Sep 21, 2014
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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.

Gloom and Doom

Sep 19, 2014

Brugler

Market Watch with Alan Brugler

September 19, 2014

Gloom and Doom

What will you do in a perfect storm? Or non-storm? Other than California, most of the country has dodged major weather events during this growing season, resulting in record corn and bean production. It isn’t only the big yields. In a perfect storm scenario other things are going wrong as well. For commodities, the dollar is rising, and the stock market is going up enough to continue sucking cash away from commodities. You will recall that commodities were promoted as a non-correlated asset. When the primary asset is performing well, you don’t want a lot of money in the non-correlated column. The result of this storm (and the skies haven’t cleared yet) is a lot of gloom and doom in the grain sector. We would point out that livestock incomes look to be excellent because of the lower feed costs. Low prices also cure low prices by both discouraging future production and stimulating additional consumption. The seeds of every rally are planted in the prior decline.

Corn ended the week 2.1% lower. The main news for the week was the lack of news. The 6-10 and 8-14 day NWS forecasts contain no threat of further frost or freeze damage into early October, adding to "rising yield perception". Weekly export sales were slow, encumbered by a strong US dollar index. The weekly total was 659,700 MT. YTD commitments are 29% of the USDA full year forecast. They would typically be 34% by now.  The Commitment of Traders report shows the large spec funds net long 87,045 corn contracts, including options. That was up 5,579 from the previous week. Corn is starting to hit the elevators, with commercial short positions increasing 10,891 for the week.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/29/14

09/05/14

09/12/14

09/19/14

Change

% Change

Dec

Corn

$3.65

$3.56

$3.39

$3.32

($0.070)

-2.07%

Dec

CBOT Wheat

$5.64

$5.35

$5.03

$4.75

($0.280)

-5.57%

Dec

KCBT Wheat

$6.43

$6.29

$5.93

$5.60

($0.330)

-5.56%

Dec

MGEX Wheat

$6.30

$6.12

$5.78

$5.35

($0.430)

-7.44%

Nov

Soybeans

$10.24

$10.22

$9.85

$9.57

($0.282)

-2.87%

Oct

Soybean Meal

$363.10

$357.30

$338.50

$324.10

($14.400)

-4.25%

Oct

Soybean Oil

$32.01

$32.28

$32.55

$32.46

($0.090)

-0.28%

Oct

Live Cattle

$151.43

$159.75

$156.28

$155.63

($0.650)

-0.42%

Sept

Feeder Cattle

$218.65

$225.73

$229.48

$230.60

$1.125

0.49%

Oct

Lean Hogs

$98.13

$105.63

$105.70

$105.98

$0.275

0.26%

Oct

Cotton

$67.60

$66.08

$70.61

$65.81

($4.800)

-6.80%

Dec

Oats

$3.42

$3.45

$3.48

$3.37

($0.108)

-3.09%

Dec

Rice

$12.67

$12.49

$12.79

$12.70

($0.085)

-0.66%

 Soybean futures were down 2.98% for the week. USDA is showing nearly a third of  year of global use already sitting in the bin before the 2015 US harvest.  On the bullish side, US export sales commitments for soybeans are record large for this date, and export commitments for soybean meal are phenomenal. USDA put the weekly figure for soybeans at 1,468,500 MT.  Soybean export sales commitments (shipments and contracts) already cover 55% of the USDA forecast for the year. They are well ahead of the 48% average for this date. Chinese purchases YTD are lagging year ago, but should catch up as the 4.8 MMT commitment signed in Milwaukee is confirmed with actual purchase contracts. Crushers and exporters will need producers to sell huge quantities of soybeans between now and January. The Friday night CFTC report shows the large spec funds getting less bearish by 6,057 contracts last week.

Wheat futures were down hard this week (5.5 to 7.5%), expanding out of a Bollinger pinch formation. Rising global stocks make it harder to get US product out the door, particularly at premium US prices and with Russia and Ukraine in a market share battle. Weekly export sales were only 314,500 MT, with Japan the largest buyer.  Weekly export shipments were the largest of the marketing year, however. Export commitments (shipments plus outstanding sales) total 51% of the much reduced USDA forecast for the entire year. They are running ahead of the 49% average for this date. Egypt did schedule a tender on Friday night for late October shipment, taking advantage of the global price drop. We will be surprised if the US is cheap enough to get any of that business. Spec funds trimmed their net long position in KC wheat by 5,151 contracts last week, and also extended their big net short in Chicago by another 5,380 contracts.

