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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.

Commodities? No Thank You!

Feb 22, 2013

Brugler


Market Watch with Alan Brugler & Ryan Palmer

 Commodities?  No Thank You…

…not right now anyway.  That’s the trading and investment mentality as of this week.  Sequestration talk, speculation about rising interest rates, a rising dollar; they all fueled the bearish sentiment towards most commodities that continued this week. Gold and crude oil were hard hit.  Soybeans and Soy meal were higher for the week; oats were up too and cotton snuck out a positive week, but other than that ag commodities continued to lose value. 

Corn futures were off another 1.22% this week after slipping 1.45% the week before.  Major winter storm precipitation throughout much of the Western Corn Belt and Southern Plains put pressure on new crop prices and the old crop went with it.  Exports continued to be perceived as weak until the Friday morning Export Sales came in at 381,900 MT, exceeding pre-report expectations.  Total export commitments are running 10% behind the 5-year average, leaving an open invitation for the USDA to lower their projections in the future unless further progress is made. The EIA reported increased daily average production and slightly lower ethanol stocks than the previous week, but the news was not enough to piece together any type of rally this week as March corn dances on both sides of $7.

The soybean market came back from the long weekend and the Chinese New Year with some fireworks.  The Argentine crop has been hurt by extended periods of heat and dryness and was expected to receive widespread drenching rains last weekend.  By Monday night the trade knew that the rains were not as heavy as expected, and some areas were missed completely. Thus the market gapped higher and ended Tuesday 46¾ cents higher in the March contract.  Yet another reminder that these markets can be explosive with stocks as tight as they are!  The soy market was propelled higher on Thursday night on rumors China was switching orders from Brazil to the US as the Brazilian workers staged a 6-hour strike on Friday. This rally in prices was quickly swept under the rug as port workers agreed to a negotiation period that will last until March 15th. This caused March soybeans to finish with a 57 cent trading range and a bad close on Friday,  but still 37 cents higher on the week. Soy meal was up $17.50 on the week or 4.27%.  Soybean oil however lost $1.27 or 2.46% closing out the week at $50.35.

CBOT wheat had the largest percent decline of the three wheat markets, losing 3.67% which is 27 cents.  Both disappointing export inspections earlier in the week and the winter precipitation events hurt all of the wheat markets this week. Total wheat exports commitments are running 13% behind the 5-year average.  The weekly export sales report on Friday morning, which indicates future shipments rather than wheat already loaded, was bull friendly.  USDA reported 699,300 MT of old crop sales and another vessel (56,600 MT) of new crop were booked in the week ending February 14.  While nobody is looking the gift horse in the mouth (the big snowfall in KS and NE), a lot more precipitation is needed in the Plains to make up the moisture deficit.

Cotton closed the week just .09% higher than last Friday, gaining 7 points to close at $81.39/lb. Weekly exports of Upland cotton were a strong 209,800 RB. Cotton total commitments are running at 87% of the USDA estimate. The USDA, at their annual Outlook Forum, projected further tightening of US cotton ending stocks in 2013/14, to 3.7 million bales. The presentation by Carol Skelley anticipates a rise in the average cash price to 73 cents/pound vs. 71 cents in the current marketing year. Production is seen dropping to 14 million bales from 17 million this year, despite a much smaller proportion of abandoned acres.

  

 

Commodity

 

 

 

 

Weekly

Weekly

Month

02/01/13

02/08/13

02/15/13

02/22/13

Change

% Change

Mar

Corn

$7.36

$7.09

$6.99

$6.90

($0.09)

-1.22%

Mar

CBOT Wheat

$7.65

$7.56

$7.42

$7.15

($0.27)

-3.67%

Mar

KCBT Wheat

$8.23

$8.00

$7.78

$7.50

($0.28)

-3.57%

Mar

MGEX Wheat

$8.52

$8.37

$8.24

$8.03

($0.21)

-2.52%

Mar

Soybeans

$14.74

$14.53

$14.25

$14.61

$0.37

2.58%

Mar

Soybean Meal

$428.20

$422.40

$409.40

$426.90

$17.50

4.27%

Mar

Soybean Oil

$52.99

$51.43

$51.62

$50.35

($1.27)

-2.46%

Feb

Live Cattle

$127.10

$126.45

$126.50

$126.35

($0.15)

-0.12%

Mar

Feeder Cattle

$149.20

$145.00

$143.38

$141.25

($2.13)

-1.48%

Apr

Lean Hogs

$88.75

$86.13

$84.25

$81.65

($2.60)

-3.09%

Mar

Cotton

$82.98

$82.67

$81.32

$81.39

$0.07

0.09%

Mar

Oats

$3.59

$3.86

$3.79

$3.88

$0.09

2.37%

Mar

Rice

$15.56

$16.35

$15.84

$15.59

($0.25)

-1.58%

 

In the cattle markets, the feeders lost $2.13 or 1.48%, but live cattle were off just 15 cents on the week, closing at $126.35. Boxed beef wrapped up the week 94 cents higher, as the trade continues to be concerned over retail demand in grocery stores and restaurants. Beef export sales provided some light at the end of the tunnel with the strongest number since April 2012 at 22,161 MT. Japan took nearly half of the total. US weekly beef production was down -3.8% from the previous week, and down 1.1% from the same week in 2012.  The Friday evening Cattle on Feed report showed total cattle on feed February 1 at 93.4% of year ago. January placements were larger than last year as expected, at 101.6%, while marketings were also larger at 105.6%. The report is supportive because numbers remain down.

Hogs took the hardest hit in the livestock sector this week.  Hog futures found themselves in a boat that was taking on water this week, possibly the same boat that cattle futures have been trying to bail out of. The trade is eyeing up pork demand, as a slide in the carcass cutout values have unveiled a weaker side in pork prices. The pork cutout value gained 1.96% on the week or $1.57, but bear in mind the previous Friday’s cutout value was the lowest in nearly 5-months.  Chinese officials added to the bearish news when they announced that they would begin requiring a third party to test for unacceptable levels of ractopamine in its pork imports.  Their main US supplier indicated a willingness to ensure that pork shipped to China remains free of the additive, which is legal and considered safe in most of the major production countries other than China.  Weekly US pork production was down 3.8% from the previous week and down 3.5% from the same week in 2012. That reduced production should be supportive to the cutout value, but was partially due to weather delays and could potentially be made up next week.

Market Watch:  February ends on Thursday, and along with it the spring pricing period for crop revenue insurance.  USDA goes back to a normal release schedule, with weekly Export Inspections n Monday morning and weekly Export Sales on Thursday. Livestock traders will begin the week dealing with the fallout from the Friday evening release of the Cold Storage and Cattle on Feed reports. Grain traders will be dealing with the loss of March options coverage, as those options expired this past Friday. Thursday will also mark First Notice Day for deliveries against March grain futures and the last trading day for February cattle. March 1 will mark the expiration of the March serial options for cattle.  We have to wait until March 20 for Spring to begin. Daylight Savings time will begin in two weeks, on the 10th.

 

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 2013 Brugler Marketing & Management, LLC

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