An Ill Wind Blows Some Good

Published on: 15:04PM Sep 26, 2008
The two largest gainers for the week were November rice and November soybeans. Both are widely grown in the southern US and specifically the Delta and Mississippi/Ohio River Valley region. That happens to be the area that Hurricane Ike and its remnants affected the most with heavy rains and high winds, as well as port and barge transport disruptions. Beans got a little extra help from higher soy oil prices driven by a tight supply of cash diesel caused by refinery shutdowns during the hurricane and aftermath. Rice’s problems were focused on shatter and other harvest loss issues, along with lagging harvest progress. A weak dollar on Monday helped buoy prices of both, even though the buck spent most of the rest of the week trying to rally back.
Below is a table showing the net weekly change of selected agricultural futures products:
Market Watch
% Change
Dec Corn
Dec CHI Wht
Dec KC Wht
Dec MGE Wht
Nov Soybeans
Oct Soy Meal
Oct Soy Oil
Oct Lv Cattle
Oct Fdr Cattle
Oct Ln Hogs
Oct Cotton
Dec Oats
Nov Rice
Corn futures eked out a modest 2 cent per bushel gain for the week, limping home with a 15 cent loss on Friday. Harvest activity continues to lag the 5 year average, and is likely to do so for much of the fall because crop maturity is still lagging. Nearly all of the crop will be at dent stage or later by this week, reducing yield risks due to a freeze. Export sales have slowed, due primarily to competition from world feed wheat and substantially higher year over year prices. Word of slow downs at several ethanol plants was a drag on prices but cutting likely annual consumption.
Wheat prices were under a little pressure in KC, handled it better in Chicago, and ended the week a nickel higher in Minneapolis. The large spec traders continue to maintain a net long position in Minneapolis. Commercials were also slightly net long as of Tuesday night’s CFTC Commitment of Traders data collection for futures and options. The leaves the small speculators and hedgers as the major shorts in the market. Fundamentals were so-so, with IGC hiking projected world production another 4 MMT, and Egypt passing on US wheat in preference for cheaper Russian offerings.
Cotton futures had a tough week, losing 3% of their value. The October contract has been in a fairly straight line decline since June, with only minor spikes for hurricanes and the like. The presence of substantial cert stocks in delivery locations is a warning to speculative long players to get out of the contract before deliveries. Most heeded the warning, putting pressure on prices. There were in fact substantial deliveries against the October futures by Dunavant.
Cattle futures have been trading in a fairly tight range over the past month, and closed 60 cents lower for the current week. Wholesale prices were on the soggy side, with consumers uncertain about their incomes and the export market showing signs of a seasonal slowdown (keep in mind that official export data is at least 45 days behind and the unofficial Export Sales data are a week behind events). Cash trade was $97-99, with most holding steady when compared to week ago. Problems at poultry giant Pilgrims Pride didn’t translate into less competition, but broiler placements and egg sets continue to run below year ago.
Hog futures were solid bullish performers for a second week, gaining another 2%. The market sold off sharply in August, and some of the futures buying is doubtless profit taking heading into the end of the quarter. Some were also just getting out ahead of Friday’s Hogs & Pigs report. The report came in close to advertised, with All Hogs at 102% of year ago, the breeding herd at 97.4%, and market hogs at 102.5% of year ago. All three numbers were within 0.1% of the average trade estimate. Litter size continues to rise rapidly, with Jun-Aug at 102.6% of year ago. This is countering some of the reduction in sow numbers.
Market Watch: This will be another tricky week for making marketing decisions. In addition to any frost/freeze risk, the market will have to deal with the outcome of the weekend Congressional decisions on the support package. There is also month end and quarter end position squaring and asset allocation adjustments. Then you can throw in the USDA Grain Stocks and Small Grains reports on Tuesday morning. Livestock traders will be dealing with the aftermath of the Hogs & Pigs report on Monday, and October cattle options expiration on Friday.
There is a substantial risk of loss in futures & options trading. Past results are not necessarily indicative of future results.                         
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