October Cotton futures dropped 6.8% this week after gaining 6.86% the previous week. The surging US dollar made US cotton more expensive for foreign buyers. Weekly export sales were slower at 78,900 RB.  US cotton export sales commitments are now 55% of the reduced forecast for the year vs. the 5 year average of 45%. Some details of the Chinese cotton support program are beginning to surface, but details on import quotas are still lacking.

Cattle futures were down 0.42% this week with a cautious approach to the monthly Cattle on Feed report on Friday and the upcoming Cold Storage report as well.  The COF report was neutral, showing September 1 On Feed at 99.22% of year ago. That was a few more cattle than expected, but still below last year. Wholesale beef prices were lower this week. Choice boxes were down 2.5%, with Select boxes down 2.1% as the choice/select spread narrowed to $14.11 from $15.39 last week. Weekly estimated slaughter was 7.5% smaller than the same week in 2013. Beef production YTD is down 6.1%, with slaughter down 7.0%. Higher carcass weights make up the difference. Weekly beef export sales were improved, as foreign buyers took advantage of a price dip. The large managed money spec funds added 7,855 contracts to their net long position in cattle futures during the week ending 9/16/14.

Hog futures saw triple digit losses a couple days this week but eked out a 0.26% gain for the full week. Thus far in 2014, hog slaughter is off 5.3% from the same point in 2013. Slaughter this past week was down 2.4% vs. year ago. Pork production is only down 1.6% YTD, due to substantially higher carcass weights. Carcasses are currently running 8# above year ago.  Pork carcass cutout values extended their gains this week, with the average price reported at $113.54 on Friday, a weekly gain of 6.54% despite a dip on Friday.

 Market Watch

Autumn officially begins on Monday. USDA celebrates with the release of the monthly Cold Storage report, as well as the weekly Export Inspections and Crop Progress reports.  Livestock traders will be dealing with any hangover from the Cattle on Feed report (see above). Wednesday will be first notice day for October cotton futures deliveries. There are few certified bales remaining in the warehouses, but "it could happen". USDA will release weekly Export Sales on Thursday morning, with huge numbers expected for soybeans as nearly 2 MMT have been announced under the daily reporting system in just the past three days. Thursday will also be the expiration day for September feeder cattle. On Friday, USDA will release the much anticipated quarterly Hogs & Pigs report and grain traders will see the expiration of the October serial options.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses. 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

BIG NUMBERS

Sep 12, 2014

Brugler

Market Watch with Alan Brugler

September 12, 2014

BIG NUMBERS

As Everett Dirkson famously said "A billion here, a billion there, and pretty soon you’re talking about real money." He was of course talking about the federal budget. If you insert the word "bushels" in there a couple places, you could just as well be talking about 2014 US crop production. On Thursday, USDA confirmed record production of both corn and soybeans, with the former crop now comfortably above 14 billion bushels. Another  Dirksen quote is that "There is no force so powerful as an idea whose time has come". That tie in, of course, is the we have too much of the darn stuff and have to find a way to get rid of it. The markets are relentlessly discounting prices to encourage more consumption and discourage future production. As a market advisor, I encourage producers and end users to take an attitude also expressed by Dirksen, "I am a man of fixed and unbending principles, the first of which is to be flexible at all times". There are marketing tools available to use in all market situations. 1

Corn ended the week 2.2% lower. The main news for the week was of course the USDA production report on Thursday, with the estimated 171.7 bushel national average yield on record high ear counts per acre. While a hike had been widely anticipated, USDA was not holding back, feeding fears that the eventual number could be even larger. As it is, projected ending stocks for 2015 are over 2 billion bushels, and the midpoint of the cash price estimate has been lowered to $3.50 per bushel. Bulls were forced to focus on strong ethanol production, a vaccine that could reduce death losses in hogs (allowing herd rebuilding and more feed use, and hopes of a smaller 2014/15 South American crop.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/22/14

