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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.

In Memory of the Bulls

May 25, 2012

Brugler

Market Watch with Alan Brugler

May 25, 2012

In Memory of The Bulls

 

Every commodity on our tracking list was in the red this week, showing a loss from the previous Friday close. Since it is Memorial Day weekend, it might be fitting to also remember the brave bulls who got us to $7.99 corn in 2011 and $15.09 soybeans in 2012. They are gone but not forgotten. Why are they gone? Global growth is tepid at best, the dollar is strong because the bond vigilantes are currently pointing their weapons at Europe. Production of some commodities (corn, hogs, soybeans) is also expected to be larger in 2012/13. Crude oil and gold are also down because of the above factors, and the CRB Index tells us that a basket of all commodities is down nearly 50% from the all time high in April 2011. Lest the above seem too bearish, we would point out that the CRB Index is near that 50% retracement support, and a dose of 90-100 degree temps or marked dryness in June and early July could thaw out the grain bulls and get them running again.

It was a tough week for nearby corn futures, which lost 9% for the week. The bulk of that occurred on Thursday. Weekly export sales were poor. There are reports of cheap new crop Brazilian corn offered as much as 60 cents per bushel below US Gulf corn at the beginning of the week. The futures slide should have narrowed the gap. The International Grains Council also increased their projection of world production in 2012/13 by 13 MMT from the previous figure.  On a bullish note, wheat futures are now high enough to remove themselves from feed ration consideration unless basis is extremely weak. US export sales commitments are now 88% of the projection for the year. They should be 92-93% by now in order to avoid a future downward revision by WASDE.

Soybeans were down 1.6% for the week, held down by a 2.06% loss in soybean meal. Production estimates for Argentina continue to leak lower, with 39.9 MMT the latest entry from the Buenos Aires Exchange. Chinese buying slacked off, but their estimated imports for May are record large at 7.23 MMT from all sources. They likely just need some logistics space. The Chinese government sold a few beans from reserves. Demand was modest, but some of the beans were reportedly several years old and the main motivation was stocks rotation. US weekly export sales were still solid at 953,700 MT. Cumulative export inspections continue to gain on year ago, due to a stronger 3Q export program.

The three wheat markets all lower. SRW was the weakest as profit taking hit the market after the 98 cent rally of the previous week. KC and MPLS were down 0.7%, supported by hot and mostly dry conditions in key Kansas production areas. Winter wheat crop condition ratings were down again this past week, and are expected to decline further on Tuesday. The Brugler500 index for the winter wheat crop was 353 after the USDA condition ratings came out. That was down from 355 the previous week. HRW ratings were down 7 points at 341. Export sales commitments are at 101% of the USDA sales total for the year. They are typically at 105% by now. The marketing year ends May 31. Weekly export sales were stronger than trade estimates coming into the report. World production estimates are shrinking, with the International Grains Council trimming estimated global production 5 MMT to 371 MMT.

Nearby cotton futures lost 5.6% for the week. Some of the decline was due to traders front running the index funds. Most of the big ones get out of their long July futures positions between May 24 and June 11. So, other traders want to sell first. India continues to undercut US sales into Asia, although China was still the largest single buyer in this week’s weekly Export Sales report. The bull story is that US old crop export commitments are 109% of the USDA projection for the year. They typically would be 103% at this time, so there is extra cushion for USDA to hike the final number, or for the market to tolerate a few cancellations or deferrals. The strong dollar is a problem for all commodities priced in dollars.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/04/12

05/11/12

05/18/12

05/25/12

Change

% Change

July

Corn

$6.20

$5.81

$6.36

$5.79

($0.57)

-8.97%

July

CBOT Wheat

$6.10

$5.97

$6.95

$6.80

($0.15)

-2.19%

July

KCBT Wheat

$6.27

$6.10

$7.05

$7.00

($0.05)

-0.71%

July

MGEX Wheat

$7.44

$7.26

$7.92

$7.86

($0.06)

-0.73%

July

Soybeans

$14.75

$14.06

$14.05

$13.82

($0.23)

-1.64%

July

Soybean Meal

$432.60

$408.50

$417.90

$409.30

($8.60)

-2.06%

July

Soybean Oil

$53.65

$52.24

$50.32

$50.12

($0.20)

-0.40%

Jun

Live Cattle

$115.38

$115.15

$119.53

$117.65

($1.88)

-1.57%

Aug

Feeder Cattle

$158.10

$157.45

$160.70

$158.50

($2.20)

-1.37%

June

Lean Hogs

$83.72

$85.30

$87.43

$85.20

($2.22)

-2.55%

July

Cotton

$87.99

$78.97

$77.99

$73.62

($4.37)

-5.60%

July

Oats

$3.40

$3.32

$3.40

$2.96

($0.44)

-12.87%

July

Rice

$15.21

$15.71

$15.18

$14.51

($0.67)

-4.42%

 

Cattle futures were down 1.6% for the week despite another solid performance by both the wholesale and cash cattle markets. Cash cattle trade was still well above the futures, with the 5-area Direct weekly average at $122.50, and $193.50 in the dressed. Estimated carcass weights are now 14 pounds above last May’s actual.  They had been running 27 pounds high earlier in the spring. Estimated beef production for the week was down 5.68% from the same week in 2011. Year to date production is now down 4.8% from last year. Weekly export sales for beef were an OK 14,400 MT, held back a little bit by the firmer US dollar. Wholesale prices did rise 1.1% for the week, with choice boxes up $2.12 but Select down $1.10 on a Friday/Friday comparison.

Lean Hog futures lost 2.55% for the week. The pork carcass cutout value lost 4.3% on a Friday/Friday basis, keeping downward pressure on packer margins and what they could pay for hogs. Hams and ribs were under major price pressure, with the former down 12.88% for the week. Pork production year to date is up 1.6% from last year. Production this past week was up 1/2% from the same week last year. Carcass weights are estimated at 209 pounds, which would be up 3# from the 2011 actual weight.  

Market Watch: Monday will be a market holiday in the United States, with grain trading resuming on Monday night and livestock trading resuming Tuesday morning at 9 am CDT. Any positions resulting from June grain options expiration on the 25th will be dealt with as futures when trading resumes. The usual USDA Monday reports will be released on Tuesday, including Export Inspections and Crop Progress. Corn planting should be about 99% complete, with soybeans into the low 90’s. The weekly Export Sales report will be delayed until Friday. Friday will also mark the expiration of June live cattle options.

 

There is a risk of loss in futures and options trading.  Such trading is not appropriate for all individuals. 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. 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 individualized subscription and consulting services. Our web site is www.bruglermarketing.com.

 .

 Copyright 2012 Brugler Marketing & Management, LLC

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