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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.

Riding Out the Storm

May 07, 2010
 

Market Watch with Alan Brugler
May 7, 2010
 
Riding Out The Storm
 
This was a volatile week with a market down swing in international equity markets and the largest intraday point drop in the DJIA ever of nearly 1000 points. There were riots in the streets of Greece, the VIX hitting a 1 year high at 41.37,  jobs data showing a 290,000 jobs increase and an increase of the unemployment rate from 9.7% to 9.9% due to new job seekers. The DJIA finished at 10,380.06 down 5.7% for the week, crude oil was down 13% this week at 75.20, the dollar index finished at 84.42 after a wild week with the dollar gaining significantly against the euro and the euro finishing at $1.275. Gold finished at $1,208.10 near record highs.
 
Corn had a net change of .41%, down 1.5 cents for the week. Net weekly export sales were a marketing year high as of last Thursday with the effects of the outside markets on corn prices limited by ideas China has a renewed interest in U.S. corn. China’s 115,000 MT purchase of corn last week showed up in the export data this week. Informa is projecting 2010 corn acres will come in at 89.60 million acres on USDA’s supply demand report next Tuesday, May 11th. The average analysts’ estimates for corn ending stocks are showing a decline for 2010/11 and a reduction from the April report for the 2009/10 marketing year. Estimates for 2009/10 are 1,865.1 million bushels and are 1,861.5 for 2010/11 marketing year. Old crop corn futures held the 18 and 40 day moving average for the week.

             Wheat futures were relatively quiet for the week. The bear story in wheat is well known, with the global stocks/use ratio at decade highs. However, there is an old trade axiom that “the bear market’s over when bad news fails to make it go down”. Wheat has rallied despite favorable crop condition ratings in the U.S., welcome rains in the EU and Canada, and the stock market meltdown. That doesn’t mean the market can’t drop again under harvest hedge pressure or an index fund retreat, but it suggests that prices had dropped enough to represent something close to “value”. Speaking of harvest, the first new crop loads are coming into elevators in Texas. The Kansas WQT is projecting the crop there at 333 million bushels, which implies a USDA May estimate around 337 million based on recent history. The tour estimate can be more than 8% away from USDA final production, and thus should be viewed only as an indication.
 
Soybeans were hit pretty hard this week, and the tie in to the US dollar action was a lot stronger. The dollar was particularly strong vs. the euro, and instability is the watch word in the EU because of the sovereign debt crisis with Greece, Portugal and Spain. Total export commitments for China to date for the 2009/10 marketing year are at 21,939,600 MT with 2010/11 outstanding sales at 2,557,500 MT. In the first planting progress report of the year, USDA said 15% of the beans were in the ground. Cold and wet weather limited the seed germination and disrupted planting this past week. Brazil’s harvest is 97% completed, and farmer selling has picked up there thanks to the strength of the dollar and corresponding weakening of the Real.  
 
Cotton futures were down again on the week, by 4.07 percent. Weekly export sales were above most trade estimates coming into the report, but that took a back seat to the videos of rioting in the streets in Greece and the fleeting 1000 point melt down in the Dow on Thursday afternoon. Those raised questions about economic stability and thus consumer demand. Crude oil was also sharply lower for the week, dropping the input cost for synthetic fibers that compete with cotton. Planting progress in the U.S. was close to the 5 year average pace. Flooding in the Delta/Mid-South region slowed planting.
 
Hog futures pulled back, losing 114% for the week. Futures were carrying a substantial premium to the CME Lean Hog Index used to settle May when it expires on the 14th. The sharp rise in the pork cutouts slowed, creating uncertainty about whether the hog prices would get all the way to the future’s price level. The lean pork cutout was 89.45 for the week, 99.4% of last week’s cutout.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
04/16/10
04/23/10
04/30/10
05/07/10
Change
% Change
May
Corn
$3.64
$3.53
$3.66
$3.65
0.02
0.41%
May
CBOT Wheat
$4.91
$4.93
$4.92
$5.00
0.09
1.73%
May
KCBT Wheat
$5.07
$5.06
$5.06
$5.13
0.07
1.38%
May
MGEX Wheat
$5.20
$5.27
$5.26
$5.30
0.04
0.67%
May
Soybeans
$9.85
$10.00
$9.90
$9.51
0.39
3.92%
May
Soybean Meal
$280.90
$292.30
$291.30
$276.40
14.90
5.12%
May
Soybean Oil
$39.80
$39.35
$38.58
$38.13
0.45
1.17%
June
Live Cattle
$94.65
$94.83
$94.22
$95.90
1.68
1.78%
May
Feeder Cattle
$112.68
$112.58
$112.80
$112.42
0.38
0.34%
May
Lean Hogs
$86.42
$87.40
$89.52
$88.50
1.02
1.14%
July
Cotton
$81.59
$86.20
$84.13
$80.71
3.42
4.07%
May
Oats
$2.15
$2.05
$2.05
$2.01
0.04
2.07%
May
Rice
$12.81
$12.41
$12.36
$11.54
0.82
6.64%
 
Cattle futures were a rare bullish exception for the week if you’ll pardon the pun. Wholesale beef prices have been strong, with choice boxes trading at $171.04, up .49%. Tight ready cattle supplies, light carcass weights and a strong export program thus far in 2010 all contribute to that strength in product value. Packers were buying cattle on Monday and Tuesday, rather than waiting for the usual late Thursday and Friday flurry. That’s because they wanted to get the available cattle before somebody else did! Cash traded mostly $98.50 to $100 per hundred on the hoof.
 
Market Watch: The main concern coming into the week of May 10 will still be the status of the euro currency and the economies in the eurozone. That has implications for the value of the dollar, and thus for US exports and for commodity prices in dollar terms. Assuming no new blow ups, attention will shift to Tuesday morning’s USDA Crop Production and WASDE reports. This report will be the first attempt by USDA since the Outlook Forum to project 2010/11 supply and demand for the world grains and oilseeds, and to project fall 2011 ending stocks. There will also be some interest in weekly Export Sales data on Thursday morning, and in the NOPA monthly crush report scheduled for Friday. Friday will also be the last trading day for May grain futures, as well as hogs.  
 
There is a risk of loss in futures and options trading. 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, or of any particular risk management technique. 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 subscription and consulting services.
 
                                                                                                                                      Copyright 2010 Brugler Marketing & Management, LLC
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COMMENTS (3 Comments)

Anonymous
We can do better in ag. Prices are in the dumps. Lets shoot for at least five dollar corn. Corn belt farmers struggle to make end s meet all the time. Poor things.
10:04 AM May 8th
 
Anonymous
Simply sell on the up and you will be one of the few. You are a big boy, quit whining.
8:34 AM May 8th
 

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