Beans on Fire

Published on: 16:02PM Aug 23, 2013


Market Watch with Alan Brugler

August 23, 2013

Beans on Fire

New crop November soybeans were up 68 ¾ cents this week. The market was literally on fire, with the NWS 6-10 and 8-14 day forecasts projecting in orange and bright red some much above normal temps from now to September 6 for most of the continental US.  Beans will hunker down in the heat and wait it out, but that isn’t what you want them doing in September. You abort a lot of pods that way. The precip situation will be key to the amount of stress, with the NWS maps showing above normal precip east of a line from ND to MS in the 10 day forecast, then drying out in the Plains/WCB for the second week. 

September soybeans were up 82 cents per bushel for the week. September is now up $1.52/bushel in three weeks. The meal market was responsible for much of the rally, gaining 6% for the week as crushers were having trouble sourcing beans, specs were fleeing a potential short squeeze, and export sales continue. On the bean side, new crop weekly export sales were disappointing by failing to make the million metric tonne mark. However, crop concerns multiplied all week due to declining soil moisture across much of the Corn Belt and above normal temps expected to persist into Labor Day. The Pro Farmer Tour reported low pod counts, particularly in the WCB, and projected a crop of only 3.158 billion bushels on a 41.8 bpa average yield. USDA is at 42.6 bpa, but PFA also assumed that the NASS August 1 resurvey of soybean planted acres missed 800,000 additional acres of prevented planting. We are not comfortable with that assumption.

September corn futures were up 22 cents per bushel, or 4.6% for the week. December futures were up 6 ½ cents. The trade, particularly the spec funds, continues to be bearish. The Commitment of Traders report on Friday showed the Managed Money category exiting 31,443 contracts from their net short position in the week ending 8/20. The weekly ethanol production slowed by 13,000 barrels per day. Ethanol imports declined to 19,000 bpd. Ethanol stocks rose slightly to 16.5 million barrels. Weekly export sales were positive for old crop at 58,200 MT but new crop bookings were only 434,400 MT. Pro Farmer issued a crop production estimate of only 13.46 billion bushels on a 154.1 bpa yield that was very close to the August NASS yield of 154.4 bpa. They assumed USDA will drop harvested acres by a large 1.8 million due to Prevented Planting insurance claims. If due to PP that would mean planted acres would be revised downward by the same amount, and would be the largest June-Final revision in planted acres since 1960! The Brugler Marketing Virtual Corn Tour estimate released Thursday calls for a 13.8 billion bushel crop.

Wheat futures eked out a 4 cent gain in Chicago this past week. The other two contracts were lower, however. Minneapolis saw the most selling pressure, down 2.6% as Stats Canada reported record large wheat production of 30.56 MMT was likely. Wheat export sales continue to be excellent, with 49% of the USDA forecast for the year already on the books or shipped out. That average for this date would be 42%. Weekly sales were 494,000 MT, with Brazil buying 188,800 MT due to freeze damage to the crop there.















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Cotton futures dropped a dramatic 9.8% in one week after climbing 4.88% the previous week. USDA trimmed projected US ending stocks on Monday to 2.8 million bales earlier in the month, and also tightened world ending stocks. The US stocks/use ratio if realized would be the tightest since 2010/11. World ending stocks outside of China continue to tighten, but rumor had it that China will begin selling some cotton out of their huge reserve stocks. If that happens, it will likely result in slower import interest. Speculative funds had also held a lopsided net long position in cotton, and prices plunged once the red line crossed the blue line and everyone wanted to leave the bull party at once.

Cattle futures fell back 0.65% this week after gaining 1.1% the prior week. Beef production this week was 2.2% smaller than the same week in 2012, and production year to date is down 1%. Wholesale beef prices were mixed, with Choice up 0.9% and Select down 1.2% on a Friday/Friday basis. USDA reported weekly beef export sales had improved to 16,100 MT last week. The USDA Cold Storage report on Thursday showed beef stocks down 4% from the previous month. The USDA Cattle on Feed report on Friday evening showed the August 1 head count only 94.1% of year ago.  July placements were smaller than expected at 89.6% of last year, while July marketings were close to trade ideas at 104.6% of July 2012.

Hog futures fell back 1.75% this past week. The estimated weekly slaughter rose to 2.207 million head. That was up 1.4% from the previous week but still down 2.9% from year ago. Pork production YTD is down only 0.3% from 2012 due to higher average carcass weights thus far in 2013. The pork carcass cutout value lost 3.07% this week after dropping 1.76% the prior week. The belly primal has begun its usual seasonal retreat, losing 11.2% this week.  The USDA weekly export sales report slowed to 7,100 MT from 8,500 MT the previous week.

Market Watch

This will be the last week of the USDA marketing year for corn and soybeans.  There will be the usual weekly updates on Export Inspections and Crop Progress on Monday, and the USDA weekly Export Sales report on Thursday. September futures will start out on Monday reacting to any surprised futures positions inherited via September options exercises on Friday. We’d be willing to bet that those short September 1360 calls never expected to be in-the-money at expiration. Crop condition ratings are expected to be lower for corn and soybeans due to the heat and drying soils. There will be interest in whether maturity (notably dough and dent stage in corn) is catching up with the higher temps. This is also the last week of the month, so some asset allocation selling and buying can be expected in commodities that saw big moves during the month. Friday is also first notice day (FND) for September futures deliveries.

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