08/29/14

09/05/14

09/12/14

Change

% Change

Sept

Corn

$3.66

$3.59

$3.47

$3.39

($0.075)

-2.16%

Sept

CBOT Wheat

$5.52

$5.50

$5.32

$4.98

($0.333)

-6.26%

Sept

KCBT Wheat

$6.34

$6.26

$6.20

$5.72

($0.475)

-7.66%

Sept

MGEX Wheat

$6.27

$6.15

$6.26

$5.68

($0.580)

-9.26%

Sept

Soybeans

$11.66

$10.90

$10.86

$10.91

$0.055

0.51%

Sept

Soybean Meal

$433.30

$439.50

$436.10

$408.00

($28.100)

-6.44%

Sept

Soybean Oil

$32.36

$32.04

$32.35

$32.16

($0.190)

-0.59%

Oct

Live Cattle

$147.00

$151.43

$159.75

$156.28

($3.475)

-2.18%

Sept

Feeder Cattle

$210.90

$218.65

$225.73

$229.48

$3.750

1.66%

Oct

Lean Hogs

$92.88

$98.13

$105.63

$105.70

$0.075

0.07%

Oct

Cotton

$67.46

$67.60

$66.08

$70.61

$4.530

6.86%

Sept

Oats

$3.84

$3.62

$3.68

$3.72

$0.032

0.88%

Sept

Rice

$12.83

$12.59

$12.38

$12.55

$0.175

1.41%

 

Soybean futures were both up and down. September expired on Friday with a 29 1/2 cent pop that resulted in a 0.51% gain for the week. It also expired on Friday and there was little or no connection to the cash market. New lead month November was down 35 1/2 cents per bushel for the week. USDA raised projected US yield to 46.6 bpa, and production to 3.9.....billino bushels. Ending stocks are thought likely to grow to 475 million bushels by next August.  If South America has the record crop currently foreseen (Brazil alone at 94 MMT vs. 86 MMT this year), USDA is showing nearly a third of  year of global use already sitting in the bin before the 2015 US harvest.  On the bullish side, US export sales commitments for soybeans are record large for this date, and export commitments for soybean meal are phenomenal. Crushers and exporters will need producers to sell huge quantities of soybeans between now and January. They will try to use the stick of record supplies, but will probably have to offer a carrot sooner or later.

Wheat futures were down hard this week, with KC and MPLS hurt the worst. The MPLS loss of 9.26% is overstated, as the September contract lost 30 3/4 on Friday going into expiration. USDA didn’t change wheat production estimates, preferring to wait for the Small Grains report at the end of the month. They backtracked on exports, though, erasing a 25 million bushel increase from the August report in the September report. Rising global stocks make it harder to get US product out the door, particularly at premium US prices. Futures are working to reduce that premium. Weekly export sales were stronger last week at 563,200 MT with trade guesses only in the 450,000 MT range.

October Cotton futures rallied 6.86% for the week. The surging US dollar made US cotton more expensive for foreign buyers, but fundamental shifts trump the relatively minor value shifts from the currency. Weekly export sales were slow, it is true. However, USDA trimmed 900,000 bales from US production in the Thursday report, dropping it to 16.54 million bales. Both yield and harvested acreage were cut. USDA trimmed export projections by 700,000 bales but by virtue of the production cut they could show ending stocks tightening from 5.6 million to 5.2 million bales. They are still more than double year ago. 

Cattle futures were down 2.18% this week, a $3.47 pull back after an $8.32 pop the prior week. Wholesale beef prices were mixed this week. Choice boxes were another 0.5% higher, but Select boxes were down 0.7% as the choice/select spread widened to $15.39. Weekly estimated slaughter was 3.7% smaller than the same week in 2013. Beef production YTD is down 6.1%, with slaughter down 6.9%. Higher carcass weights make up the difference. Weekly beef export sales were improved, as foreign buyers took advantage of a price dip. The weekly totals do tend to decline for the next couple months.

Hog futures were up an almost invisible 0.7% this week after the 7.64%  jump the prior week. The good news for bulls is that the market held the prior gain. Thus far in 2014, hog slaughter is off 5.3% from the same point in 2013. Slaughter this past week was down 5.4% vs. year ago. Pork production is only down 1.6% YTD, due to substantially higher carcass weights. Carcasses are currently running 8# above year ago.  Pork carcass cutout values extended their gains this week, with the average price reported at $106.57 on Friday, a weekly gain of 3.31%.

