu of corn. That allowed USDA to leave projected ending stocks of corn UNCH at 675 million bushels instead of dropping them 100 million bushels or more as they would be based on typical second half feed consumption. The trade is skeptical whether that much feed substitution can occur, since it is dependent on Chicago wheat futures maintaining an unusually narrow price spread with corn, and maintaining it even after supplies of SRW start to tighten due to the assumed use. The poultry market has not been shy about feeding wheat, but cattle and hog producers have typically been more reluctant to use the grain without at least a 3 month local supply to draw on. While the USDA number was more bearish than expected, the projected ending stocks are still at or perhaps below pipeline required levels. Thus, futures were able to continue to rally after the report came out. The weakness of the dollar was supportive to potential export sales, and the surge in crude oil and gasoline prices makes using ethanol even more important to the US economy. Ethanol makes up more than 10% of the US gasoline supply, and is not subject to Middle East violence and supply interruptions.
 
The soybean complex was higher this past week. Soybean futures were up 36 cents for the week. Meal futures were boosted by the rise in corn and DDG prices. Soy oil was up 3.24%, buoyed by tighter than expected Census soy oil stocks that implied more biodiesel use. Global veg oil use for biodiesel is also rising, with Argentina and Brazil confirming rising domestic use. The USDA Grain Stocks report on Thursday put March 1 soybean inventory at 1.249 billion bushels. That was about 40 million bushels below the average trade estimate, and implied a large residual use for the quarter. Futures were up 35 cents or so on Thursday because of that tighter stocks estimate. Soybean planting intentions were below the average trade guess at 76.609 million acres, but some recent private surveys had suggested only 75 million, so there was some backlash on Friday.
 
Wheat continued to rally, gaining another 2.9 to 5% for the week. The presumed bull leader, KC HRW, got help from very low weekly crop condition ratings released on Monday evening. However, KC lost leadership status on Friday after USDA projected a sharp jump in SRW wheat feeding as a substitute for corn. To offset the amount of corn USDA did not show being used, wheat feeding will have to nearly double. Since USDA sees that being SRW, Chicago gained on KC. Of course, if SRW prices rise enough, wheat will no longer be cheaper than corn. Based on bushel weights, wheat should be 7.14% higher than corn to match up tonnage. If corn is $7.68, the equivalent SRW price would be $8.23. Chicago May was only $7.975 on Friday. USDA did show a slightly smaller than expected ending stocks projection of 839 million bushels.
 
Cotton futures were up 3.79% for the week, despite losing 5.25 cents on Friday. That was a “buy the rumor, sell the fact” reaction to USDA cutting projected US cotton ending stocks to 1.6 million bales from 1.9 million in the March report. USDA reduced the old crop production estimate to 18.1 million bales, a move that had been expected since the release of the annual ginnings report. However, they also raised projected domestic mill use by another 100,000 bales. The world cotton ending stocks estimate was also tightened on Friday, to 41.55 million bales from 42.33 million in March. Projected Chinese ending stocks were trimmed by 500,000 bales.
 
Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
03/18/11
03/25/11
04/01/11
04/08/11
Change
% Change
May
Corn
$6.84
$6.90
$7.36
$7.68
0.32
4.35%
May
CBOT Wheat
$7.23
$7.33
$7.60
$7.98
0.38
5.00%
May
KCBT Wheat
$8.43
$8.55
$9.07
$9.33
0.26
2.90%
May
MGEX Wheat
$8.68
$8.81
$9.23
$9.53
0.31
3.33%
May
Soybeans
$13.63
$13.58
$13.94
$13.92
0.02
0.11%
May
Soybean Meal
$367.90
$357.20
$360.90
$357.20
3.70
1.03%
May
Soybean Oil
$55.77
$56.84
$58.68
$59.77
1.09
1.86%
Apr
Live Cattle
$111.65
$118.60
$122.08
$118.83
3.25
2.66%
Apr
Feeder Cattle
$129.18
$133.73
$138.10
$134.60
3.50
2.53%
April
Lean Hogs
$88.33
$92.48
$94.23
$93.15
1.07
1.14%
May
Cotton
$199.12
$204.49
$195.55
$202.97
7.42
3.79%
May
Oats
$3.52
$3.49
$3.75
$3.94
0.19
4.93%
May
Rice
$13.64
$14.30
$13.81
$13.69
0.13
0.91%

 
 
Cattle futures lost 2.66% of their value this past week. Cash cattle prices backed off from the record levels of the previous week, and wholesale prices were also weaker. The USDA supply/demand report. increased projected beef production for 2011 by 20 million pounds. USDA showed beef production for the week was down 1.5% from the previous week, but 3.5% larger than the same week in 2010. Estimated carcass weights are still running 11 to 12 pounds above last year. Wholesale prices were mixed on Friday, but choice boxed beef was up 0.4% for the week and select was up 1.1% on a Friday/Friday basis.
 
