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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.

US Export Demand Plus a Falling Dollar

Aug 21, 2009

 

 

Market Watch with Alan Brugler and Kyung Ra

 

Week Ending August 21, 2009

 

US Export Demand plus a Falling Dollar

 

This week crude oil rose $7.14 per barrel from Monday to Friday.  Along with a higher crude oil, the US Dollar Index saw a 125.5 point drop for the week.  Weakness in the US dollar allows US exports to have a price advantage over foreign goods.  With this help, corn and soybean exports continue to have strong demand.  Monday, the USDA reported weekly export inspections for corn and soybeans at nearly 40.88 million bu and 5.62 million bu, respectively, which was better than expected by traders.  Thursday the USDA reported weekly export sales for corn and soybeans at nearly 1.43 million MT and 858,000 MT, respectively, which also beat trade estimates. 

 

China’s appetite for US soybeans continued this week.  A total of 896,000 MT of US soybeans were purchased.  Though this week’s purchases were for 2009/100 delivery, they lent a supportive tone to both old crop and new crop soybean futures. The most recent NOPA report indicated this: soybean crushing was down in July which led to a decrease in monthly soy meal production and is leading to the firmer basis. Tightness in the deliverable-grade soy meal supply also lent a bullish tone for September meal futures.

 

Soybean oil futures were the only contract in the soy complex that didn’t have a net weekly gain.  Lower than expected export sales of soy oil, trading activity in Malaysian palm oil, and a continuing large domestic supply of soy oil weighed on the contract.  Supportive factors from soybeans, soy meal, and crude oil limited some of the downside moves.  On Friday Statistics Canada reported a larger than estimated decline in 2009 canola production at 9.54 million metric tons.  This caused soy oil futures to rally on Friday, but they still ended the week in negative territory.

 

The 2009 Pro Farmer tour occurred this week, and it affirmed through its forecast that this season’s corn and soy crop will be close to the USDA projections.  On Friday Pro Farmer estimated 2009 corn production at 12.807 billion bu, with an average yield at 160.1 bushels per acre. This estimate is NOT directly derived from the crop tour data. 2009 soybean production was forecasted at 3.15 billion bu, with an average yield at 41.0 bpa.  The figures for the corn crop fell above the August USDA projections, while the figures for the soybean crop were close to that of the USDA.  One factor that can greatly affect the outcome will be weather.  Speculation concerning an early frost this fall continues due to the recent string of cooler, below normal temperatures this summer and late plantings this spring.

 

Wheat futures continue to succumb to the ongoing sentiment of ample global wheat supply and weak US wheat export demand.  Though spillover activity from other grains and a weaker US dollar lent some support, wheat contracts continued their downward slide. On Friday, Statistics Canada estimated 2009 Canadian wheat production at 23.61 million metric tonnes, which fell above trade expectations. Some potential improvements in wheat’s outlook took place this week. The impact of drought in parts of India, Argentina, Ukraine and Russia has the potential to boost the US market share in exports. 

 

The table below lists the Friday’s close of selected commodity futures for the past four weeks as well as this week’s net changes.

 

Market Watch

 

 

 

 

Weekly

Weekly

 

07/31/09

08/07/09

08/14/09

08/21/09

Change

% Change

September Corn

$3.40

$3.22

$3.19

$3.22

0.02

0.78%

September CBOT Wheat

$5.28

$4.90

$4.82

$4.60

-0.22

-4.46%

September KCBT Wheat

$5.59

$5.25

$5.09

$4.94

-0.15

-2.90%

September MGEX Wheat

$6.05

$5.73

$5.49

$5.32

-0.17

-3.14%

September Soybeans

$10.44

$10.91

$10.23

$10.23

0.01

0.05%

September Soy Meal

$332.50

$344.20

$319.40

$333.00

13.60

4.26%

September Soy Oil

$35.24

$36.92

$37.18

$36.33

-0.85

-2.29%

August Live Cattle

$84.70

$83.85

$84.65

$85.00

0.35

0.41%

August Feeder Cattle

$102.35

$101.35

$100.70

$100.15

-0.55

-0.55%

October Lean Hogs

$53.90

$44.90

$44.65

$47.85

3.20

7.17%

October Cotton

$57.93

$60.53

$59.21

$56.45

-2.76

-4.66%

September Oats

$1.98

$1.99

$2.01

$2.05

0.04

1.86%

September Rice

$13.77

$13.87

$13.30

$13.13

-0.18

-1.32%

 

Live cattle futures ended the week in positive territory, but feeder cattle contracts ended on the downside.  Positioning ahead of the USDA Cattle on Feed report was a feature.  Uncertainty of the pace of economic recovery in the US held the cattle complex at bay.  Increase in weekly jobless claims reflected a reduced demand for beef, which affected wholesale beef prices and in turn affected cash cattle trading.  Some improvements in US beef exports lent a supportive tone where monthly US exports for June at nearly 174 million pounds were higher compared to the previous month and weekly beef export sales at near 11,440 metric tons were also higher. The Cattle on Feed report showed much larger than expected July placements on feed, at 113% of year ago. The trade had been looking for 107%. Because of this, the August 1 inventory was larger than expected at 98% of year ago.

 

Lean hog futures finished the week higher compared to the previous week.  Recovering from a low of $51.33 per cwt in the average wholesale pork price on Tuesday, pork prices improved on wholesale demand ahead of the Labor Day holiday weekend.  A joint effort of Statistics Canada and the USDA indicated that the combined hog supply on June 1 of this year had the largest, negative percentage change since June of 2003.  This along with Friday’s USDA report of total frozen pork held in cold storage for July at nearly 574.33 million pounds indicate that though the hog supply may be at multi year lows, existing pork supply is still exceeding demand.

 

Market Watch: Key commodities reports coming up this week:  monthly US Census Oilseed Crushing & Cotton Mill Consumption – Thursday, beyond the usual weekly reports by the USDA on Monday (export inspections and crop progress) and on Thursday (Export Sales). On tap for next week also are some key economic reports:  Consumer Confidence – Tuesday, Durable Goods & New Home Sales – Wednesday, 2nd Quarter GDP & Jobless Claims – Thursday, and Personal Income – Friday.

 

Past performance is not indicative to future results.  Trading in futures and option on futures involve risks.

 

© 2009 Brugler Marketing & Management, LLC

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