 Market Watch

We will begin with week with USDA weekly Export Inspections and Crop Progress reports on Monday. Traders will be looking for any drop in condition ratings for the WCB states due to the snow and cold on Thursday and Friday. The Fed (FOMC) meets on Tuesday and Wednesday. No interest rate hike is expected, but the language is expected to show them heading further that way. USDA Weekly Export Sales will be released on Thursday morning. The monthly Cattle on Feed report is slated for Friday afternoon at 2 pm CDT.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses. 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

Chill in the Air

Sep 05, 2014

 Brugler

Market Watch with Alan Brugler

September 5, 2014

A Chill In the Air

While fall is not officially here, football season has begun in the US and being on the back side of Labor Day makes it feel like autumn has begun. There has also been a distinct chill in the commodity markets, with a sharply rising US dollar index acting as the freon. Grains and crude oil were mostly lower for the week. Livestock, on the other hand, were hot, hot, hot. October hogs were up more than 7%, and October cattle jumped more than 5%. Maybe all of the tailgate parties are impacting demand? At the end of the week, a different kind of chill was being felt, with weather forecasts calling for overnight lows in the 20’s next Thursday-Saturday depending on where you are located. The more bullish of those had temps below 30 as far south as I-80. If that actually happens, there will be a lot of bushels of test weight lost in corn, and a lot of immature soybeans. Only 53% of the Iowa corn crop had made it to dent stage by August 31, with 2% to black layer (maturity).  Minnesota was only 34% dented. Both states will of course have advanced this week. Pay attention to those 5-7 day forecasts on Sunday night and Monday!

Corn ended the week 3.5% lower despite a double digit gain on Friday following weather forecasts calling for potential  temps as low as 27 degrees down into Central Iowa on 9/13. Other runs have been in the low 30’s, but if the new one holds up a lot of immature corn would be hurt. Trade estimates for the USDA weekly export sales report were in the 350,000 to 800,000 MT range. USDA put the actual figure at a neutral 518,100 MT for combined old and new crop sales. Weekly corn use for ethanol rose, but ethanol stocks also recovered 400,000 barrels after a steep decline was reported the previous week.  Consultant Informa projected a US corn crop of 14.281 billion bushels with other less conservative estimates running as high as 14.649 billion.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/15/14

08/22/14

08/29/14

09/05/14

Change

% Change

Sept

Corn

$3.66

$3.66

$3.59

$3.47

($0.125)

-3.48%

Sept

CBOT Wheat

$5.51

$5.52

$5.50

$5.32

($0.1875)

-3.41%

Sept

KCBT Wheat

$6.19

$6.34

$6.26

$6.20

($0.065)

-1.04%

Sept

MGEX Wheat

$6.11

$6.27

$6.15

$6.26

$0.1125

1.83%

Sept

Soybeans

$11.03

$11.66

$10.90

$10.86

($0.040)

-0.37%

Sept

Soybean Meal

$388.30

$433.30

$439.50

$436.10

($3.400)

-0.77%

Sept

Soybean Oil

$32.87

$32.36

$32.04

$32.35

$0.310

0.97%

Oct

Live Cattle

$147.75

$147.00

$151.43

$159.75

$8.325

5.50%

Sept

Feeder Cattle

$215.10

$210.90

$218.65

$225.73

$7.075

3.24%

Oct

Lean Hogs

$94.95

$92.88

$98.13

$105.63

$7.500

7.64%

Oct

Cotton

$63.60

$67.46

$67.60

$66.08

($1.520)

-2.25%

Sept

Oats

$3.65

$3.84

$3.62

$3.68

$0.060

1.66%

Sept

Rice

$12.91

$12.83

$12.59

$12.38

($0.210)

-1.67%

 

Soybean futures were up and down, losing a net 4 cents per bushel for the week. November was also down 4 1/4. Soybean futures closed 15 3/4 to 21 1/4 higher on Friday, erasing double digit losses from Thursday. Increased freeze/frost potential for next week was the main supportive factor on Friday. The weekly USDA export sales numbers were bearish. Trade estimates were in the 400,000 MT to 1.15 MMT range. USDA reported net weekly sales of 781,300 MT, with -87,700 MT of old crop cancellations/deferrals. Memphis based Informa projected the US national average yield at 46.1 bpa, with production at 3.876 billion bushels.

