A Mixed Bag

Published on: 15:56PM Aug 08, 2014


Market Watch with Alan Brugler

August 8, 2014

A Mixed Bag

Futures activity was volatile this week, but also somewhat directionless. Wheat rallied and then gave it back. Ditto for corn. Old crop August beans were up 70 cents per bushel, but new crop November was up only 17 3/4. Hogs were ugly all week (if you weren’t following the hedge advice) while cattle sold off enough on Friday to erase gains from the other four days. The stock market was similarly erratic, with big early week losses countered by a 185 point Dow advance on Friday.   Some of this choppiness is politically related, with Russia/Ukrain,  Isreal/Hamas, and ISIL vs. everybody playing back and forth. Part of it is related to a reduced number fo futures players. Less liquidity makes it easier to extend price runs in both directions.

Corn lost 1 cent after losing nearly a dime the previous week. Trade estimates for weekly export sales were between 700-900,000 MT.  USDA put the actual figure at 879,600 MT. Cumulative sales commitments are now 101% of the USDA forecast for full year shipments, but only 89% had been shipped by July 31. Census reported that official June ethanol exports were up 13% from May at 59.9 mgal, while imports dropped 75% to 7.3 mgal. Private estimates for US corn yields were uniformly bearish, running from Informa’s 168 bpa to Lanworth’s 174.8 bpa. USDA will release the first official estimate for the year on Tuesday at 11 am CDT.  Friday’s Commitment of Traders report showed the large spec funds adding longs in corn, with the net long position up 8,664 contracts from the previous Tuesday night. Some of those may have washed out on Friday.
















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Soybean futures were up 70 cents per bushel in nearby August, with a short squeeze in the beans aided by the $10 gain in meal prices to add product value.  A Bloomberg survey shows an average trade estimate of 45.5 bpa and 3.815 billion bushels of production for the August 12 USDA report.  USDA put weekly export sales at 1.103 MMT, within the range of trade estimates.  Indonesia was the largest old crop buyer. Soybean meal export sales were a strong 731,100 MT, including 252,100 MT to be shipped before August 31. Soy oil bookings were 25,400 MT.

Wheat futures were strong early in the week but gave back most of it (CHI and MPLS) or all of it (KC) by Friday night. KC was down 0.55% for the week, while Chicago was up 2.8%.  USDA weekly export sales for the week ending July 31 were expected between 500-700,000 MT.   USDA put the actual figure at 590,900 MT.  A Bloomberg survey shows the average trade estimate for ending stocks at 666 million bushels for 2015 up from 660 million in the July WASDE report. The  average pre-report guess for US wheat production is 2.015 billion bushels.

October Cotton futures recovered 2.1% this week after a 4.1% slide the previous week. USDA put weekly export sales for cotton at 251,000 RB for Upland in 2014/15.  There were net reductions of 1300 RB for upland in 13/14, and net reductions of 900 RB for Pima in 13/14. This report was through July 31, the end of the cotton marketing year.  USDA rolled 551,100 RB of prior old crop sales into the 2014/15 delivery slot. The weekly Commitment of Traders report showed managed money accounts went net short in cotton by 1,753 contracts.  

Cattle futures fell off on Thursday and Friday to post a loss of $4.75 or 3%.  Feeders were down 2.25% for the week. Nearby cattle futures are still trading at a discount to the cash market, which works well for hedgers.  Cash cattle traded on Friday at $160 and $248-252 in the north, while August futures settled at $152.55. Wholesale beef prices hit record highs again this week. Choice boxes were 1.0% lower on the week. Select boxes dropped 2.0% for the week as the choice/select spread widened back out.  Weekly estimated slaughter was down 0.2% from last week, but down 8.8% from year ago. Beef production YTD is down 6.3%, with slaughter down 7%. Higher carcass weights make up the difference. The CFTC Commitment of Traders report showed managed money accounts increasing their net long position in live cattle by 4,204 contracts last week bringing their overall net long position to 120,641 contracts. Just in time for the limit down move on Friday!

August Hog futures were down $3.80 for the week after losing $5.60 the previous week. Thus far in 2014, hog slaughter is off 4.8% from the the same point in 2013.  Pork production is only down 1.1%, due to substantially higher carcass weights. Carcasses are currently running 10# above year ago, with live weights up about 13 pounds. Pork carcass cutout values continued to slip this week, with the average price reported at $124.99 on Friday, a weekly loss of 1.83%.  Hams were down 6.67%, offset partially by a rebound in bellies.  As of the close last Tuesday, managed money accounts reported a weekly decrease of 1,498 contracts in lean hog longs giving them a net long position of 52,336 contracts.

 Market Watch

We will get the usual USDA Export Inspections and Crop Progress reports on Monday, and the weekly Export Sales report on Thursday morning. The main USDA reports for the week will be on Tuesday, however. The NASS division of USDA will release the first official corn and soybean production estimates based on surveys and field plots, and the WASDE division will update projected supply and demand estimates for both the US and globally.  The August hogs and soybean complex contracts expire on Thursday.

Six Hundred and Counting!

According to the Ag Web archiving system, this is our 600th Market Watch column. Thanks to the 1000's of readers each month who make this worth doing, both with your readership and your financial support via our Ag Marketing Professional and Special Research Reports subscription services. Here's to a couple hundred more columns!                                              Alan Brugler

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

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