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March 2010 Archive for Market Watch

RSS By: Alan Brugler, AgWeb.com

Alan Brugler is the President of Brugler Marketing & Management, and the primary analyst and advisor.

Out Like a Lion?

Mar 26, 2010
 

Market Watch with Alan Brugler
March 26, 2010
 
Out Like A Lion?
 
There is an old saying that March comes in like a lion and goes out like a lamb. Market weather appears to be a flipping that formula, getting more volatile in the run up to the March 31 USDA reports.
 
Corn prices gave back all 11 cents gained in the previous week, and lost 8 cents more. Rain forecasts were revised several times, usually to lower totals. That made a normal spring appear more likely, and the market pulled some of the weather premium out of the new crop futures. Spec funds were also liquidating longs ahead of the Planting Intentions report, respecting trade forecasts for a 3 million acre increase in 2010. Export sales commitments are running 6.2% above year ago. That is larger than USDA’s revised projection for the year, but it has slowed dramatically from the 20% lead it had back at the beginning of the year. Expected supplies out of Argentina are a factor in that loss of enthusiasm for buying US corn.
 
Soybeans dropped 10 cents per bushel for the week, just over 1%. Meal futures were able to eke out a rise of 75 cents/ton for the week, despite bearish Census meal stocks of 700 thousand tons as of February 28. Decent export business supported the meal, and there were also ideas of stronger replacement buying interest in March. Soy oil was down .89% for the week, as the stronger US dollar limited gains in the energy complex. There was also some back tracking on use of vegetable oils for motor fuel. A palm  oil biodiesel mandate was delayed until 2011. For soybeans, it is a struggle between tight old crop stocks and a large perceived 2010 US acreage chasing a record large South American crop into the world market.
 
Wheat futures were lower at all three exchanges this past week. The bear story in wheat is very well advertised, with world production 17 MMT smaller than last year (International Grains Council) but still running ahead of global demand. The world stocks/use ratio should be the loosest since the turn of the century, putting constant pressure on prices. The US winter wheat crop appears to have come out of the winter in pretty good shape, with excellent moisture conditions in the southern Plains.
 
Cotton prices were down 3.03% for the week, erasing the advance from the previous week. The surge in the value of the U.S. dollar played out as weakness in commodity prices including cotton. Weekly US export sales were weaker than expected at 128,400 RB, but saw good shipments of outstanding contracts at 308,700 RB. USDA put the AWP at 69.14 for this week. USDA also announced another weekly import quota of 69,141 bales for April 1 under the Farm Bill formula.
 
Hogs were down a sharp 5.02% for the week. The pork market wasn’t impressed with the resumption of export sales to Russia. The cutout value dropped 4.1% for the week, to $70.76. Ham prices dropped 9% for the week, as Easter demand has been met and retailers are buying their needs for the week after the holiday. Obviously, that weighed on what packers were willing to pay for the cash hogs. Futures saw profit taking type selling as we approached month end and also the expiration of the April contract. It was aggravated by the selling pressure in the cattle pit and the weakness in cash hogs.
 
Cattle futures had an ugly week, losing 4.03% in a week, or $3.95/cwt. That was 2/3 of what they had gained in the prior three weeks. Wholesale prices rose sharply for the week, with choice boxed beef up $6.05, a 3.86% advance for the week. A combination of reduced beef tonnage and improving export demand has fueled the advance. The US consumer may also be helping out a little bit as the weather improves. Cash cattle trade was mostly in the $96-97 range for the week, with an unusual weekly pattern. Packers were active buyers on Monday and Tuesday, with business pretty well finished by mid-week instead of just getting started.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
03/05/10
03/12/10
03/19/10
03/26/10
Change
% Change
May
Corn
$3.75
$3.64
$3.75
$3.56
0.19
-5.00%
May
CBOT Wheat
$4.93
$4.85
$4.83
$4.65
0.18
-3.68%
May
KCBT Wheat
$5.00
$4.95
$4.93
$4.76
0.17
-3.45%
May
MGEX Wheat
$5.12
$5.13
$5.09
$4.97
0.12
-2.41%
May
Soybeans
$9.43
$9.25
$9.62
$9.52
0.10
-1.01%
May
Soybean Meal
$257.70
$251.30
$270.25
$271.00
0.75
0.28%
May
Soybean Oil
$40.05
$39.55
$39.30
$38.95
0.35
-0.89%
April
Live Cattle
$92.95
$95.10
$97.97
$94.02
3.95
-4.03%
April
Feeder Cattle
$105.23
$105.98
$108.68
$107.20
1.47
-1.36%
April
Lean Hogs
$73.10
$72.65
$73.35
$69.67
3.68
-5.02%
May
Cotton
$82.43
$80.47
$82.18
$79.69
2.49
-3.03%
May
Oats
$2.27
$2.19
$2.25
$2.12
0.13
-5.57%
May
Rice
$13.09
$12.43
$12.70
$12.46
0.24
-1.89%
 
