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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.

The Euro and Dollar Connection

Oct 28, 2011

Brugler

Market Watch

October 28, 2011

The Euro and Dollar Connection

 

The dollar dropped hard this week vs. most of the major currencies. The European crisis abated with some decisions made on how to handle Greek sovereign debt, allowing a huge pop in the euro. Even the Chinese yuan was allowed to rise against the dollar to levels matching those of early October. Dollar weakness is always ‘compared to what?’ but the focus was shifting at least temporarily back to the Congressional super committee and its lack of progress in debt reduction talks. Higher oil prices also argued for a bigger US trade deficit next month despite declining gasoline consumption.

Corn was up another 5 ¾ cents for the week. Ethanol production rose for the most recent week, which of course means a greater need for cash corn to grind. Ethanol plants need to run flat out through the end of the year, and are bidding aggressively in the cash corn market to get late harvest bushels coming out of the field to come to the plant rather than the farm storage. Their task has been made easier by a drop in export sales last week. The livestock feed use picture is mixed, with the broiler industry still cutting back egg sets and chick placements until it can force chicken breast prices higher (to something north of the cost of production). Cattle numbers are up, and so are hogs, but they are using more DDGS than a year ago, and maybe a little more wheat.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

10/07/11

10/14/11

10/21/11

10/28/11

Change

% Change

Dec

Corn

6

6.4

6.4925

6.55

0.0575

0.89%

Dec

CBOT Wheat

6.075

6.2275

6.32

6.445

0.1250

1.98%

Dec

KCBT Wheat

6.845

7.075

7.23

7.38

0.1500

2.07%

Dec

MGEX Wheat

9.195

8.925

9.1925

9.205

0.0125

0.14%

Nov

Soybeans

11.5825

12.7

12.1225

12.17

0.0475

0.39%

Dec

Soybean Meal

304.3

327.6

316.5

317.5

1.0000

0.32%

Dec

Soybean Oil

49.32

53.54

51.25

51.77

0.5200

1.01%

Oct

Live Cattle

121.975

121.65

121.925

120.95

0.9750

0.80%

Nov

Feeder Cattle

142.35

144.425

142.725

141.1

1.6250

1.14%

Dec

Lean Hogs

89.4

90.075

89.65

86.675

2.9750

3.32%

Dec

Cotton

101.98

101.94

97.1

104.37

7.2700

7.49%

Dec

Oats

3.21

3.4

3.37

3.3625

0.0075

0.22%

Nov

Rice

15.625

16.625

16.405

16.74

0.3350

2.04%

 

All three wheat exchanges were higher for the week. Minneapolis was the weakest after being the strongest last week, due to inter-market spreading. KC posted the largest gain at 2.07%, due to ongoing drought in the Plains. Chicago was also firmer due to likely permanent planting delays in Ohio.  Egypt continues to buy Russian wheat, with this week’s purchase $6.50/MT cheaper as the Ukrainians came back into the market. US wheat was not offered in that tender, as it is not competitive.  Winter wheat crop condition ratings in the States are poor, but there is also not a very good correlation between fall ratings and spring final yields.

Soybeans eked out a 0.39% gain in the November contract. Liquidation of positions was the name of the game, with November going into delivery notices on Monday. OI had declined to 35,000 contracts as of Friday morning. USDA Weekly Export Sales were a low 254.6 MT, the lowest weekly number since June. China appears to still be buying Brazilian cargos on dips. They need to buy 40 million bushels per week from somebody, but the overhang of Brazilian supplies is limiting US bookings. So is the lack of berth space in the PNW, where the US has a freight advantage.

Cotton had a huge up week, gaining 7.49% for the week. Stronger weekly export sales get a lot of the credit, with December futures up the 400 point limit on Thursday. A sharp drop in the dollar aided the bounce in cotton prices, and rising equity markets suggested a little more wealth effect spending by consumers. Actually, retail sales haven’t been that bad, but retailers are also being very cautious about inventory for the holiday season. . Pakistan trimmed its production estimate to 12.22 million 170kg bales, down about 6% from previous estimates. Egypt issued a temporary import ban on cotton until it uses up local stocks.

Cattle futures lost 97 cents for the week in the nearby October, which expires on Monday but also tracks the cash market the closest. Cash cattle prices were $1-2 higher than the previous week, with the bulk of the trade at $121-123. The market ignored the bearish cattle on feed report for the most part, although the lower close for the week fit the fundamentals we knew at the start of the week. Prices were supported by a strong weekly beef export sales total of 20,900 MT. That came after a series of weeks with 13 thousand tonne bookings. Wholesale prices reacted to the export interest, and that ultimately allowed packers to pay up. Weekly slaughter was 3,000 head larger than last year for the same week.  Due to lower estimated carcass weights, beef production was up 0.2%.

Lean Hog futures sank 3.3% this past week. Traders bought the rumor and sold the fact of McDonald’s national roll out of the McRib sandwich, which will be available through November 14th. That explained some of the strength in pork prices during October, but also suggests less domestic demand once the program ends. Export interest remains strong, aided by the weakness of the US dollar. Pork carcass cutout values were down 2.39% for the week. Pork production for the year to date is up 1.1%, but this past week production was 1.7% smaller than in the equivalent week in 2010.  Estimated carcass weights were 3# lighter.

Call in consulting service with Alan is 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. 

Market Watch:  Monday will mark first notice day for November soybean, rice and canola futures. October cattle will also expire on Monday. The USDA Crop Progress report is declining in relevance, with the bulk of the US crops in the bin. There will be a focus on winter wheat planting progress and to a lesser degree the crop condition ratings for winter wheat. There will be a Fed FOMC meeting on Tuesday and Wednesday, which always has the potential for something market moving to come out of it. USDA will report the usual weekly Export Sales on Thursday morning.  Friday will mark the last trading day for November serial options in live cattle and the US dollar index. The USDA crop reports aren’t until the following Wednesday, November 9.

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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