KC was the strongest wheat market on Friday, but MPLS posted the only positive number for the week. Stats Canada showed year end wheat stocks at 9.8 MMT, when traders were looking for something around 10.7 MMT. The record 2013 Canadian crop is still hanging over the market, due in part to lousy rail service. Canadian ending stocks last year were only 5.05 MMT. Trade ideas for US weekly export sales were in the 200,000-500,000 MT range. USDA put the figure at a slow 168,800 MT in the Friday morning report, which was delayed a day by the Labor Day holiday. 

October Cotton futures dropped 2.25%, giving back gains from the prior two weeks. The surging US dollar made US cotton more expensive for foreign buyers and we started to see the effects. USDA reported net cotton export sales of 90,800 RB last week, including 5,300 RB of pima. The rest was of course upland cotton. The largest buyer was Turkey. The ICAC increased projected world production by 530,000 MT from their prior estimate, and cut 2014/15 consumption by 130,000 bales. If realized, the global cotton glut would get worse, going to 22.25 MMT from 20.56 MMT this year and the ICAC figure of 17.78 MMT for 2012/13.

Cattle futures were up $8.32 for the week, a two week gain of $12.75 or roughly $178 per steer. Wholesale beef prices were higher this week. Choice boxes were 1.0% higher on the week. Select boxes were up 0.8%. Weekly estimated slaughter was 8.9% smaller than the same Labor Day limited week in 2013. Smaller supplies and higher prices. That is the way it is supposed to work. Beef production YTD is down 6.3%, with slaughter down 7.1%. Higher carcass weights make up the difference. Weekly beef export sales were a lackluster 10,200 MT and decline in the last third of the year from where they are in the spring and early summer.

Hog futures were up a stout 7.64% this week. It is a futures market, looking past current weakness in cash hogs toward tight 4th quarter meat supplies overall. Thus far in 2014, hog slaughter is off 5.3% from the same point in 2013. Slaughter this past week was down 6.5% vs. year ago. Pork production is only down 1.6% YTD, due to substantially higher carcass weights. Carcasses are currently running 9# above year ago.  Pork carcass cutout values reversed direction this week, with the average price reported at $103.16 on Friday, a weekly gain of 1.42%. Zoetis announced a rollout of a new PED virus vaccine for sows and gilts. We need to remember that it is only for the mothers, and administered prior to birth. Even if it gains rapid market share and proves effective, it won’t alter the hog marketing curve vs status quo for at least 6 months if given right away to already bred sows, and 9 months or more for gilts not yet bred.  

 Market Watch

Cattle traders will begin the week dealing with any surprise futures positions inherited upon expiration of the September cattle options on the 4th. The big move last week might have caught a few folks who thought their options positions were safe. For grains, we will start off Monday with the usual USDA Export Inspections and Crop Progress reports. Thursday will be the big day, newswise, with the monthly USDA Crop Production and WASDE supply/demand updates scheduled for 11 am CDT. Traders are generally expecting USDA to hike both corn and soybean yield estimates from the August figures. USDA will also issue the weekly Export Sales report on Thursday morning.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses. 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

Rest for the Weary

Aug 29, 2014

 Brugler

Market Watch with Alan Brugler

August 29, 2014

Rest for the Weary

 

There are a number of competing claims as to who originated the idea for a Labor Day holiday. It is clear that some local versions were in place as early as 1882 and that it became a federal holiday in 1894. The day is dedicated to, as Wikipedia puts it "the social and economic achievents of workers". In practice, it is an informal holiday to mark the end of summer, a day off for US workers, and a national shopping day. Don’t overlook the latter, given the importance of consumer retail purchases to US GDP. For the ag markets, it is for most a pre-harvest ritual (yes, I know some of you in the south have been combining since July). I would argue Labor Day is also a chance for a little break from the relentless downward mental pressure that bumper crops and declining prices generate. There is some psychological exhaustion out there in ag land, with clinical depression symptoms in some cases such as the inability to make a decision (pull the trigger on sales), hopelessness, etc. Even if you are self employed and the cows have to be milked or the hogs have to be fed, give yourself the day off mentally. The re-charge will do you good!