Market Watch: Hog traders will begin the week reacting to the smaller than expected numbers in the quarterly Hogs & Pigs report which was released on Friday night. Grain traders are without their April options coverage, which also expired on Friday. There are routine grain Export Inspections and Export Sales reports from USDA on Monday and Thursday. The big reports for the week, as you may have heard, are the USDA Prospective Plantings report and the quarterly Grain Stocks report. Both are scheduled for 7:30 am CDT on Wednesday morning. The trade has had a tendency to miss big on Intentions report guesstimates, so there is potential price volatility. The Grain Stocks reports will drive feed and residual use adjustments in the April WASDE report. Wednesday also marks the end of the first calendar quarter, with some asset allocation adjustments and plain old profit taking tied to the calendar. The US futures markets will be closed on Friday for the Good Friday holiday.
 
There is a risk of loss in futures and options trading. 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, or of any particular risk management technique. 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 more extensive paid subscription and consulting services.
 
                                                                                                                                      Copyright 2010 Brugler Marketing & Management, LLC

Big Turnaround in Soybean Meal

Mar 19, 2010
 

Market Watch with Alan Brugler
March 19, 2010
 
Big Turnaround in Meal
 
Soybean meal was the biggest gainer for the week. That wasn’t great news for livestock feeders who were un-hedged. It did help soybeans a bit, since product value got a boost from the 7.5% rise in what the processor could hedge on the meal. Soy oil was going the opposite direction, however, lost .6% because of sloppiness in energy futures prices. Oil World and USDA are both showing sharp increases in world veg oil use for biodiesel, and soybean prices are to a degree dependent on making those sales to the fuel market. When fuel prices are weaker (and Congress delays acting on a renewal of the biodiesel blend credit) that can weigh on bean oil and beans. Soybeans were able to rally almost 4% for the week. As pointed out in a Brugler bruglermarketing.com/index.php Special Research Report on Wednesday, soybean prices in the Brazilian interior have dipped below the cost of production, potentially slowing sales from that region.
 
Corn prices rebounded 11 cents for the week, after two hard down weeks. US export sales have been picking up a little with the lower prices, and with the uptick in the value of the US dollar. Ethanol futures also firmed at mid-week after getting very cheap compared to gasoline and providing windfall profit potential to discretionary blenders. Trade attention is shifting steadily toward the March 31 Grain Stocks and Planting Intentions reports. A private forecaster on Friday put the acreage intentions at 88.4 million.
 
Wheat futures were fractionally lower at all three exchanges. The bear story in wheat is very well advertised, and is having less day to day impact on prices. US export sales and shipments both appear to be on track to meet USDA’s reduced 825 million bushel forecast for the year. The biggest questions revolve around feed use and exports. In the former, basis weakness is the way to get more fed, along with large enough supplies to support big feedlot users for 2-3 months at a time. On the exports, the EU is underselling everyone in an attempt to clear out inventory.
 
Cotton prices were up 2.1% for the week, about offsetting the 2.4% loss in the previous week. Weekly US export sales were stronger than expected at a solid 277,900 RB. USDA put the AWP for this coming week at 67.61 cents per pound.  They also announced another import quota of 69,978 bales that will open on March 25 under the Farm Bill formula.
 
Cattle futures had another strong week, and are up more than $6 in three weeks. Wholesale prices rose sharply, with the choice boxed beef cutout on Friday up $1.77 for the day at $156.64. A combination of reduced tonnage and improving export demand has fueled the advance. The US consumer may also be helping out a little bit as the weather improves. Friday’s USDA Cattle on Feed report showed February marketings at 102.1% of last year, which was larger than expected. That was offset by the larger than expected February placements, resulting in March 1 On Feed numbers that were right where trade estimates expected them to be.
 
