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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.

Rain Makes Grain, Maybe?

Jun 15, 2012

Brugler

Market Watch with Alan Brugler

June 15, 2012

Rain Makes Grain, Maybe?
 

The crop weather situation was mixed, with the WCB definitely getting rain and cooler temps. The US model saw relief for the ECB out in the mid-range forecasts, but the European model leaned drier than the other as the trade went home on Friday. New crop futures were mostly lower, amid perceptions (not shared by most of the farmers we talked to this week) that drought stress would be eased comfortably before pollination.

That which goes up can again go down. Corn rallied 7.8% two weeks ago, but gave back 3.1% this week. The entire loss was on Friday; after rumors spread that a firm was planning on importing cheap Brazilian corn into the US this summer to break the old crop tightness. Weekly export sales were already poor, but the potential for adding supplies chased some "short squeeze" bulls out of the July contract. The Wall Street Journal chose to highlight the closure of a small old North Dakota ethanol plant in April (and first announced months before that) as a sign that corn use for ethanol would flatten or reverse lower. There was also "talk" of other plants either shutting down or taking extended down time this summer due to tight corn supplies. Ethanol production last week was the largest in 4 months, and blending demand has been strong. Go figure! China continues to buy small quantities, but much of the world seems intent to either use feed wheat bought previously, use South American corn, or wait for the expected record US new crop harvest.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/25/12

06/01/12

06/08/12

06/15/12

Change

% Change

July

Corn

$5.79

$5.55

$5.98

$5.80

($0.19)

-3.09%

July

CBOT Wheat

$6.80

$6.15

$6.30

$6.10

($0.21)

-3.29%

July

KCBT Wheat

$7.00

$6.42

$6.56

$6.30

($0.26)

-3.96%

July

MGEX Wheat

$7.86

$7.40

$7.69

$7.88

$0.18

2.37%

July

Soybeans

$13.82

$13.43

$14.26

$13.76

($0.50)

-3.52%

July

Soybean Meal

$409.30

$395.80

$429.80

$410.10

($19.70)

-4.58%

July

Soybean Oil

$50.12

$48.71

$49.46

$48.44

($1.02)

-2.06%

Jun

Live Cattle

$117.65

$117.70

$119.88

$116.15

($3.72)

-3.11%

Aug

Feeder Cattle

$158.50

$157.38

$159.38

$156.03

($3.35)

-2.10%

July

Lean Hogs

$86.58

$91.59

$92.93

$93.03

$0.10

0.11%

July

Cotton

$73.62

$68.55

$72.90

$79.98

$7.08

9.71%

July

Oats

$2.96

$2.82

$3.03

$3.08

$0.04

1.48%

July

Rice

$14.51

$14.06

$14.05

$13.92

($0.13)

-0.93%

 

Soybeans lost 3.5% for the week after being up 6.2% the prior week. Weekly soybean export sales were larger than expected for the reporting week ending June 7. Chinese buying is still there. US export commitments (shipments plus open contracts) fully cover the USDA export estimate for the year. While it is difficult to hurt soybean yields in June, there are widespread complaints about poor stands. The Brugler500 index for soybean crop conditions dropped to 357 from 368. Ratings are now similar to 2008, and well below the 5 year average.

The three wheat markets were running at different speeds. All were down on Friday, and the December contracts were all down. However, MPLS July had a big up day which allowed it to post a 2.8% gain for the week while the winter wheat futures were down 3.2% in Chicago and nearly 4% in KC. Crop condition ratings rebounded slightly from the Brugler500 index of 340 the previous week. Weekly export sales for the week ending June 7th were 432,900 MT and just under the high end of trade estimates. Private exporters announced to USDA export sales of 110,000 metric tons of SRW wheat for delivery to China during the 2012/2013 marketing year.

Nearby cotton futures surged 9.7% for the week. China bought a huge chunk of old crop cotton from the US (744,200) running bales, putting the weekly sales total at 795,700 RB. China also took 180,500 RB of the 219,600 RB for 2012/13. Cumulative old crop commitments (exports plus sales contracts outstanding) are 117% of the USDA projected exports for the year. They are typically at 108% by mid-June, so we will either have larger than expected exports between now and July 31 or carry over more commitments than usual into the 2012/13 marketing year. The third alternative is a raft of cancellations. We saw that a year ago, but the prices locked in this year were much less burdensome than those buyers were trying to get out of last summer.

Cattle futures were down 3.1% this past week. Wholesale beef prices slowed down, but are still only about $2.03 from all time highs in the choice. For the week, choice boxed beef was up 0.5%, while select dropped 1.54%. Estimated beef production for the week was 2.9% smaller than the same week in 2011. YTD production is down 2.7%, while cumulative beef export sales are running above year ago. Cash cattle traded lower this week. 

Lean Hog futures were up 0.11% for the week, as profit taking selling on Friday took off almost all of the gain for the week. Pork production was down 2.6% from the previous week. It was still up 0.7% from the same week in 2011. Cumulative pork production for the year is 2.0% larger than last year on 1.6% more hogs. Cash and futures deserved to be up, with packers extracting 11% more value for the pork carcass cutout this week than last week. Quotes for pork ribs, seasonally strong for BBQ, shot up 22% for the week. 

Market Watch:

The main USDA reports this coming week will fall on Friday, with Cold Storage and Cattle on Feed to be released at 2 pm CDT. There will of course be interest in the Crop Progress report onn Monday afternoon at 3:00 pm.  The Fed Open Market Committee is due to meet on Tuesday and Wednesday.  Thursday will include the weekly USDA Export Sales report. July grain futures options will expire on Friday.

 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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