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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.

Hogs on a Hot Streak?

Aug 28, 2009

 

Market Watch Summary with Alan Brugler & Kyung Ra

August 28, 2009

 

Hogs on a Hot Streak?

 

It’s been a while since we’ve been able to talk about Hogs as one of the bull leaders for the Ag commodities.  They earned it this week, with October futures trading at the highest price since August 5.  The lean pork cutout, a composite of the values of the major primal cuts sold by packers from a hog, jumped to $58.57 on Thursday, and was up $7.24 from the low of the year set just 9 days earlier at $51.33.  Labor Day feature interest by retailers helped firm up the market, along with some school lunch program buying and suspected export interest.  Bears were still looking at historically high carcass weights, and the expected seasonal increase in 4th quarter slaughter.

 

Soybeans also had a strong bullish week, with most of the advance confined to the nearby September contract.  The Census Crush report on Thursday showed slightly larger monthly crush than expected (but well below the previous month).  The July 31 soybean meal stocks dipped below 350 thousand tons because the smaller crush tightened up supplies and forced the industry to draw on inventories.  That tightening was reflected this week in a sharp jump in September meal futures, with crushers having trouble originating old crop beans to squeeze and end users needing to book coverage.  Futures shorts were also buying back positions ahead of first notice day because they couldn’t obtain receipts to deliver.  Soy oil was a drag on the product value, with biodiesel use down and July 31 stocks over 3.3 billion pounds.  In addition to the bullish meal story, China continued to buy new crop soybeans aggressively, with another 2 cargoes announced on Friday under the USDA daily reporting system.

 

Corn was down 0.23% for the week, but essentially in a trading range.  On the one hand, private estimates are calling for record US average yields and the second largest crop on record if the weather holds.  That’s the bear argument.  On the other hand, there are several cold fronts projected to come through vulnerable areas of the northern US.  As the days shorten and the polar air mass cools, the risk of temperatures below freezing hitting some portion of the crop increases.  By some estimates, as much as one billion bushels could be affected by a broad, early freeze.  Our number is smaller than that, as we believe a chunk of the latest corn is destined to be silage corn and not counted in the harvested for grain acreage.

 

Wheat futures in CHI rallied smartly on Monday and Tuesday, aided by end of month profit taking, spread unwinding, and a successful export sale to Egypt.  The market was having trouble holding the gain though, with the International Grains Council boosting projected world wheat production to 662 million metric tons and several Australian banks re-affirming their production estimates for Australia in the 22-23 million metric tons range.

 

Cotton lost ground for the week, down 0.27 %.  Census data on Thursday put the annual 2008/09 US domestic mill use at 3.61 million bales, just fractionally above USDA’s August WASDE forecast.  Use was still down 21.57% from the previous year, making the US ever more export dependent.  Weekly export sales were stronger than expected, but China is still importing at a very low level because of large domestic stocks.

 

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

Market Watch

 

 

 

 

 

Weekly

Weekly

 

07/31/09

08/07/09

08/14/09

08/21/09

08/28/09

Change

% Change

September Corn

$3.40

$3.22

$3.19

$3.22

$3.21

-0.01

-0.23%

September CBOT Wheat

$5.28

$4.90

$4.82

$4.60

$4.67

0.07

1.47%

September KCBT Wheat

$5.59

$5.25

$5.09

$4.94

$5.00

0.06

1.27%

September MGEX Wheat

$6.05

$5.73

$5.49

$5.32

$5.22

-0.11

-1.97%

September Soybeans

$10.44

$10.91

$10.23

$10.23

$11.36

1.13

11.02%

September Soy Meal

$332.50

$344.20

$319.40

$333.00

$387.00

54.00

16.22%

September Soy Oil

$35.24

$36.92

$37.18

$36.33

$36.07

-0.26

-0.72%

August Live Cattle

$84.70

$83.85

$84.65

$85.00

$84.65

-0.35

-0.41%

September Feeder Cattle

$102.55

$100.98

$100.20

$100.70

$98.15

-2.55

-2.53%

October Lean Hogs

$53.90

$44.90

$44.65

$47.85

$48.07

0.22

0.46%

October Cotton

$57.93

$60.53

$59.21

$56.45

$56.30

-0.15

-0.27%

September Oats

$1.98

$1.99

$2.01

$2.05

$2.11

0.06

2.80%

September Rice

$13.77

$13.87

$13.30

$13.13

$13.51

0.39

2.93%

 

Live Cattle futures declined by 0.41% for the week, but only in the August contract.  The back months were losing their premiums to the nearby amid doubts about late in the year export sales potential and post-Labor Day demand.  August saw some deliveries against the futures contract, implying futures were high vs. cash, but at the end of the week cash cattle were trading at $84-85 and a dollar higher for the week.  August futures were in the same vicinity and prices didn’t have to change much to adjust to the cash.

 

October Crude Oil futures for the week closed near $73 per barrel, after reaching a high at $75 on Tuesday, and dropped to a low at $70.60 on Thursday.  The US dollar index pretty much traded sideways this week within a choppy range.  Economic indicators this week were mixed as uncertainty in consumer confidence kept any bullish news and the major US stock markets at bay.

 

Market Watch:  Monday will be first notice day for September grain futures contracts.  No deliveries are currently expected against September soybeans or soybean meal, and it would be surprise if there were.  There will again be interest in the weekly crop progress numbers in Monday night’s USDA report, with particular attention on the % of the corn crop reaching dent stage or maturity.  The % of the crop setting pods and/or dropping leaves will also be important, as traders try to assess how much of the crop is vulnerable to a normal freeze date.  Friday will be the last trading day for September cattle options.  It will also be the last trading day before the Labor Day holiday, and a number of traders will likely be absent.

 

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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