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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.

It's A Jungle Out There

Aug 06, 2010

 brulogomed

 Market Watch with Alan Brugler
August 6, 2010
It’s A Jungle Out There
 
Wheat once again posted the largest percentage gains overall in our table. Chicago futures were up 9.7% for the week, DESPITE losing 60 cents per bushel on Friday. That left them with a 64 cent gain for the week, and it was still the highest weekly close since September 5, 2008. KC futures were up 6.75% for the week, and MPLS trailed along with a 5.1% advance. Spring wheat harvest is just getting underway, and the current price level encourages big sales straight out of the field. Of course, the big news of the week was Russia’s announcement that they would halt exports next week and that they would be shut down until at least December. Existing contracts will not be delivered during the halt, leaving end users scrambling for other, more expensive supplies from the EU, Canada and the United States. The wheat rally and the Russian situation made the front page of the Wall Street Journal on Friday morning, a time tested sell signal that was honored once again by the traders.
 
Corn was up another 12 cents per bushel for the week, and is up 34 cents in two weeks. This past week’s 3.1% advance came mostly courtesy of the drought in Russia and surrounding countries. Trade estimates are being reduced for world barley and corn production from that region, and that creates opportunities for additional US corn exports either directly or indirectly through substitution. Weekly export sales were decent, but producer selling of old crop corn was also heavy and kept basis under pressure. Trade estimates for USDA’s August 12 crop yield have been running in the 162-167 bushel range, about a 400 million bushel swing in potential production and ending stocks if there are 80 million harvested acres.
 
Soybeans weren’t about to be left out of the rally in the other grains, and in fact they really can’t be left out of a feed grain rally for very long. Soybean meal is a substitute, and has often followed the corn and wheat. Meal was up $2.60/ton or 0.8% for the week. Nearby bean futures crawled 6 cents higher. There have still been no deliveries vs. August futures, but the shorts seem to have handled it well. New crop export bookings are now ahead of last year at this point, thanks to aggressive Chinese buying over the past two weeks. They aren’t the only ones buying, but do represent well over half of the commitments to date.
 
Cotton futures broke through the 80 cent mark for new crop December futures. October futures, sort of a between month, were up 2.48% for the week as old crop cotton in delivery warehouses dwindled to multi-year lows and most of the early cotton from new crop appears to be committed to end users and shippers. Weekly export sales were within the range of trade estimates.


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

 
Market Watch
 
 
 
 
Weekly
Weekly
Month
07/16/10
07/23/10
07/30/10
08/06/10
Change
% Change
Sep
Corn
$3.95
$3.71
$3.93
$4.05
0.12
3.12%
Sep
CBOT Wheat
$5.87
$5.96
$6.62
$7.26
0.64
9.71%
Sep
KCBT Wheat
$5.99
$6.15
$6.75
$7.20
0.46
6.75%
Sep
MGEX Wheat
$6.12
$6.29
$6.88
$7.23
0.35
5.13%
Aug
Soybeans
$10.20
$10.17
$10.53
$10.59
0.06
0.62%
Aug
Soybean Meal
$307.80
$299.90
$310.90
$313.60
2.70
0.87%
Aug
Soybean Oil
$38.31
$39.07
$39.83
$41.39
1.56
3.92%
Aug
Live Cattle
$92.27
$93.42
$92.65
$92.77
0.12
0.13%
Aug
Feeder Cattle
$113.10
$115.17
$113.72
$112.35
1.37
1.20%
Aug
Lean Hogs
$81.70
$83.23
$85.82
$82.02
3.80
4.43%
Oct
Cotton
$79.96
$80.32
$82.36
    $84.40
2.04
2.48%
Sep
Oats
$2.68
$2.55
$2.71
$2.80
0.09
3.14%
Sep
Rice
$9.86
$10.28
$10.55
$10.61
0.06
0.57%

 
Cattle futures squeezed out a 12 cent gain for the week. Beef production for the year to date is still down 0.6%, but it was 2.7% larger for the first week of August than for the corresponding week in 2009. On a Thursday/Thursday basis, the choice boxed beef market was down 2.24%. Select quotes were down 1.85%. Cash cattle traded on Friday at $93 to $93.50, fully steady with the previous week
 
Hogs were down a sharp $3.80 in the nearby and soon to expire August contract. Longs tried one more time to push prices higher, but on Thursday everyone headed for the door at the same time and the contract was limit down. The sell pressure continued on Friday. Pork production YTD is down 4.1%, and estimated production for the week ending August 7 is 6% smaller than the same week in 2009. This comparative scarcity is supporting the pork cutout market. However, retailer and consumer resistance also becomes a factor when carcass values get above $90 as they were early in the week.
 
Market Watch: Cattle traders will start the week dealing with last Friday’s expiration of the August options. Monday is also first notice day for August cattle deliveries. Grain traders will be focused on the crop condition ratings from USDA to be released on Monday evening. Ratings for corn and soybeans typically decline in August, but the question is “how much?” USDA will issue its first objective and survey based Crop Production numbers for corn and soybeans on Thursday morning. There will also be keen interest in how much they adjust the world wheat and coarse grains production numbers to reflect the drought in the EU and FSU. Friday will be the last trading day for August hog futures/options, and also for August soy complex futures.
 
Looking for professional help with your marketing decisions? Consider subscribing to our daily Ag Marketing Professional service or Special Research Reports. Call our office for details at 402-697-3623, or visit www.bruglermarketing.com.
 
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 more extensive paid subscription and consulting services.
 
                                      Copyright 2010 Brugler Marketing & Management, LLC
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