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BIG NUMBERS

Published on: 02:43AM Sep 15, 2014

 Brugler

Market Watch and Dec Corn Tech Talk with Alan Brugler

September 12, 2014

BIG NUMBERS

 

As Everett Dirkson famously said “A billion here, a billion there, and pretty soon you’re talking about real money.” He was of course talking about the federal budget. If you insert the word “bushels” in there a couple places, you could just as well be talking about 2014 US crop production. On Thursday, USDA confirmed record production of both corn and soybeans, with the former crop now comfortably above 14 billion bushels. Another  Dirksen quote is that “There is no force so powerful as an idea whose time has come”. That tie in, of course, is the we have too much of the darn stuff and have to find a way to get rid of it. The markets are relentlessly discounting prices to encourage more consumption and discourage future production. As a market advisor, I encourage producers and end users to take an attitude also expressed by Dirksen, “I am a man of fixed and unbending principles, the first of which is to be flexible at all times”. There are marketing tools available to use in all market situations. 1

Corn ended the week 2.2% lower. The main news for the week was of course the USDA production report on Thursday, with the estimated 171.7 bushel national average yield on record high ear counts per acre. While a hike had been widely anticipated, USDA was not holding back, feeding fears that the eventual number could be even larger. As it is, projected ending stocks for 2015 are over 2 billion bushels, and the midpoint of the cash price estimate has been lowered to $3.50 per bushel. Bulls were forced to focus on strong ethanol production, a vaccine that could reduce death losses in hogs (allowing herd rebuilding and more feed use, and hopes of a smaller 2014/15 South American crop.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/22/14

08/29/14

09/05/14

09/12/14

Change

% Change

Sept

Corn

$3.66

$3.59

$3.47

$3.39

($0.075)

-2.16%

Sept

CBOT Wheat

$5.52

$5.50

$5.32

$4.98

($0.333)

-6.26%

Sept

KCBT Wheat

$6.34

$6.26

$6.20

$5.72

($0.475)

-7.66%

Sept

MGEX Wheat

$6.27

$6.15

$6.26

$5.68

($0.580)

-9.26%

Sept

Soybeans

$11.66

$10.90

$10.86

$10.91

$0.055

0.51%

Sept

Soybean Meal

$433.30

$439.50

$436.10

$408.00

($28.100)

-6.44%

Sept

Soybean Oil

$32.36

$32.04

$32.35

$32.16

($0.190)

-0.59%

Oct

Live Cattle

$147.00

$151.43

$159.75

$156.28

($3.475)

-2.18%

Sept

Feeder Cattle

$210.90

$218.65

$225.73

$229.48

$3.750

1.66%

Oct

Lean Hogs

$92.88

$98.13

$105.63

$105.70

$0.075

0.07%

Oct

Cotton

$67.46

$67.60

$66.08

$70.61

$4.530

6.86%

Sept

Oats

$3.84

$3.62

$3.68

$3.72

$0.032

0.88%

Sept

Rice

$12.83

$12.59

$12.38

$12.55

$0.175

1.41%

 

Soybean futures were both up and down. September expired on Friday with a 29 1/2 cent pop that resulted in a 0.51% gain for the week. It also expired on Friday and there was little or no connection to the cash market. New lead month November was down 35 1/2 cents per bushel for the week. USDA raised projected US yield to 46.6 bpa, and production to 3.913 billion bushels. Ending stocks are thought likely to grow to 475 million bushels by next August.  If South America has the record crop currently foreseen (Brazil alone at 94 MMT vs. 86 MMT this year), USDA is showing nearly a third of  year of global use already sitting in the bin before the 2015 US harvest.  On the bullish side, US export sales commitments for soybeans are record large for this date, and export commitments for soybean meal are phenomenal. Crushers and exporters will need producers to sell huge quantities of soybeans between now and January. They will try to use the stick of record supplies, but will probably have to offer a carrot sooner or later. The Friday night CFTC report shows the large spec funds getting more bearish by 14,212 contract last week, both lifting longs and adding shorts against commercial buying.

Wheat futures were down hard this week, with KC and MPLS hurt the worst. The MPLS loss of 9.26% is overstated, as the September contract lost 30 3/4 on Friday going into expiration. USDA didn’t change wheat production estimates, preferring to wait for the Small Grains report at the end of the month. They backtracked on exports, though, erasing a 25 million bushel increase from the August report in the September report. Rising global stocks make it harder to get US product out the door, particularly at premium US prices. Futures are working to reduce that premium. Weekly export sales were stronger last week at 563,200 MT with trade guesses only in the 450,000 MT range.

October Cotton futures rallied 6.86% for the week. The surging US dollar made US cotton more expensive for foreign buyers, but fundamental shifts trump the relatively minor value shifts from the currency. Weekly export sales were slow, it is true. However, USDA trimmed 900,000 bales from US production in the Thursday report, dropping it to 16.54 million bales. Both yield and harvested acreage were cut. USDA trimmed export projections by 700,000 bales but by virtue of the production cut they could show ending stocks tightening from 5.6 million to 5.2 million bales. They are still more than double year ago. 

Cattle futures were down 2.18% this week, a $3.47 pull back after an $8.32 pop the prior week. Wholesale beef prices were mixed this week. Choice boxes were another 0.5% higher, but Select boxes were down 0.7% as the choice/select spread widened to $15.39. Weekly estimated slaughter was 3.7% smaller than the same week in 2013. Beef production YTD is down 6.1%, with slaughter down 6.9%. Higher carcass weights make up the difference. Weekly beef export sales were improved, as foreign buyers took advantage of a price dip. The weekly totals do tend to decline for the next couple months.

Hog futures were up an almost invisible 0.7% this week after the 7.64%  jump the prior week. The good news for bulls is that the market held the prior gain. Thus far in 2014, hog slaughter is off 5.3% from the same point in 2013. Slaughter this past week was down 5.4% vs. year ago. Pork production is only down 1.6% YTD, due to substantially higher carcass weights. Carcasses are currently running 8# above year ago.  Pork carcass cutout values extended their gains this week, with the average price reported at $106.57 on Friday, a weekly gain of 3.31%.

 Market Watch

We will begin with week with USDA weekly Export Inspections and Crop Progress reports on Monday. Traders will be looking for any drop in condition ratings for the WCB states due to the snow and cold on Thursday and Friday. The Fed (FOMC) meets on Tuesday and Wednesday. No interest rate hike is expected, but the language is expected to show them heading further that way. USDA Weekly Export Sales will be released on Thursday morning. The monthly Cattle on Feed report is slated for Friday afternoon at 2 pm CDT.

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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