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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.

Bean Bulls Run Rampant, Hogs Just Dead

May 01, 2009

 

           

 

Market Watch with Alan Brugler

May 1, 2009

 

Bean Bulls Run Rampant, Hogs Just Dead

 

Livestock producers didn’t have a very good week, with H1N1 Influenza A spreading around the world and unfortunately named swine flu. At least 16 countries are now limiting imports of either hogs or pork from the U.S. due to the misconception that it is being spread via hogs. Hog futures aborted their usual spring cash market rally and turned due south because of shrinking retail consumption by nervous consumers and shrinking export interest. Beef prices were also dragged down at the wholesale level by the competition from cheap pork, which resulted in June cattle futures trading about 50 cents lower for the week. Cash cattle trade for the week was at a depressed $85-86, mostly $2 below the previous week.

 

Soybean futures were up 62 cents for the week, dropping hard on Monday and Tuesday, but rallying sharply on Wednesday through Friday and taking out the January high.  Beans were up 6% for the week, but led by soybean meal rising 8.7%. That raises an interesting question, i.e. with hog producers going broke worldwide, who is buying the soybean meal besides the speculators? The USDA report showed strong export sales of soybean meal for the week prior to the swine flu outbreak hitting the news. This week’s report will be more indicative about the impact of the H1N1 on meal and corn demand outside the United States. Soy oil was up 3% in support of the beans, aided by a recovery in palm oil prices ahead of the May 1 holiday in China (and several other countries). China has continued to be a strong buyer of US beans to offset diminished Argentine availability and perhaps with a secondary benefit in using up US dollars parked in low yielding US government debt instruments.

 

Corn futures rose 29 cents per bushel, or 7.76%. Producer selling dried up because a) they were busy planting and b) in areas where they couldn’t plant they were hanging onto old crop supplies just in case they never get the new crop planted.  Export sales for the pre-H1N1 week were strong at more than 1.22 million tonnes. The other motivator was of course the planting delays. While the WCB made good progress and Iowa is likely over 60% done, the ECB was mired in mud and flooded fields. As we get into May the planting window gets smaller and nervousness about a short fall in corn acreage gets more pronounced. Of course, any land not planted to corn is likely to end up as extra soybean acres since they can be planted well into June.

 

Below is a table showing the net weekly changes and 4 week history of selected agricultural futures contracts:

 

 

Market Watch

 

 

 

 

 

 

 

 

 

 

 

Weekly

Weekly

 

04/09/09

04/17/09

04/24/09

05/01/09

Change

% Change

May Corn

$3.90

$3.76

$3.77

$4.06

0.29

7.76%

May CBOT Wheat

$5.22

$5.23

$5.32

$5.57

0.25

4.75%

May KCBT Wheat

$5.71

$5.72

$5.86

$6.07

0.21

3.63%

May MGEX Wheat

$6.45

$6.36

$6.65

$6.95

0.30

4.51%

May Soybeans

$10.07

$10.51

$10.40

$11.02

0.62

5.96%

May Soy Meal

$311.20

$326.60

$325.40

$353.70

28.30

8.70%

May Soy Oil

$35.42

$36.77

$36.34

$37.43

1.09

3.00%

June Live Cattle

$84.60

$84.53

$82.60

$82.10

0.50

-0.61%

May Feeder Cattle

$98.93

$99.53

$99.13

$97.45

1.68

-1.69%

May Lean Hogs

$73.45

$72.25

$69.00

$58.48

10.53

-15.25%

May Cotton

$48.41

$49.94

$51.70

$56.52

4.82

9.32%

May Oats

$1.96

$1.89

$1.93

$2.00

0.07

3.63%

May Rice

$13.40

$12.84

$12.87

$13.02

0.15

1.20%

 

Wheat futures posted gains of 3.6 to 4.8% at the three exchanges. The entire rally in Chicago came on Friday, when May advanced 33 cents per bushel. Minneapolis was an obvious bull play given delays in planting spring wheat. KC got to play because of drought and frost damage. CHI could rationalize bullish behavior on ideas that the constant wet weather will create fungal disease problems as well as various yield depressing plant diseases. While the US offers were not accepted by Egypt in this week’s tender, prices were getting close to world levels –until Friday’s rally.

 

Cotton futures rose 9.32% for the week, the biggest percentage advance in the tracked commodities. Wet weather and forecasts for up to 6” accumulations over the next few days boosted prices because of the threat to planting progress. Export sales have also been running above the diminished pace USDA is predicting for the year, and cotton is having to defend its intended planted acres against incursions from the soybean market.

 

Market Watch:  Monday is Greenery Day in Japan, a suitable start to the main planting and growing season for US row crops. Typically, April planting delays are taken with a grain of salt, but lingering delays into mid-May start to raise more concerns about whether the stuff will “ever” be planted. USDA’s Crop Progress report on Monday night will be closely scrutinized. Thursday will have the usual USDA Export Sales report, with interest in any additional contra-seasonal Chinese purchases out of the US.


 

 

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.  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 content, or visit the web site @ www.bruglermktg.com.                                                

 

© 2009 Brugler Marketing & Management, LLC

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