Getting a Divorce?

Published on: 17:27PM Dec 11, 2009


Market Watch with Alan Brugler

December 11, 2009


Getting A Divorce?


The US dollar has been inversely (or perversely) related to a number of asset classes this fall. Typically the dollar dropped and commodities like grain, gold, crude oil and the stock market indices would rally. And vice versa. As we’ve approached year end, the relationships seem to be weakening a bit, trumped by yearend tax considerations, vacations for the wealthier traders, and some adjustments in expectations if in fact the economy is growing at a faster pace. We probably won’t know for a month or more whether this is just a trial separation or a divorce.


Corn futures were down early in the week, but staged a classic “sell the rumor, buy the fact” rally on Thursday and Friday after the USDA report on Thursday morning. The USDA raised projected US ending stocks by 50 million bushels due to slow exports, but projected world coarse grain ending stocks were tightened to 176.52 MMT, and are seen dropping more than 6% from year ago.


Wheat futures were unable to follow corn higher, losing 3.26 to 3.74% for the week. USDA hiked projected 2010 ending stocks to 900 million bushels from 885 million bushels in the November report. Projected exports were not cut despite lagging the anticipated pace. However, USDA trimmed domestic food use because of higher flour yields at the mills. World ending stocks also continue to creep higher, and are now estimated at 190.91 MMT as of May 31, 2010.


Soybeans lost 8 cents per bushel for the week. Crush margins were pressured, with both soybean meal and bean oil lower. USDA raised projected US exports by another 15 million bushels, and cut projected August ending stocks to 255 million bushels. Futures were lower on some profit taking type selling, rolling of the January index fund positions to March, and the squeeze on crush margins. USDA disappointed bulls by leaving Argentine production UNCH at 53 MMT, and disappointed bears by not raising the Brazilian estimate to be in line with 64-64.7 MMT figures trotted out by several Brazilian government and private entities ahead of the USDA report.


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




Market Watch












% Change

December Corn







December CBOT Wheat







December KCBT Wheat







December MGEX Wheat







January Soybeans







December Soy Meal







December Soy Oil







December Live Cattle







January Feeder Cattle







December Lean Hogs







December Cotton







December Oats







January Rice








Cotton futures rose sharply this week, with the largest percentage gains of anything on the list that we track. USDA raised projected US production slightly, but lower projected US ending stocks via a more ambitious export forecast.


Hogs continued to rally, adding another 4.66% as they headed into expiration on Monday. Pork cutout values have risen sharply, not just the expected holiday hams but the loins, butts and other primal as well. Export business is expected to be a part of the equation, but of course the reporting lags. Census pork exports for October (the freshest official data) were down 5.9% vs. last year, but up from September.


Live Cattle have been in a dive, and didn’t find the bottom of the pool. The market attention shifted back to ham and turkey for Christmas and there were no indications of a suddenly renewed interest in prime rib at restaurants.  The cash cattle market is wrestling with a rise in ready cattle numbers compared to November, and packers also appeared to be slow to buy them due to an interest in propping up wholesale prices. The cold and snowy weather in the Plains interfered with cattle movement, and might has slowed rates of gain slightly. Because of the number of cattle available, it was difficult to translate that potential into higher prices. Cash cattle were down $3 for the week at $80 in the south and mostly $79 in the north. Official October exports were down 2.6% from October 2008. South Korea was down 60% year/year despite a relaxing of the old BSE era restrictions.


Market Watch:  The December grain and hog futures contracts expire on Monday. NOPA is also expected to release its monthly soybean crush estimate for November on Monday.  The Fed is expected to meet on Tuesday, with the trade currently expecting no change in the target interest rates.  USDA will issue a special Crop Progress report on Monday night to track the much delayed corn and cotton harvest progress. Normally, they are done with those reports for the year.  The main USDA reports for the week are on Friday afternoon, with Cattle on Feed and Milk Production.


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