Market Watch and Dec Corn Tech Talk with Alan Brugler
February 27, 2015
A Quietly Positive Week
Most markets chopped around the past few days and finished the week in the black, except nearby corn was slightly lower and the MPLS wheat contracts slipped a dime. The soybean complex was the strongest, with beans up better than 3%, meal up almost 2% and oil up more than 4% on solid demand that included good export sales, especially with Brazilian harvest underway, and product prices supporting processing margins. Cattle found new strength and even lean hogs were able to end the week with gains of a few cents despite sharp losses on Thursday and increasing production.
March corn was slightly lower on the week, but December corn was slightly higher. Export sales this week came in just below the lower end of the trade range as combined old and new crop sales totaled 864,000 MT. About 17% was for delivery in the 2015/16 marketing year. Ethanol news was somewhat disappointing for corn growers as well: EIA reported production for the week ending February 20 at 947,000 barrels per day, down 1.76% from the 964K bpd pace reported for the prior week. Stocks were up 2.36% from the previous report, even with the slower production. At more than 21.6 million barrels, ethanol stocks were the largest reported since May of 2012. The ethanol industry is fired up about a bill introduced in the Senate yesterday that would remove corn ethanol from the Renewable Fuel Standard in an effort to boost support for alternative biofuels. The December futures price average during February, used in formulating the crop insurance guarantee, is unofficially $4.15.
March soybeans netted a weekly gain of 31 1/2 cents; more than 3% as trouble on the roads in Brazil combined with continued US export sales supported the market. Net soybean export sales were 459,200 MT for old crop plus 36,200 MT for the new crop. Meal sales were not as encouraging: 2014/15 saw a net reduction of 6,400 MT, largely due to a decrease of 90,400 MT for unknown destinations. Sales for 2015/16 were reported at 91,400 MT, with all of it booked for unknown destinations. Just as the west coast ports get back into operation, exports through the Great Lakes could be disrupted: Ice cover is 8% ahead of last year at this time and last year led to some shipping problems as well as a slow start to the spring navigation season. The November futures price average for February, used in formulating the crop insurance guarantee, is unofficially $9.73. In the weekly COT report from the CFTC, managed money accounts were shown to be net long 284 contracts as of Tuesday night. These funds had been net short for the previous five weeks.
CBT wheat ended the week with a gain of more than 7 cents, and KC wheat squeezed out two bits more than a penny gain in the March contract. MPLS wheat lost more than a dime in the front month. Weekly wheat export sales reported by USDA were stronger than the trade had expected, coming in at 459,000 MT with 130,700 MT of the total booked for 2015/16 delivery. Egypt bought 120,000 MT of HRW wheat from the United States in its first US purchase since last July. The weekly Commitment of Traders Report from the CFTC showed managed money accounts getting more short by a net -5,989 contracts in Chicago wheat, and they reduced their net long in KC wheat by a net -4,460 contracts.
March cotton futures ended the week just 0.10% higher. According to the weekly CFTC report, managed money accounts had increased their net long position in cotton by a net 13,535 contracts from the previous week as of the Tuesday close. At 46,887 contracts, that is the longest net position reported for managed money since May 20, 2014. Combined old and new crop cotton weekly export sales reported by the USDA were 137,300 RB, with 65,900 RB of the total booked for the next marketing year, a vast improvement over the net reduction for the prior week, but fairly week compared to the 482,000 RB average for the four weeks reported in January. The AWP for the week beginning Feb. 27 is 49.48 cents and the LDP is 2.52 cents, the smallest LDP since Oct. 31 and down 4.49 cents from the peak LDP at the end of January.
April cattle futures added $3.45 this week as the Feb contract went off the board today. March feeders wer up $2.725 on the week. Wholesale beef also rallied with Choice boxes gaining 3.1% and Select boxes were up 3.4% from Friday to Friday. Beef production in the week ended Feb. 28 is estimated at 427 million pounds, up half a percent from the prior week and down 5.9% from the same week last year. Year to date, 3.677 billion pounds have been processed, down 200.7 million or 5.2% from last year. Net weekly beef export sales reported this week were 13,900 MT. Export shipments are lagging a year ago, down by 21% partly due to the dock workers strike on the West Coast that affected the ports at Long Beach/Los Angeles, Oakland, San Diego, Portland, and Seattle/Tacoma. Some 80% of meat shipments exit the country from the west coast and last year, some $2 billion worth of chilled beef and pork went to Asian markets, overwhelmingly from the west coast. Although a labor contract has not yet been signed, the agreement to resume full operations this week comes as a relief to everyone involved in ag trade.
Pork prices continued to slide this week with the carcass cutout off another 99 cents for the week at $70.51. Lean hog futures were slightly higher for the week. USDA reports pork production in the week ending Feb. 28 at 486.3 million pounds. That’s up 6.5% from last year. The total year to date, is 4.032 billion, up 2.9% from a year ago. It is interesting to note that last year’s production of pork and beef at this time was virtually the same as of last week – 3.462 billion for pork versus 3.242 billion for beef. This week, with pork at 4.032 billion pounds and beef at just 3.667 million pounds, pork is 355 million pounds ahead. Weekly net pork export sales this week rebounded 38% from the prior week to 19,000 MT. Actual exports to date exceed the PEDv-depressed total for the same time last year by 49% and are expected to gain speed with the opening of the ports that serve as gateways to the important Asian markets. Weekly hog slaughter including Saturday is estimated at 2.262 million head, down 0.8% on the week but up 5.6% from last year.
No monthly or quarterly reports are due from USDA in the week ahead, though the end of the week could see the beginning of positioning for the WASDE report on Tuesday, March 10. The usual weekly USDA export inspections will be out on Monday and the Export Sales report on Thursday, marking the first full week of China back in business after its weekly holiday. The weekly EIA ethanol production and stocks will be updated on Wednesday. We expect the US dollar and oil price fluctuations to continue to push on commodities, and Friday’s monthly Unemployment report will be closely watched both for a measure of consumer financial health, and an indicator for Federal Reserve policy.
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