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RSS By: Alan Brugler, AgWeb.com

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

Attitude Determines Altitude

Nov 30, 2012

 

Brugler

Market Watch with Alan Brugler

November 30, 2012

 

Attitude Determines Altitude

 

World famous motivational speaker Zig Ziglar passed away this week. As with many who are successful in that occupation, he has a number of sayings credited to him. One of them was "Your attitude, not your aptitude, will determine your altitude." It doesn’t take much of a mental adjustment to adapt this quote to the markets.  Equate altitude to price. Equate aptitude to ability to properly reflect the supply/demand balance in the price. Attitude equals the level of bullish or bearish interest of the end users and the spec funds. Lots of bullish attitude is more important than the stocks/use ratio in setting the price.  Right now the attitude is confusion, as the trade watches the budget/fiscal cliff negotiations in Washington, fully realizing that multi-year trends are at stake depending on the outcome. You can have tight S&D balance sheets but not trade anywhere near the summer highs as long as the attitude is caution. Relative to the fiscal cliff debate, a quote attributed to Otto von Bismarck comes to mind, "If you like laws and sausages, you should never watch either one being made."

Corn futures were 0.34% higher this week, a second higher weekly close. As they say in sports, two in a row is a winning streak. Weekly export sales dropped sharply, to 236,140 MT. This should not have surprised anyone since it included Thanksgiving, but after a weeklong rally it was a good excuse to take short term profits. Weekly export sales for this coming week could also be light, as they will include the Thanksgiving weekend. Weekly ethanol production was down 8,000 bpd and contributed to a decline in US ethanol stocks. Stocks were lower despite also importing an average of 27,000 bpd. Corn use for ethanol is running at about a 4.35 billion bushel pace and down sharply from last year. Despite years of exhaustive testing by EPA, the American Automobile Association on Friday came out and suggested that EPA should discontinue sales of E-15 at the 15 pumps in the US that currently offer it. It is the same old engine damage and warranty voiding story that has been with us since the 1990’s. The spread between gasoline and ethanol futures is only 36 cents per gallon, and not sending a strong signal for blenders to use more.

The soy complex also rallied 1.4% this week to add to a 2.6% advance last week. Meal was up 3.2%. Soy oil got all the press due to a string of export sales announcements, but was up only 0.75% for the week after profit taking kicked in. Weekly soybean meal sales were the largest of the year. Soybean export bookings slowed for the simple reason that the US has already sold much of what it needs to sell prior to South American new crop harvest. Total commitments are now 75% of the USDA forecast for the full year, which extends until August 31. Soybean oil export commitments are now 106% of the USDA forecast for the year. They would typically be 38%, so USDA is expected to increase projected exports in the December WASDE report. US October biomass based biodiesel production was 98.37 million gallons, up from 96.77 million in September.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

11/02/12

11/16/12

11/23/12

11/23/12

Change

% Change

Dec

Corn

$7.39

$7.27

$7.46

$7.48

$0.03

0.34%

Dec

CBOT Wheat

$8.87

$8.38

$8.48

$8.45

($0.03)

-0.35%

Dec

KCBT Wheat

$9.22

$8.76

$8.78

$8.97

$0.19

2.13%

Dec

MGEX Wheat

$9.51

$9.10

$9.14

$9.19

$0.05

0.52%

Jan

Soybeans

$15.27

$13.83

$14.19

$14.39

$0.20

1.41%

Dec

Soybean Meal

$449.70

$424.60

$428.60

$442.40

$13.80

3.22%

Dec

Soybean Oil

$47.77

$47.05

$49.04

$49.41

$0.37

0.75%

Dec

Live Cattle

$125.75

$126.15

$128.95

$126.73

($2.22)

-1.73%

Jan

Feeder Cattle

$146.68

$145.60

$147.88

$145.63

($2.25)

-1.52%

Dec

Lean Hogs

$80.75

$80.33

$82.48

$84.08

$1.60

1.94%

Dec

Cotton

$69.58

$72.73

$69.83

$72.65

$2.82

4.04%

Dec

Oats

$3.64

$3.65

$3.69

$3.61

($0.08)

-2.24%

Jan

Rice

$15.01

$14.85

$15.04

$15.27

$0.23

1.56%

 

KC wheat futures were up more than 2% for the week, as HRW crop condition ratings declined and the weather forecasts for the next two weeks showed much below normal rainfall for the main Plains growing area. Chicago and MPLS were on the sell side of spreads with KC, and Chicago ended the week in negative territory because of a 24 ½ cent drop on Friday. Weekly wheat export sales were smaller than expected by the trade at 279,300 MT.

Cotton futures were up 4% this week in the December contract, almost erasing the loss from the week before. There was a steady drumbeat of delivery notices against the Dec contract, mostly from one merchant to another. The USDA weekly Export Sales report showed net sales for last week of 300,000 running bales for 2012/13 shipment. Net American Pima sales were 10,600 running bales for 2012/13.

Cattle futures were down 1.7% this past week. Weekly estimated slaughter totaled 635,000 head (including estimated Saturday kill), up 52,000 from the previous week. Beef production was up 8.9% from the prior week, but was down 2.3% from last year. The YTD production is down 1.6% from last year. Weekly beef export sales for last week slowed to only 11, 800 MT. Wholesale prices were mixed this past week.  Choice boxes were down 0.7% for the week while Select boxes were up 3 cents or just barely above UNCH.  

Hogs were up nearly 2% for the week, with futures continuing to expect a sharp rally in cash hogs over the next two weeks. Estimated weekly slaughter was 2.399 million head, up 1.5% from the same week in 2011. Weekly pork production jumped 16.3% from the holiday week, but was down 0.5% from the same week a year ago. Estimated carcass weights are up 4# from last year, reducing the number of hogs needed.  Pork production YTD has still been 1.9% larger than last year. The pork carcass cutout rose 3.5% from last week. Ham prices surged 10.4% to lead the product values.

Market Watch:

The calendar turns to December, with the usual first of month position adjustments due to asset allocation programs. The Dec corn, wheat and soy products futures are in delivery, with large deliveries against Chicago Dec wheat a surprise because the CME failed to report 2000 delivery registrations from The Andersons and that wheat was put out. USDA is done with crop progress reports for the year, but will still have weekly Export Inspections on Monday and Export Sales on Thursday. Thursday will also mark the last trading day for December cotton, and Friday will be the last trading day for December live cattle 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. Visit our web site at https://www.bruglermarketing.com for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

Copyright 2012 Brugler Marketing & Management, LLC

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