Hogs were up 70 cents, or almost one percent. The value of the pork was almost UNCH for the week, with the cutout losing a penny at $73.82. Loins and picnics were the weakest. Hams didn’t get much of a boost from Easter featuring plans. Cash hog trade on Friday was described as mostly steady. Traders are beginning to square up positions ahead of the Hogs & Pigs report, and also month end liquidation by some funds that prefer not to hold contracts into the delivery month.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
02/26/10
03/05/10
03/12/10
03/19/10
Change
% Change
May
Corn
$3.89
$3.75
$3.64
$3.75
0.11
2.95%
May
CBOT Wheat
$5.19
$4.93
$4.85
$4.83
-0.03
-0.56%
May
KCBT Wheat
$5.21
$5.00
$4.95
$4.93
-0.02
-0.42%
May
MGEX Wheat
$5.29
$5.12
$5.13
$5.09
-0.04
-0.81%
May
Soybeans
$9.61
$9.43
$9.25
$9.62
0.36
3.93%
May
Soybean Meal
$270.00
$257.70
$251.30
$270.25
18.95
7.54%
May
Soybean Oil
$39.70
$40.05
$39.55
$39.30
-0.25
-0.63%
April
Live Cattle
$91.92
$92.95
$95.10
$97.97
2.87
3.02%
March
Feeder Cattle
$101.05
$102.20
$103.00
$104.80
1.80
1.75%
April
Lean Hogs
$72.80
$73.10
$72.65
$73.35
0.70
0.96%
May
Cotton
$82.46
$82.43
$80.47
$82.18
1.71
2.13%
May
Oats
$2.31
$2.27
$2.19
$2.25
0.06
2.75%
May
Rice
$13.76
$13.09
$12.43
$12.70
0.27
2.17%
 
Market Watch: Spring officially begins on Saturday, and hopefully spring weather won’t be far behind. Cattle traders will begin the week by reacting to Friday evening’s Cattle on Feed report. On Monday afternoon, USDA will follow up with the monthly Cold Storage report. March feeder cattle futures will expire on March 25. March 26 will mark the quarterly Hogs & Pigs report, as well as the expiration of April serial options in the grains. Grain producers will see the typical USDA export inspections report on Monday morning and weekly Export Sales on Thursday. The monthly Census Crush report is also scheduled for Thursday morning, along with the Cotton Consumption report.
 
There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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 more extensive paid subscription and consulting services.
 
Copyright 2010 Brugler Marketing & Management, LLC

Cattle Still BulledUp

Mar 12, 2010
 

Market Watch with Alan Brugler
March 12, 2010
 
Cattle Still Bulled Up!
 
Cattle futures posted the largest percentage gain this week for any of the agricultural commodities that we track. Prices were up 2.31%. Feeder cattle were also pulled higher by the combination of higher cattle futures and lower corn prices. Cash cattle traded at $94-95 in the Plains on Friday, yet another testimony to tightening supplies and improved feedlot leverage. Wholesale prices were less enthusiastic, with choice boxes up a whole nickel for the week.
 
Hogs were down all week, but bounced on Friday. The pork cutout fell $1.88 for the week. Hams took the biggest hit, losing 7.5% over the 7 days. However, the CME Lean Hog Index used to settle futures deliveries was rising. Weekly slaughter was well below both year ago and last week, due to downtime at an Indiana plant caused by a fire.
 
Corn prices were under pressure, with net weekly export sales for the week ending March 4 only 338,900 MT. Prices are lower than they were in January, but the world market isn’t terribly eager to stock up. USDA showed us one reason this week, boosting projected Argentine production by 3.8 MMT and boosting projected exports for that country to 12 MMT (472 million bushels). Ethanol plant margins continue to be in the black, but have been diminished by weakness in the ethanol. That has weighed on cash corn bids.
 
Wheat futures were lower, but more reluctantly so. The bear story in wheat is very well advertised. USDA’s cut in projected US food use was a small bearish surprise, and nudged projected ending stocks above the psychologically important billion bushel mark. Essentially the U.S. will have a 6 month supply of wheat already in the bin when harvest is just starting in May.
 
Soybeans were down 1.8% for the week. Bulls thought they had something on Friday, with USDA reporting fresh old crop export sales of 220,000 MT to China. However, the announcement was corrected to show those sales as 2010/11 delivery, a drop in the bucket of world new crop supplies instead of a sizeable buy in a rapidly shrinking old crop supply pool. Weekly US export sales for the week ending March 4 had already been net negative, as China had canceled 192,400 MT of previous purchases.
 
