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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.

Livestock Eat Grains Lunch

Jun 17, 2011

brulogomed 

Market Watch

June 17, 2011

Livestock Eat Grains Lunch 

This week was shaken up by a huge move higher in the dollar, driven by a flight to quality because of trouble with Greek debt again. We are nearing the end of the July contracts for grains which will cause volatility, starting with next Friday when July options expire. First notice is June 30th and last trade is on July 14th.

Corn futures began losing ground out of the gate this week dropping nearly a dollar from Monday’s high to today’s low on the July contract with a 67 cents drop on the new crop December. The crop progress report showed corn planting at 99 percent as of Sunday which offset the effects of last Friday’s crop report that showed a reduction in corn acres for this crop year. Adding to the initial bearishness was an improvement in weather conditions for a large portion of the Midwest this week. The rise in the value of the U.S. dollar at midweek gave the bears confidence to keep selling. On the other side of the scale the U.S. is still looking at a substantial reduction in ending stocks, so usage will have to be cut at some levels which could start with ethanol.  The Senate voted yesterday 73-27 to cut the 45 cents given to refiners for every gallon of ethanol bended with gasoline and to end the 54 cent tariff on imported ethanol at the end of 2011. It still has to go through the House and President Obama, who presumably does not want the blame for $.80/gallon higher gasoline prices that would occur if the ethanol plants shut down. An Iowa Senator has suggested a gradual decrease in the subsidies in keeping with the governments mandate for increased renewal fuel production in the U.S. The mandate calls for 12.6 billion gallons of ethanol to be added to the gas pool this year. Current output is running almost 10 percent above that rate. Dropping the 54 cent tariff would allow other alternative fuels like sugarcane ethanol to compete with the U.S. ethanol.

Soybeans closed sharply lower for the week, down 54 ¼ cents or 3.91%. Soybeans were weighed by weakness in crude oil, a sharply higher dollar, and a decent Crop Progress report. The NOPA crush came in lower than last year for May while meal yield was record high. Export sales came in at a healthy pace, up 49% from the previous week.

 

Wheat closed sharply lower for the week, down 87 cents or 11.46% for CBOT, down 63 ½ or 7.32% for KCBT and $1.02 ¾ or 10.28% for MGEX. Wheat was weighed by a higher dollar and weakness in the grains. Export sales were healthy at 455.5 TMT and inspections were 23.9 MB, well ahead of last year. Wheat is at a heavy discount to corn, 72 cents/bu on a pound for pound basis. It hit its highest levels last week at 89 cents which means there will likely be some wheat feeding if end users can get ahold of enough to hold them over for a few months.

Cotton showed some strength earlier in the week but sold off heavily into a higher dollar and broad weakness in commodities. Cotton ended 485 points lower for the week or 3.23%. A bullish Crop progress report earlier in the week with continued dryness in Texas offered support but that apparently wasn’t enough with the low levels of demand for yarn internationally and the cancellations of exports we have been seeing. Exports this week showed a glimmer of hope even though they were extremely low they were not negative.

Looking to enhance your existing Ag Marketing Professional subscription? Add free futures market quotes sent to your cell phone via our Market Monitor service. Or "push" the daily recommendations out to your phone as they happen with Market Messenger 2. Call in consulting service with Alan is also available for a limited number of new customers in our Ag Marketing Professional Premium package. Call our office for details on either service at 402-289-2330. 

Here are the Friday night closes for the past four weeks, along with the net change for this week vs. the previous week:

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/27/11

06/03/11

06/10/11

06/17/11

Change

% Change

July

Corn

7.585

7.54

7.87

7.0025

0.8675

11.02%

July

CBOT Wheat

8.1975

7.7375

7.5925

6.7225

0.8700

11.46%

July

KCBT Wheat

9.43

9.1425

8.68

8.045

0.6350

7.32%

July

MGEX Wheat

10.5625

10.605

10

8.9725

1.0275

10.28%

July

Soybeans

13.7975

14.145

13.8725

13.33

0.5425

3.91%

July

Soybean Meal

355.6

368.4

373.3

349

24.3000

6.51%

July

Soybean Oil

58.61

58.73

56.85

55.92

0.9300

1.64%

June

Live Cattle

104.1

104.175

102.725

109.75

7.0250

6.84%

Aug

Feeder Cattle

122.72

124.25

123.625

132.65

9.0250

7.30%

July

Lean Hogs

88.6

87.85

93.225

95.65

2.4250

2.60%

July

Cotton

152.67

161.63

150.03

145.18

4.8500

3.23%

July

Oats

3.8275

3.78

3.955

3.515

0.4400

11.13%

July

Rice

15.185

14.475

14.895

13.965

0.9300

6.24%

 

Cattle futures were up about $7.00 for the week on $4 to $5 higher cash prices. The higher prices were supported by today’s monthly Cattle on Feed report. The report was bullish with every category an improvement over the average trade estimate. June 1 on Feed was 104 percent, May Placements were 89 percent and May Marketings were 107 percent versus the average trade estimates of 105.5, 92.5 and 103.5 respectively. Exports have also been robust. Accumulated exports so far this year are 333,755 MT, looking to outpace last year, which was the strongest export year since BSE.  The carcass value was up about $1.40 from last Friday for Choice beef. Beef production is estimated at 523 million pounds, up .4% from a year ago and up 1.8% from last week. Average carcass weight is estimated to be 1 pound lighter than last week for the second week in a row showing a readiness for producers to move cattle at higher money along with the packer willingness to show them the money.   

Lean Hog futures gained 2.43% for the week and have rallied about $7 since June 7th.  Pork production YTD is now only 1.0% ahead of last year, and estimated weekly production of 406.3 million pounds was down 1.5% from a week ago. The pieced out value of the hog rose 2.32% on a Thursday/Thursday basis, with the daily trend moving steadily up this week.  All the cuts improved versus a week ago except for Loins and Hams which showed substantial gains the previous week.  

Market Watch: We start the coming week with USDA export inspections and the well followed weekly Crop Progress and condition reports. Tuesday, June 21st, is the first day for the Federal Open Market Committee meeting and the longest day of the year. Fed Chairman Bernanke probably feels like Bill Murray in Ground Hog Day, for more of the same. Wednesday is the monthly USDA Cold Storage report and the second day for the FOMC meeting. USDA will release weekly Export Sales along with the Cotton Consumption, Census Crush and EIA Gas Storage on Thursday morning and the macro traders will get the weekly Initial Jobless Claims and monthly Housing Starts numbers to play with.  On Friday, USDA will weigh in with the quarterly Hog and Pig report.

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.

 Copyright 2011 Brugler Marketing & Management, LLC

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