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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.

Wet Blanket

May 15, 2009

 

           

 

Market Watch with Alan Brugler

May 15, 2009

 

Wet Blanket

 

Last week we talked about the wet weather in the central US and how the associated planting delays were beginning to be noticed by the grain markets. That was again true for most of the week, with new crop corn supported by ideas of smaller final acreage and wheat aided by severe and persistent wetness in some of the spring wheat areas of North Dakota. On Friday, the outside markets threw a wet blanket on the bullish fire, however. Crude oil was down more than $2/barrel and the dollar jumped to a one week high against the euro and the Swiss franc. The strength in the dollar (with rumors of Swiss bank intervention) seemed to trigger some profit taking in the admittedly overbought grain futures. That resulted in net losses for the week in corn, CHI and KC wheat, and soybean oil. Soybeans and MGE spring wheat were also down on Friday but held onto net gains for the week.

 

Soybeans got some bullish help from USDA on Tuesday, with projected ending stocks cut to 130 million bushels for old crop and 230 million for new crop. USDA didn’t add any 2009 soybean acres, lacking the hard data to do so. Most analysts do expect additional acres in the June report due to switched from corn or spring wheat. USDA does see an expansion in world production for 2009/10, and a bearish buildup of world stocks (close to 52 MMT) by mid-2010. However, new crop prices are for the moment are mostly being dragged around by old crop price rationing. Soy oil weighed on bean values for the week, with the NOPA report on Thursday showing a big accumulation in soy oil stocks during April to more than 2.7 billion pounds. Palm oil futures in China also weakened a little.

 

Corn looked a little stronger fundamentally on Tuesday, as USDA boosted projected export and ethanol use for old crop and trimmed the August 31 ending stocks estimate to 1.6 billion bushels. The new crop figure was cut to an even tighter 1.145 billion. Weekly export sales on Thursday were again comfortably over the million tonne mark. Weather forecasts on Friday showed a window for some of the drier areas of the ECB to get planting done, and we got a number of reports of progress in Ohio (mostly mudding it in). That weighed on prices a little and then the dollar rally got untracked and bulls headed for the sidelines ahead of the weekend.

 

Wheat futures were down in CHI and KC but up in MPLS for the week. The MPLS market took out technical resistance at $7.07 in the September contract and got as high as $7.23 ¼ before backing off on Friday.  Our estimate for ND spring wheat acres is now below 6 million, and average yield is also likely to be lower due to later than normal planting dates. Crop condition ratings for HRW and SRW changed little in the previous week, thanks to significant improvement in those reported by Arkansas. On Tuesday, USDA jumped projected world ending stocks for 2009/10 by 14.75 MMT from the 2008/09 level, despite smaller world production.

 

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

 

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Weekly

Weekly

 

04/24/09

05/01/09

05/08/09

05/15/09

Change

% Change

July Corn

$3.86

$4.14

$4.21

$4.17

0.04

-0.89%

July CBOT Wheat

$5.43

$5.70

$5.91

$5.78

0.14

-2.28%

July KCBT Wheat

$5.94

$6.15

$6.33

$6.31

0.03

-0.39%

July MGEX Wheat

$6.51

$6.85

$7.00

$7.05

0.05

0.75%

July Soybeans

$10.34

$10.91

$11.12

$11.31

0.19

1.71%

July Soy Meal

$318.30

$342.00

$341.50

$358.20

16.70

4.89%

July Soy Oil

$36.65

$37.75

$39.61

$37.90

1.71

-4.32%

June Live Cattle

$82.60

$82.10

$82.97

$82.37

0.60

-0.72%

May Feeder Cattle

$99.13

$97.45

$99.35

$99.00

0.35

-0.35%

June Lean Hogs

$69.00

$58.48

$61.12

$66.52

5.40

8.84%

July Cotton

$52.70

$57.20

$59.85

$56.30

3.55

-5.93%

July Oats

$2.02

$2.07

$2.26

$2.28

0.02

0.88%

July Rice

$12.98

$13.24

$12.65

$11.94

0.72

-5.65%

 

Cotton futures ended a dynamic run of up weeks with a loss of 355 points, or nearly 6%. Export sales continue to drag, with Chinese buying notably light compared to the last couple years. Retail sales data was negative for the apparel end of things, and the stock market (used as a proxy for the status of any economic recovery in the US) had a tough week. Planting delays were supportive, but with USDA showing a comfortable 5.6 million bales of 2010 ending stocks the weather bulls didn’t have much leverage.

 

Cattle futures lost 60 cents for the week, or less that ¾%. Cash cattle prices were higher for the week by $1-2, with June futures trading at a slight discount. Wholesale beef prices got a little boost from Memorial Day pipeline stocking, but lost momentum at mid-week. March beef exports were up 5.2%, making first quarter shipments 6.6% bigger than in 2008. This is helping to offset weakness in the domestic consumption caused by the recession.

 

Hogs rose dramatically, up 8.84% and showing the best weekly gain of any of the tracked commodities. Retailers had drained inventory following the H1N1 flu outbreak, but consumers came back as the education efforts expanded (showing that the virus was not spread by hogs or pork, but rather by human to human contact). Wholesale prices rebounded from late April levels, and cash hogs rallied sharply. May hog futures expired on Thursday at a premium to the CME Index, anticipating that it would rise over the next two days. March pork exports, pre-swine flu, were up 2.2% from March 2008 on a carcass weight basis.

 

Market Watch:  The main USDA reports for the week are the Cattle on Feed and Cold Storage reports, which are scheduled for Friday evening. Friday will also make the expiration of the June grain options. Not to be overlooked, USDA will release the weekly Crop Progress and Crop Condition ratings on Monday night, and the weekly Export Sales report on Thursday morning. The interest in the latter is focused on Chinese oilseed buying and whether the US is able to sell wheat after the recent rally. Last but not least, a week from Monday is the Memorial Day holiday, so Friday could be a thin trading day as the traders head out for the holiday or make it a 4-day weekend.

 

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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