Corn ended the week 1.78% below the prior Friday. Old crop export commitments total 100% of the USDA forecast for the year, but would typically be 107% heading into the last week of the marketing year.  The International Grains Council hiked projected world production 4 MMT to 973 MMT. That is still below the 982 MMT from year ago, but things continue to look less and less tight. The weekly new crop exports sales of 695,600 MT were on the low end of estimates and did little to stir up ideas about demand matching the rising production estimates.

 

8/29/2014

           

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/08/14

08/15/14

08/22/14

08/29/14

Change

% Change

Sept

Corn

$3.52

$3.66

$3.66

$3.59

($0.0650)

-1.78%

Sept

CBOT Wheat

$5.49

$5.51

$5.52

$5.50

($0.0175)

-0.32%

Sept

KCBT Wheat

$6.29

$6.19

$6.34

$6.26

($0.0725)

-1.14%

Sept

MGEX Wheat

$6.19

$6.11

$6.27

$6.15

($0.1175)

-1.87%

Sept

Soybeans

$11.14

$11.03

$11.66

$10.90

($0.7650)

-6.56%

Sept

Soybean Meal

$367.90

$388.30

$433.30

$439.50

$6.2000

1.43%

Sept

Soybean Oil

$35.52

$32.87

$32.36

$32.04

($0.3200)

-0.99%

Aug

Live Cattle

$152.55

$150.60

$151.85

$155.90

$4.0500

2.67%

Sept

Feeder Cattle

$214.73

$215.10

$210.90

$218.65

$7.7500

3.67%

Oct

Lean Hogs

$99.33

$94.95

$92.88

$98.13

$5.2500

5.65%

Oct

Cotton

$63.81

$63.60

$67.46

$67.60

$0.1400

0.21%

Sept

Oats

$3.58

$3.65

$3.84

$3.62

($0.2175)

-5.66%

Sept

Rice

$12.66

$12.91

$12.83

$12.59

($0.2400)

-1.87%

 

 Soybean futures were down 76 cents this week after gaining 64 cents per bushel the previous week. There were no registered receipts for September bean delivieries, which panicked the shorts, but then left the longs wanting to take profits ahead of the Labor Day weekend and selling into a vacuum.  Basis is strong, with one plant bidding $4 over November for immediate delivery. Apparently several plants have been unable to access the Brazilian beans USDA told us were being imported into the US this summer. US new crop export sales bookings are now more than 2 MMT larger than last year at this time. Meal export bookings are up 2.6 MMT.

 

Wheat futures all three markets lower by Friday night after midweek strength evaporated. The regular "Russians shooting in Ukraine" report propped up prices mid-week, with columns of Russian tanks along the Sea of Azov coast inside Ukraine. The willingness of the West or Far East to cut off Russian exports/imports through credit or other means is still in question. The International Grains Council revised their estimated global production sharply higher (+11 MMT) to 713 MMT. That makes it as large as last year. The upward revisions were primarily in Russia, EU and China.

October Cotton futures crawled 0.21% higher, holding onto the 6.07% for the prior week. The gain was notable given the strength of the US dollar for the week. USDA reported US export sales for the week ending August 21 totaled 264,400 RB of upland cotton and 2,900 RB of pima.  The largest buyer was China, at 92,800 RB. US export commitments (sales plus bales already shipped) are 50% of the full year forecast vs. the average of 41%.

Cattle futures were up $4.05 for the week. Wholesale beef prices were weaker this week, being dragged down by the pork market and larger weekly slaughter. Choice boxes were 1.4% lower on the week. Select boxes dropped 2.2%. Weekly estimated slaughter was 6.1% smaller than the same week in 2013. Beef production YTD is down 6.2%, with slaughter down 7%. Higher carcass weights make up the difference. Weekly beef export sales were improved from the prior week, but typically decline in the last third of the year from where they are in the spring and early summer.

