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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.

Roll On, Big P

May 17, 2013

Brugler

Market Watch with Alan Brugler

May 17, 2013

Roll On, Big P

 

That’s P as in Planter. We finally got a break in the weather for a few days, with a huge jump in average daily temperatures. That was accompanied by wind in some areas, amplifying the soil drying effect. Producers put their new GPS equipped planters to work 18 hours a day or more in some cases, and got a lot of seed in the ground. USDA will tell us on Monday what the overall progress was, but it was clearly substantial. The advance would have been larger if not for widespread shower activity breaking out all over the eastern 2/3 of the country from Wednesday evening on. 

Corn futures rallied 17 cents per bushel this week, a 2.5% gain after losing 1.7% the previous week. Ethanol plant margins are positive, and weekly ethanol production responded with a jump in average daily production.  Old crop corn consumption is up accordingly. Imports were zero for the 5th week of the past 6, and ethanol stocks were drawn down to a snug 16.4 million barrels. Export interest, on the other hand, is very weak. Foreign buyers have been soaking up the limited export corn available out of South Africa, and also buying much cheaper Brazilian corn which they hope gets shipped before they need it. US planting progress expanded greatly this week, with trade estimates of total plantings in the 60-75% range for the Monday USDA report. Upper Midwest planting activity was halted by rain on Friday, as were a number of producers in IL and IN. A Memphis based consulting firm reduced its projection of US corn plantings to 96.827 million, about 455,000 fewer than the USDA Planting Intentions report showed in March.

Soybeans gained 49 cents per bushels for the week after a 33 cent gain the previous week. Weekly export sales were in line with trade estimates, but soybean meal export activity continues strong and that means higher meal prices if crushers can’t find enough beans. The NOPA crush for April was smaller than had been expected, a little over 120 million bushels. If you don’t crush the beans, you don’t sell the meal.  Meal futures were up 4.3% for the week. Soybean planting activity is just getting rolling, since it usually follows corn planting. Argentine sources indicated that neither exporters nor domestic processors have been able to buy as many beans from the farmer as they did a year ago. This raised crop size questions, but may also be a function of high inflation rates in Argentina and the necessity to keep some physical commodity as an inflation hedge. It does imply reduced export availability for the time being.

Wheat futures were lower on all three exchanges. The focus was on large global production for 2013, and not on the smaller US HRW crop. It was sort of a "you have a problem but we don’t need you anyway" attitude. That said, US weekly export sales were a solid 540,000 MT for the week, so somebody needs US origin wheat. MPLS was the firmest market, as a small planting window opened and then closed as rain chased producers back out of the field. A Memphis based analysis firm projected on Friday that US spring wheat acreage would total 12.401 million acres, apparently little affected by the flooding and planting delays.

Cotton lost a minuscule 11 points for the week, with nearby futures continuing to hover around the 86 cents per pound mark. US export sales last week were stronger than some had expected at 142,800 RB. However, the stronger dollar is raising doubts about next week’s sales. The dollar reached heights not seen since 2010. Total US export commitments are now about 99% of the USDA forecast for the year. The marketing year ends July 31.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

04/26/13

05/03/13

05/10/13

05/17/13

Change

% Change

July

Corn

$6.20

$6.61

$6.36

$6.53

$0.17

2.53%

July

CBOT Wheat

$6.93

$7.21

$7.04

$6.83

($0.21)

-3.07%

July

KCBT Wheat

$7.51

$7.78

$7.59

$7.37

($0.22)

-2.92%

July

MGEX Wheat

$8.05

$8.19

$8.09

$8.04

($0.05)

-0.62%

July

Soybeans

$13.81

$13.87

$13.99

$14.49

$0.49

3.42%

July

Soybean Meal

$404.70

$406.50

$406.80

$425.10

$18.30

4.30%

July

Soybean Oil

$49.54

$49.27

$49.23

$49.52

$0.29

0.59%

June

Live Cattle

$122.60

$121.83

$120.45

$119.40

($1.05)

-0.88%

May

Feeder Cattle

$141.80

$138.78

$135.38

$133.90

($1.47)

-1.10%

June

Lean Hogs

$92.53

$92.18

$90.50

$91.53

$1.03

1.12%

July

Cotton

$84.32

$86.18

$86.48

$86.41

($0.07)

-0.08%

July

Oats

$3.84

$3.88

$3.79

$3.76

($0.03)

-0.80%

July

Rice

$15.07

$15.36

$15.25

$15.24

($0.02)

-0.10%

 

Cattle futures lost $1.05 per cwt this week. That caused a lot of head scratching, as wholesale beef prices set new record highs and futures were still more than $12 below their 2013 high of $132.95. June futures only need to respect cash market values when they are in deliveries, which don’t begin until mid-June. In the mean time, speculative sellers or others are free to assume that cash cattle prices and those wholesale prices will decline from current levels by June. Cash cattle trade was mostly $125-126.50 this week, well above the futures but at a discount to the beef. As mentioned, wholesale beef prices were record high, with choice gaining 2.2% for the week. Select was up 0.8%.  Beef production YTD is 1.2% smaller than last year. The USDA Cattle on Feed report on Friday afternoon showed stronger than expected demand for feeders (placements 115.1% of year ago) but as a result there were more cattle in the lot on May 1 than expected (96.6% of year ago).

Hog futures were up $1.03 for the week, hurt a little by a dive on Friday. The skyrocketing value of the US dollar index caused concern about pork exports, which in recent years have been more than 20% of total production. The pork carcass cutout gained $3.61/cwt or 4.02% for the week.  Rising prices for chicken provided support, along with reduced slaughter rates for hogs. Estimated weekly slaughter was 2.035 million head. Weekly pork production was down 2.2% from the prior week, and 4.2% smaller than the same week in 2012. Some producers appeared to be focused on planting rather than marketing hogs. Average carcass weights were estimated to be equal to year ago, so slaughter was also down 2.1% from the prior week. Pork production YTD is still 1% below last year at this time.

 Market Watch

Livestock traders will begin the week assessing how much further prices need to drop to reflect the USDA Cattle on Feed report from Friday afternoon.  The USDA monthly Cold Storage report will be released on Wednesday afternoon. Grain market participants will focus on the Crop Progress report on Monday at 3 pm CDT, with a glance at weekly Export Inspections on Monday and Export Sales on Thursday morning. Friday will mark the expiration of June serial options in the grains, and the start of a long 3-day weekend because of Memorial Day in the U.S. on May 27.

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.  Visit our web site at https://www.bruglermarketing.com or call 402-697-3623 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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