Hog futures were down 1.14% for the week. USDA shows hog weights are still running about 4 pounds above last year, resulting in pork production since January 1 being 0.9% above year ago despite slaughtering 1.5% fewer hogs. USDA increased projected pork production for 2011 by 30 million pounds in the Friday morning WASDE report. The value of the pork carcass cutout rose 0.5% for the week, to $94.60.
 
Market Watch:  The USDA April WASDE report provided more excitement than expected on Friday, but that doesn’t mean report surprises are over for the month. This week’s lineup of USDA reports includes Export Inspections on Monday and Weekly Export Sales on Thursday. Monday will also include the first planting progress report for corn, and the second week of 18-state condition ratings on wheat. It is unclear whether any of these reports will be issued if the government is shut down due to a failure of budget talks that were still ongoing as this was written.  NOPA monthly soybean crush is expected to be released on Thursday morning. Thursday will also be the last trading day for April hog futures.
 
Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or “push” the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 
 
There is a risk of loss in futures and options trading. Such trading is not appropriate for all individuals. Past performance is not necessarily indicative of future results. Comments made in this article are in no way to be seen as an endorsement of futures and options trading. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited. Call 402-697-3623 for information on our individualized subscription and consulting services.
 
 Copyright 2011 Brugler Marketing & Management, LLC


No Foolin'...The Bulls Are Still Alive

Apr 01, 2011

Market Watch with Alan Brugler

April 1, 2011

No Foolin, The Bulls Are Still Alive

 

The calendar has turned to April and a young man’s thoughts turn to ....spring planting!  Well, at least for the two million folks USDA classifies as farmers in the United States. For the rest of the world, the focus is about what it was in March. Regime change is still in the air in the Middle East, which has crude oil trading above $107 and cash again headed to the sidelines for the weekend. The rising energy prices and a weaker US dollar boosted a number of commodities, and shifting fundamental news did the rest. The bulls are running in nice green pasture.

 

Corn posted a third consecutive higher weekly close, up 47 cents thanks to a limit up move on Thursday and another strong performance on Friday. USDA fed the bull some nitro, with the March 1 Grain Stocks report showing only 6.522 billion bushels still in inventory. That was below trade estimates by 167 million bushels, and requires the market to slow use at least 2% below last year’s second half, just to keep ending stocks at USDA’s current 675 million bushel forecast. Since second quarter use was up 9.7% year over year; that means standing on the usage brakes, not just tapping them here and there. The weekly export sales total of 1.9 MMT, the largest of the year, shows that even a two week price correction gives end users the signal to keep on buying. The Planting Intentions report on Thursday was generally expected to show 91-93 million acres, and USDA delivered at 92.178 million.

 

The soybean complex was higher this past week. Soybean futures were up 36 cents for the week. Meal futures were boosted by the rise in corn and DDG prices. Soy oil was up 3.24%, buoyed by tighter than expected Census soy oil stocks that implied more biodiesel use. Global veg oil use for biodiesel is also rising, with Argentina and Brazil confirming rising domestic use.  The USDA Grain Stocks report on Thursday put March 1 soybean inventory at 1.249 billion bushels. That was about 40 million bushels below the average trade estimate, and implied a large residual use for the quarter. Futures were up 35 cents or so on Thursday because of that tighter stocks estimate. Soybean planting intentions were below the average trade guess at 76.609 million acres, but some recent private surveys had suggested only 75 million, so there was some backlash on Friday.