Hog futures were up a stout 5.65% this week. It is a futures market, looking past current weakness in cash hogs toward tight 4th quarter meat supplies overall. Thus far in 2014, hog slaughter is off 5.2% from the same point in 2013.  Slaughter this past week was down 5.9% vs. year ago. Pork production is only down 1.4% YTD, due to substantially higher carcass weights. Carcasses are currently running 10# above year ago.  Pork carcass cutout values continued to slip this week, with the average price reported at $101.72 on Friday, a weekly loss of 1.81%.  Prices were up $1.10 on Friday. Hams were up 1.5% after a severe slide following the Russian sanctions prohibiting US imports. Bellies and picnics were lower, however. On Thursday, USDA also confirmed cancellation of more than 15 thousand MT of unshipped pork sales to Russia, all of the known outstanding business.

 Market Watch

 

The US markets will be closed on Monday for the Labor Day holiday. The usual USDA Export Inspections and Crop Progress reports will be delayed until Tuesday, with the weekly Export Sales report deferred until Friday. The latter will cover sales through August 28, and thus will not technically be a year end report even though the marketing year ends on August 31. The September serial options for Live Cattle will expire on Friday, September 4.

 

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

Strong Dollar vs. Fundamentals

Aug 22, 2014

 Brugler

Market Watch with Alan Brugler

August 22, 2014

Strong Dollar Vs. Fundamentals

The US dollar index broke out of a multi-week consolidation to the upside this week. Commodities priced in dollars tend to go down when each dollar can buy more value. It also means it takes more euros or yen or pesos to buy the same export good, sometimes resulting in lost export business.  There is a strong inverse correlation between the CRB Index (basket of commodities) and the US dollar which reflects these relationships. However, we have also taught our Brugler Ag Marketing Professional clients over the years that a) There are typically 3-4 commodities that are going the opposite direction to the CRB index due to their unique fundamental situations and b) for grains, the market pays more attention to exports and thus the dollar after harvest. Prior to harvest, fundamental news shifts carry more weight. Cattle appeared to be one of the counter-trend markets, due to futures being at a big discount to the cash market heading into the last week of deliveries. Soybeans and wheat were reacting to bullish fundamental threads, while some of the other markets let the dollar current push them along.

Corn ended the week just 1/4 cent from where it began. If not for a little last minute window dressing it might even have closed higher. USDA weekly Export Sales were about as expected at 819,200 MT. Cumulative sales commitments are now 100% of the USDA revised forecast for full year shipments. They would typically be 107% by now, which caused some head scratching when USDA hiked the number a week ago. The Pro Farmer group projected the US average yield at 169.3 bpa on Friday, vs. USDA @ 167.4 bpa.  The weekly CFTC commitment of traders report showed managed money accounts decreased their net long position in corn by 2,946, taking them down to a net long position of 64,719 contracts as of the closing bell on Aug 19.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/01/14

08/08/14

08/15/14

08/22/14

Change

% Change

Sept

Corn

$3.53

$3.52

$3.66

$3.66

($0.0025)

-0.07%

Sept

CBOT Wheat

$5.34

$5.49

$5.51

$5.52

$0.01

0.14%

Sept

KCBT Wheat

$6.33

$6.29

$6.19

$6.34

$0.15

2.34%

Sept

MGEX Wheat

$6.16

$6.19

$6.11

$6.27

$0.16

2.58%

Sept

Soybeans

$10.74

$11.14

$11.03

$11.66

$0.64

5.76%

Sept

Soybean Meal

$355.80

$367.90

$388.30

$433.30

$45.00

11.59%

Sept

Soybean Oil

$35.54

$35.52

$32.87

$32.36

($0.51)

-1.55%

Aug

Live Cattle

$157.30

$152.55

$150.60

$151.85

$1.25

0.83%

Aug

Feeder Cattle

$220.28

$215.33

$217.23

$216.10

($1.13)

-0.52%

Oct

Lean Hogs

$102.83

$99.33

$94.95

$92.88

($2.08)

-2.19%

Oct

Cotton

$62.49

$63.81

$63.60

$67.46

$3.86

6.07%

Sept

Oats

$3.51

$3.58

$3.65

$3.84

$0.19

5.21%

Sept

Rice

$12.79

$12.66

$12.91

$12.83

($0.08)