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
 
Market Watch
 
 
 
 
Weekly
Weekly
Month
02/19/10
02/26/10
03/05/10
03/12/10
Change
% Change
May
Corn
$3.72
$3.89
$3.75
$3.64
-0.11
-2.97%
May
CBOT Wheat
$5.04
$5.19
$4.93
$4.85
-0.08
-1.66%
May
KCBT Wheat
$5.09
$5.21
$5.00
$4.95
-0.06
-1.16%
May
MGEX Wheat
$5.19
$5.29
$5.12
$5.13
0.01
0.23%
May
Soybeans
$9.54
$9.61
$9.43
$9.25
-0.17
-1.82%
May
Soybean Meal
$270.00
$270.00
$257.70
$251.30
-6.40
-2.48%
May
Soybean Oil
$39.00
$39.70
$40.05
$39.55
-0.50
-1.25%
April
Live Cattle
$93.30
$91.92
$92.95
$95.10
2.15
2.31%
March
Feeder Cattle
$102.60
$101.05
$102.20
$103.00
0.80
0.78%
April
Lean Hogs
$69.65
$72.80
$73.10
$72.65
-0.45
-0.62%
May
Cotton
$78.98
$82.46
$82.43
$80.47
-1.96
-2.38%
May
Oats
$2.39
$2.31
$2.27
$2.19
-0.08
-3.53%
May
Rice
$13.97
$13.76
$13.09
$12.43
-0.66
-5.04%
 
Cotton prices pulled back after a strong run in February and early March. They were down 2.4% for the week in the May contract. Net upland cotton export sales were 131,900 running bales for the week. That was only half of the 4-week moving average pace. A higher than expected inflation rate in China raised concerns about further Chinese government attempts to tighten up credit and the money supply. Some saw that as a threat to cotton import purchases.
 
Market Watch: Monday marks the full moon and the first trading day after the switch to Daylight Savings Time. It will also be the Ides of March made immortal by Shakespeare’s Julius Caesar as in “Beware the Ides of March”. The soothsayer didn’t tell us whether he was warning the bulls or the bears, but it certainly wasn’t a good day for Caesar! For the agricultural markets, the main items for the day are expected to be the monthly NOPA soybean crush report and the USDA weekly Export Inspections numbers. It is also the last trading day for the March US dollar index futures. The Fed is scheduled to begin the FOMC meeting on Tuesday. Wednesday is St. Patrick’s Day, a time when the river in Chicago has traditionally turned green and some traders have taken extra long lunch hours. Thursday features USDA’s weekly Export Sales report, as well as monthly Milk Production. On Friday, we’ll see the monthly Cattle on Feed report in the afternoon.  Not to be forgotten, and eagerly hoped for my many, Saturday will be the first day of Spring.
 
There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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 more extensive paid subscription and consulting services.
 
Copyright 2010 Brugler Marketing & Management, LLC

Concerns About Feed Demand

Mar 05, 2010
 
Market Watch with Alan Brugler
March 5, 2010
 
Concerns About Feed Demand
 
The theme of the week was a slide in things you feed to livestock. Corn, wheat and soybean meal were all lower. There was kind of a bearish spiral involved. Wheat stocks are burdensome and trying to work their way into rations all over the world. Census soybean meal stocks were record large at the end of January, and a crusher surprised the market with deliveries against March meal futures (suggesting they didn’t have a home for the meal). Corn and its DDG byproduct was competing with the others, while also seeing a slowdown in its export sales commitment “lead” vs. last year.
 
Corn gained 18 cents two weeks ago, and then gave back 13 of them this week. Weekly export sales were above the pre-report guesses, but those guesses were pessimistic. The sales pace is being hobbled by competition from feed wheat, and promises of more corn out of South America than was available at this time a year ago. Some areas of the country are also having trouble meeting contract specs for export programs, limiting shipping totals. Part of the weakness was also garden variety profit taking after a month long run up and just ahead of a USDA report that could potentially alter the 2009 production number.
 
Wheat was down 2 ½ to 3 ½% for the week, with all three markets lower. Bearish world fundamentals continue to weigh on prices periodically. The U.S. makes some export sales on dips, but has been losing competitive tenders due to prices that are above world market levels. High freight costs to the main net importers have also hurt the U.S. success rate. A state crop report showed that Kansas winter wheat was in better condition than last year at this time. Texas is also seen in excellent shape due to more moisture than usual over the winter.
 
