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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.

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
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