 

Wheat bulls found their footing after a multi-week slide, and built gains of 3 to 6% this week to close higher for the third week in a row.  KC futures were the strongest, as crop condition ratings for most of the HRW production states continued to decline, taking production prospects with them. The USDA Grain Stocks report was seen as modestly bearish at 1.425 billion bushels. The Other Spring Wheat acreage intentions were also well above trade expectations at 14.427 million. That nicked MPLS futures on the spreads, but the continued snow cover across much of spring wheat country raised questions about whether producers are really going to be able to get all that wheat planted.

 

Cotton futures were down a sharp 4.37% after being up 2.7% the previous week. Old crop stocks are tight, weekly export sales are still running larger than anticipated, and domestic mill use is showing improvement as the US economy strengthens. US unemployment dropped to 8.8% in March from 8.9% in February. Trade guesses for US planting intentions ran from 12.8 to 13.3 million acres, but USDA found fewer acres than that. March intentions were only 12.566 million acres, below the NCC survey intentions from back in January. All states showed increased plantings, just not as large of an increase as the market had convinced itself was coming. We believe the gap between USDA and trade perceptions is primarily due to acres that are currently still in poor looking winter wheat, or so dry that the producer wasn’t willing to commit to cotton without a change in the weather pattern.

 

 

Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

03/11/11

03/18/11

03/25/11

04/01/11

Change

% Change

May

Corn

$6.64

$6.84

$6.90

$7.36

0.47

6.74%

May

CBOT Wheat

$7.19

$7.23

$7.33

$7.60

0.26

3.58%

May

KCBT Wheat

$8.23

$8.43

$8.55

$9.07

0.51

6.02%

May

MGEX Wheat

$8.59

$8.68

$8.81

$9.23

0.41

4.71%

May

Soybeans

$13.35

$13.63

$13.58

$13.94

0.36

2.61%

May

Soybean Meal

$350.00

$367.90

$357.20

$360.90

3.70

1.04%

May

Soybean Oil

$55.90

$55.77

$56.84

$58.68

1.84

3.24%

Apr

Live Cattle

$117.13

$111.65

$118.60

$122.08

3.48

2.93%

Apr

Feeder Cattle

$134.53

$129.18

$133.73

$138.10

4.38

3.27%

April

Lean Hogs

$88.15

$88.33

$92.48

$94.23

1.75

1.89%

May

Cotton

$204.94

$199.12

$204.49

$195.55

8.94

4.37%

May

Oats

$3.51

$3.52

$3.49

$3.75

0.26

7.45%

May

Rice

$13.01

$13.64

$14.30

$13.81

0.48

3.39%

 

Cattle futures set new record highs this week, and by Friday night they were up 2.93% for the week. Cash cattle set record levels, with southern cattle trading at $122 to $123 and Nebraska trading at $200.00 in the dressed.  Wholesale prices are not yet at the highs seen in 2003, when Choice boxes reached $200.03. The Choice was up $1.59 for the week on a Thursday/Thursday basis but was still at $188 and change.  Weekly beef export sales were 15,300 MT.

 

Hog futures were $1.75 higher. The pork cutout value was up 2.33% for the week on a Thursday/Thursday basis, with pork bellies showing a big gain. Back month hog futures showed big gains, with traders betting that high feed costs will trim summer farrowing intentions and/or cut average slaughter weights. Both result in smaller total pork production and could mean higher prices if demand holds up. Pork production for the year to date is up 0.7% from last year, which makes the strength in the pork prices all the more notable.

 

Market Watch:  The calendar has turned to April, and a lot more North American farmers will be getting planters out of the machine shed. Cattle traders will be dealing with the effects of record high prices last week, and some unexpected April options exercises on Friday.  Monday is first notice day for April cattle futures deliveries, and Friday will be the last trading day for May cotton options. USDA’s main report for the week will be the monthly WASDE supply/demand report on Friday morning. That report will reflect all of the changes required by the Grain Stocks data, but USDA will usually not issue 2011 crop production estimates and S&D tables until May.

 

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330.  

 

There is a risk of loss in futures and options trading.  Such trading is not appropriate for all individuals. Past performance is not necessarily indicative of future results.  Comments made in this article are in no way to be seen as an endorsement of futures and options trading. Reproduction or rebroadcast of any portion of this article without written consent of Brugler Marketing & Management LLC is strictly prohibited.  Call 402-697-3623 for information on our individualized subscription and consulting services.

 

 Copyright 2011 Brugler Marketing & Management, LLC

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