-0.62%

 

Soybean futures were up 64 cents per bushel in the nearby September contract for the week, but it was a mirage. Even with strong plus basis, flat prices are below where they were earlier in the summer, and the new crop November futures were 7 3/4 lower for the week.  New crop soybean export sales were reported at 1,420,600 MT, with China the largest buyer @ 947,900 MT.  We continue to have to report sales of 100,000 MT or more under the daily reporting system. A new sale of 120,000 MT to China was announced on Friday. The weekly CFTC Commitment of Traders report showed managed money accounts adding 4,994 contracts to their short position during the week ending Tuesday August 19.  The managed money net position is now short -16,698 contracts; the second most bearish net position reported for managed money since October 10, 2006.

Wheat futures saw another small weekly gain in Chicago, up 1 cent.  Unlike the past two weeks, the hard wheat futures contracts were higher as well, up 2.3 and 2.6%. The regular Friday "shooting in Ukraine" report propped up prices, already given a boost by heavy rains and high winds in spring wheat country. Those will slow an already delayed harvest.  Stats Canada also showed a smaller Canadian crop than expected, at 27.704 MMT vs. trade ideas closer to 29 MMT. Cumulative US export commitments are now 43% of the USDA forecast for the full year, up from the 5 year average of 41% for this week. The weekly CFTC Commitment of Traders report showed managed money accounts with a net short position of 50,668 contracts, with net buying for the week of 10.456 contracts. They added 2,062 contracts to their net long position in KC wheat, bringing them to a net long position of 15,421 contracts.

October Cotton futures shot up 6.07% for the week despite a surging US dollar index and competition from lower crude oil (synthetic fiber). Rapidly declining cert stocks may have spooked a few shorts, with a lot of the deliverable inventory being loaded out. The weekly USDA export sales report put Upland sales at 155,600 running bales. Total export commitments for the marketing year total 48% of the full year projection, and are running ahead of the 40% average for this date. The CFTC COT disaggregated futures and options report shows managed money speculative accounts adding shorts. They were net short -7,404 contracts at the end of the day on August 19.

Cattle futures were up $1.25 for the week, with all of it coming on Friday ahead of the USDA Cattle on Feed and Cold Storage reports. The COF report showed a few more cattle in the lots than expected, with July placements down 7.4% when trade ideas had been closer to 10%. When combined with smaller July marketings than expected, the August 1 On Feed total was 98.12% of year ago. The Cold Storage report also showed some beef backing up in the cooler, with the July 31 beef stocks 2.3% larger than last month. They are still very small vs. year ago. Wholesale beef prices were weaker this week, being dragged down by the pork market and larger weekly slaughter. Choice boxes were 2.3% lower on the week. Select boxes dropped 3.5%. Weekly estimated slaughter was up 2.5% from last week, but down 5.9% from year ago. Beef production YTD is down 6.3%, with slaughter down 7%. Higher carcass weights make up the difference.

Hog futures were down 2.19% this week, a slowing from the sharp 4.4% slide the previous week, but still bearish. Thus far in 2014, hog slaughter is off 5.0% from the same point in 2013.  Pork production is only down 1.3%, due to substantially higher carcass weights. Carcasses are currently running 10# above year ago, with live weights up about 13 pounds. Pork carcass cutout values continued to slip this week, with the average price reported at $103.60 on Friday, a weekly loss of 7.3%.  Hams were down 20.6%  a week ago, and fell another 9.6% this week. This time they were joined by a 10.6% drop in pork bellies, more typical seasonal weakness for the latter.

 Market Watch

The ag markets will begin the week reacting to the USDA Cattle on Feed and Cold Storage reports released on Friday night. Grain traders will be making adjustments tied to any surprise futures positions inherited on the expiration of September options, also on Friday. We will get the usual month end portfolio adjustment this week, with the Rogers roll out of October contracts at the end of the week. USDA Export Inspections and Crop Progress reports will be out on Monday and the weekly Export Sales report on Thursday morning. The markets are open on Friday, but it will be the beginning of the Labor Day holiday weekend and the trading population is expected to be thin.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses. 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

Copyright 2014 Brugler Marketing & Management, LLC

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