Soybeans lost 16 cents for the week, and are still within a dime of where they were a month ago. A sharp 5.6% drop in soybean oil took away a lot of product value and put pressure on crush margins. Soy oil was up 1.09%, but that was not near enough to make up for the drop in meal. Weekly export sales for the U.S. were also the lowest of the marketing year, as world demand shifts to cheaper “fresh out of the field” supplies from Brazil. A private forecasting firm raised its estimate of Argentine soybean production to 55 MMT, a full 2 MMT above USDA. The Argentines themselves were less excited about crop prospects, due to wet weather and rapidly spreading fungal diseases like rust.
 
Hogs eked out a small 30 cent gain for the week.  The pork carcass cutout gained another 3.2% for the week, boosting what packers could and would pay for the hogs. All cuts were up except for the picnics. While not a market factor, a jury in Missouri awarded the largest hog odor damages award in history ($11 million) to residents living around a Premium Standard Farms facility in Berlin, MO. This is a warning to CAFO’s with all types of livestock that even being mostly surrounded by farmers won’t protect you from such suits. It is not known at this time whether Smithfield will appeal the ruling, which covers 11 years of operation at the 4,300 acre facility.  
 
Cattle gained 1.12% for the week. Cash cattle trade was very slow to develop, and steady to a dollar lower in the north. Wholesale prices were lower on the week, with choice boxes retreating 37 cents for the week and select down $1.45. Export sales for the prior week were also on the light side for the end of February. Late on Friday some cash cattle trades in KS and TX were reported in the $92-92.50 range.
 
Below is a table showing the net weekly changes and 4 week history of selected agricultural futures:
 
Market Watch
 
 
 
 
Weekly
Weekly
02/12/10
02/19/10
02/26/10
03/05/10
Change
% Change
March Corn
$3.62
$3.60
$3.78
$3.65
-0.13
-3.51%
March CBOT Wheat
$4.87
$4.90
$5.07
$4.91
-0.16
-3.16%
March KCBT Wheat
$4.95
$4.98
$5.11
$4.93
-0.18
-3.52%
March MGEX Wheat
$5.05
$5.09
$5.17
$5.04
-0.13
-2.52%
March Soybeans
$9.45
$9.45
$9.51
$9.35
-0.16
-1.71%
March Soybean Meal
$280.00
$276.40
$273.20
$257.90
-15.30
-5.60%
March Soybean Oil
$37.84
$38.52
$39.29
$39.72
0.43
1.09%
April Live Cattle
$90.77
$93.30
$91.92
$92.95
1.03
1.12%
March Feeder Cattle
$99.92
$102.55
$101.05
$102.20
1.15
1.14%
April Lean Hogs
$68.20
$69.65
$72.80
$73.10
0.30
0.41%
March Cotton
$74.39
$78.79
$82.61
       $82.53
-0.08
-0.10%
March Oats
$2.37
$2.30
$2.21
$2.19
-0.02
-0.90%
March Rice
$14.26
$13.63
$13.43
     $12.825
-.60
-4.6%
 
March Cotton futures were higher on Friday, but not by enough to put a plus sign on the line for the week. Cotton futures hit their highest price since the March 2008 options fiasco early in the week, but then retreated. Downward revisions in cotton production numbers for several countries have been supportive, with USDA going to give us the full low down on Wednesday. Weekly export sales were still slow. Brazil indicated that a deal might be in the offing to resolve the WTO finding that the US had broken rules on subsidies and export guarantees. The WTO had authorized cross-retaliation against other US products.
 
Market Watch: The main USDA reports for the week will be on Wednesday, with Crop Production and the WASDE supply/demand reports. Traders are widely divided on whether USDA’s re-survey effort will find more corn and soybeans, or fewer than were shown in the January reports. There is more unanimity that USDA will hike Southern Hemisphere corn production. There will be the usual weekly Export Inspections report on Monday and weekly Export Sales on Thursday morning. Tuesday will be the last trading day for ICE March cotton futures. Friday will mark the expiration of the March grain contracts at the CME Group. Not to be forgotten, Daylight Savings Time is due to begin on the morning of March 15. Spring is still another week away!
 
There is a risk of loss in futures and options trading.  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, or of any particular risk management technique. 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 more extensive paid subscription and consulting services.
 
Copyright 2010 Brugler Marketing & Management, LLC
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