Aug 27, 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.

Midwinter Lull

Jan 23, 2009
Other than for rice, it was a comparatively tame week in terms of net price changes. Rice fell 6.56% in the March contract, which was seeing longs trying to roll to the May contract and finding few willing buyers to come in. In addition to the dispute with Mexico over fungus, India eliminated the ban on exports of basmati rice. Cheaper soybeans also meant slightly less competition for rice acres.
 
The bull leader for the week was the cotton market, which ignored stock market worries about slow global demand and rallied 3.3%. A much larger than expected weekly export sales total on Friday morning boosted prices 1.71 cents per pound. Thus, that one development accounted for the entire net gain on the week. Chinese buying was also much larger than we’ve seen recently. When combined with the LDP, prices to the farmer are getting to the upper end of the range seen since harvest.
 
Below is a table showing the net weekly change of selected agricultural futures contracts: 
 
Market Watch
 
 
 
 
 
 
 
 
 
 
 
Wkly
Wkly
 
01/02/09
01/09/09
01/16/09
01/23/09
Change
% Change
March Corn
$4.12
$4.11
$3.91
$3.91
0.01
-0.13%
March CHI Wht
$6.11
$6.30
$5.78
$5.83
0.04
0.78%
March KC Wht
$6.34
$6.51
$6.09
$6.11
0.02
0.25%
March MGE Wht
$6.55
$6.80
$6.53
$6.61
0.08
1.23%
March Soybeans
$9.77
$10.36
$10.20
$10.09
0.11
-1.08%
March Soy Meal
$300.20
$314.50
$316.00
$318.30
2.30
0.73%
March Soy Oil
$33.88
$36.72
$34.59
$33.60
0.99
-2.86%
Feb Live Cattle
$87.10
$83.10
$84.52
$82.67
1.85
-2.19%
Jan Feeder Cattle
$95.60
$94.10
$95.00
$93.65
1.35
-1.42%
Feb Lean Hogs
$63.85
$62.45
$59.95
$58.92
1.03
-1.72%
March Cotton
$48.91
$49.32
$49.00
$50.64
1.64
3.35%
March Oats
$2.12
$2.30
$2.23
$2.15
0.08
-3.37%
March Rice
$15.12
$14.65
$13.65
$12.75
0.90
-6.56%
 
Corn futures are caught in a new trading range after taking the post-report price hit caused by the larger USDA reported corn stocks and higher projected ending stocks. Bulls got a little bit to chew on, with Argentina cutting projected production to well below USDA’s number. On Friday, USDA reported the largest weekly export sales total for the marketing year to date, proving once again that the cure for low prices is low prices. At this point we can only say that we’ve treated the disease, not that we’re observing a healthy bull romping around!
 
Soybeans were down a net 11 cents for the week. Bulls were feeling fine at midday on Friday, following another strong weekly Export Sales number from USDA. China was again a large scale buyer. However, the market had been tipped off to that fact by sales previously announced under the daily reporting system. Pre-weekend profit taking in the soy oil pit knocked 73 points off of the nearby bean oil. At current oil yields, that alone was worth more than 8 cents per bushel. Soybean futures retreated that much and more. South American weather, specifically Argentine weather, continues to be a focus. It is difficult to assess dryness related yield losses in a crop that hasn’t yet started flowering (equivalent of late June in the U.S.). Soil moisture is definitely way down, but showers were seen and more were expected for this coming week in the key Cordoba province. Other areas like Formosa and La Pampa looked to miss out. Stay tuned, the weather forecasts vary by day and by forecaster!
 
Wheat futures were higher at all three exchanges. The US has won a few battles in the export market, including two recent sales to Egypt. Futures rallied on Friday despite a big Nigerian cancellation, because other countries were starting to step up activity. Prices for Black Sea origin have also firmed up a bit, and Argentina’s cut in projected production to 8.3 MMT also suggests very limited exports from that country. Most of their wheat goes to Brazil.
 
Cattle were down $1.85 for the week. Wholesale prices dropped during the week despite slightly reduced slaughter tied to the government holiday on Monday. Friday saw a little short covering ahead of the Cattle on Feed report. That caution by the bears was justified. The report showed lighter than expected placements during December, and larger slaughter than the average trade guess had anticipated. The net result was 11.234 million head on feed as of January 1, 2009. That’s 92.87% of last year’s figure.
 
Hogs marked time, with Feb drifting $1.03 lower over the course of the week to meet the rising CME Lean Hog Index (used to settle the contract at expiration in mid-February). At one point in late 2008 the Feb futures had a $9 premium to the cash index. That had narrowed to less than $2 by the middle of this past week. The real puzzle is how the packers can afford to pay as much for the cash hogs as they are, given the cutout values being reported. The cutout is usually above the CME Index, not several dollars below it.
 
Market Watch:  Livestock traders will begin the week reacting to Friday’s USDA Cattle on Feed report. Grain traders may have to make minor adjustments due to the expiration of the February serial options on the 23rd. It’s the end of the month, and there will be some book squaring adjustments by the various funds, CTA’s and pools. Census will also issue an oilseed crush report on Thursday morning, accompanied by the monthly cotton consumption numbers. USDA’s semi-annual Cattle Inventory report is scheduled for Friday afternoon. Also lurking in the background is the FOMC (Fed) meeting scheduled for the 28th. Further interest rate cuts are not expected, but surprises are always possible.
 
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 Ag Market Professional or SRR subscriptions, or visit the web site @ www.bruglermktg.com.
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