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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.

The Sky's The Limit

Oct 08, 2010

brulogomed

Market Watch and Tech Talk
October 8, 2010
The Sky’s The Limit
 
Forget the midweek action. Forget the big volume and volatile trading on Friday’s that we talked about last week. This week, the big moves were courtesy of the USDA Crop Production and WASDE reports on Friday morning. There was almost no volume and no volatility. You can’t have much trading volume or price volatility when prices lock limit up on the open and stay there all day.
 
 Soybeans were up 78 cents per bushel for the week, a jump of 7.38%. That was backed up by a nearly 11% rise in soybean meal, which in turn was chasing corn values. Soybean oil was up more than 6% while on the short end of meal/oil spreads. USDA surprised the trade by cutting projected yield to 44.4 bushels per acre from 44.7 in the previous report. The integration of FSA data into the NASS survey system also resulted in a cut of 1.2 million soybean acres. The resulting drop of 75 million bushels of production was coupled with a forecast for an all time record high export program off 1.52 billion bushels. That drove projected ending stocks down to 265 million bushels after the market had become semi-comfortable with 350 million bushels. Given the pace of global demand growth, the market continues to need to buy acreage.
 
Corn was up a huge 13% for the week, 63 cents per bushel. Nearly half of that was due to the limit up 30 cent move on Friday. USDA surprised the trade with a 12.664 billion bushel production estimate for the U.S., coming on a reduced yield forecast of only 155.8 bushels per acre. A number of Midwest states saw their average yields cut by 9 to 14 bushels per acre in one swoop. The extra 300 million bushels of old crop carryover was promptly erased and USDA projected ending stocks of only 902 million bushels for next August. That is at or below the theoretical pipeline requirement needed to cover grain in transit and in short term storage at end users like ethanol plants and livestock operations.  Futures will go to expanded daily limits of 45 cents, beginning with the Sunday evening Globex trade.
 
Wheat ended up outgaining corn for the week, but wheat fundamentals didn’t appear to be in the driver’s seat. World ending stocks remain adequate, at a projected 174.66 MMT. However, USDA did hike projected world feed use another 2.27 MMT for 2010/11, emphasizing the link between feed wheat and corn prices. There were also concerns about dryness in Western Australia cutting into final yields there, and also hindering winter wheat planting in the Plains. USDA made no wheat production change other than those shown on September 30. It did cut projected new crop ending stocks to 853 million bushels. The trade had been calling for 873 million.
 
Cotton futures posted 15 year highs again this week. Speculative ownership interest is high, and mills are also scrambling to get inventory. USDA cut projected world cotton ending stocks to 44.66 million bales from the prior estimate of 45.44 million. No change was made in the “already tight” US ending stocks of 2.70 million bales. A minor upward revision in yield to 841 pounds from 839 pounds was offset by smaller beginning stocks of 2.95 million bales. The mid-point of the cash average price estimate for the year was increased another 3 cents per pound.
 
 

 
Commodity
 
 
 
 
Weekly
Weekly
Month
09/17/10
09/24/10
10/01/10
10/08/10
Change
% Change
Dec
Corn
$5.13
$5.22
$4.66
$5.28
0.63
13.42%
Dec
CBOT Wheat
$7.39
$7.20
$6.55
$7.19
0.64
9.81%
Dec
KCBT Wheat
$7.68
$7.58
$6.90
$7.59
0.69
9.97%
Dec
MGEX Wheat
$7.73
$7.63
$7.06
$7.65
0.59
8.29%
Nov
Soybeans
$10.69
$11.26
$10.57
$11.35
0.78
7.38%
Oct
Soybean Meal
$304.70
$313.20
$285.70
$317.00
31.30
10.96%
Oct
Soybean Oil
$41.91
$44.48
$43.49
$46.22
2.73
6.28%
Oct
Live Cattle
$99.40
$96.02
$95.95
$95.55
0.40
0.42%
Oct
Feeder Cattle
$111.85
$109.50
$111.80
$107.72
4.08
3.65%
Oct
Lean Hogs
$77.70
$79.02
$76.37
$74.52
1.85
2.42%
Dec
Cotton
$98.22
$99.93
$98.02
$107.17
9.15
9.33%
Dec
Oats
$3.56
$3.52
$3.33
$3.69
0.36
10.73%
Nov
Rice
$12.08
$12.36
$12.37
$13.25
0.88
7.11%

 
Cattle futures drifted .42% lower for the week, or 40 cents. Cash cattle traded at $95, down mostly $2 from the previous week. Wholesale prices were under pressure, losing 1.75%  on a Thursday/Thursday basis in the choice cutouts. Select was down 1.88%. Those drops translate to more than $2 per hundred pounds, and that put the cash cattle market on the defensive. USDA also raised projected 2010 beef production in the U.S. to 25.83 billion pounds in 2010. That was 125 million pounds more than the September figure.  Beef production YTD has been creeping up relative to last year, and is now at 99.8% of year ago.
 
Hogs were down for the week, losing 2.42%. On Friday morning, USDA reduced projected 2010 pork production by 65 million pounds, and also cut the outlook for 2011 by 165 million pounds. Pork production for the year to date is down 4.6% from last year, which had been supporting pork prices. However, the pork belly primal has plunged 47% in only 5 days (Thr-Thr) and that is putting serious pressure on what packers can pay for the hog. The cutout was down 8.9% for the week.
 
Looking for professional help with your agricultural 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.
 
Market Watch:  Monday is a government holiday, but not a market holiday (Columbus Day in the U.S., Thanksgiving in Canada).  The regular Monday USDA reports will be delayed until Tuesday. NOPA will issue its September crush report on Thursday morning. Thursday will also be the last trading day for October hog futures, soybean meal and soybean oil. The weekly Export Sales report from USDA will be delayed until Friday.
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