Chill in the Air

Published on: 16:23PM Sep 05, 2014

 Brugler

Market Watch with Alan Brugler

September 5, 2014

A Chill In the Air

While fall is not officially here, football season has begun in the US and being on the back side of Labor Day makes it feel like autumn has begun. There has also been a distinct chill in the commodity markets, with a sharply rising US dollar index acting as the freon. Grains and crude oil were mostly lower for the week. Livestock, on the other hand, were hot, hot, hot. October hogs were up more than 7%, and October cattle jumped more than 5%. Maybe all of the tailgate parties are impacting demand? At the end of the week, a different kind of chill was being felt, with weather forecasts calling for overnight lows in the 20’s next Thursday-Saturday depending on where you are located. The more bullish of those had temps below 30 as far south as I-80. If that actually happens, there will be a lot of bushels of test weight lost in corn, and a lot of immature soybeans. Only 53% of the Iowa corn crop had made it to dent stage by August 31, with 2% to black layer (maturity).  Minnesota was only 34% dented. Both states will of course have advanced this week. Pay attention to those 5-7 day forecasts on Sunday night and Monday!

Corn ended the week 3.5% lower despite a double digit gain on Friday following weather forecasts calling for potential  temps as low as 27 degrees down into Central Iowa on 9/13. Other runs have been in the low 30’s, but if the new one holds up a lot of immature corn would be hurt. Trade estimates for the USDA weekly export sales report were in the 350,000 to 800,000 MT range. USDA put the actual figure at a neutral 518,100 MT for combined old and new crop sales. Weekly corn use for ethanol rose, but ethanol stocks also recovered 400,000 barrels after a steep decline was reported the previous week.  Consultant Informa projected a US corn crop of 14.281 billion bushels with other less conservative estimates running as high as 14.649 billion.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

08/15/14

08/22/14

08/29/14

09/05/14

Change

% Change

Sept

Corn

$3.66

$3.66

$3.59

$3.47

($0.125)

-3.48%

Sept

CBOT Wheat

$5.51

$5.52

$5.50

$5.32

($0.1875)

-3.41%

Sept

KCBT Wheat

$6.19

$6.34

$6.26

$6.20

($0.065)

-1.04%

Sept

MGEX Wheat

$6.11

$6.27

$6.15

$6.26

$0.1125

1.83%

Sept

Soybeans

$11.03

$11.66

$10.90

$10.86

($0.040)

-0.37%

Sept

Soybean Meal

$388.30

$433.30

$439.50

$436.10

($3.400)

-0.77%

Sept

Soybean Oil

$32.87

$32.36

$32.04

$32.35

$0.310

0.97%

Oct

Live Cattle

$147.75

$147.00

$151.43

$159.75

$8.325

5.50%

Sept

Feeder Cattle

$215.10

$210.90

$218.65

$225.73

$7.075

3.24%

Oct

Lean Hogs

$94.95

$92.88

$98.13

$105.63

$7.500

7.64%

Oct

Cotton

$63.60

$67.46

$67.60

$66.08

($1.520)

-2.25%

Sept

Oats

$3.65

$3.84

$3.62

$3.68

$0.060

1.66%

Sept

Rice

$12.91

$12.83

$12.59

$12.38

($0.210)

-1.67%

 

Soybean futures were up and down, losing a net 4 cents per bushel for the week. November was also down 4 1/4. Soybean futures closed 15 3/4 to 21 1/4 higher on Friday, erasing double digit losses from Thursday. Increased freeze/frost potential for next week was the main supportive factor on Friday. The weekly USDA export sales numbers were bearish. Trade estimates were in the 400,000 MT to 1.15 MMT range. USDA reported net weekly sales of 781,300 MT, with -87,700 MT of old crop cancellations/deferrals. Memphis based Informa projected the US national average yield at 46.1 bpa, with production at 3.876 billion bushels.

KC was the strongest wheat market on Friday, but MPLS posted the only positive number for the week. Stats Canada showed year end wheat stocks at 9.8 MMT, when traders were looking for something around 10.7 MMT. The record 2013 Canadian crop is still hanging over the market, due in part to lousy rail service. Canadian ending stocks last year were only 5.05 MMT. Trade ideas for US weekly export sales were in the 200,000-500,000 MT range. USDA put the figure at a slow 168,800 MT in the Friday morning report, which was delayed a day by the Labor Day holiday. 

October Cotton futures dropped 2.25%, giving back gains from the prior two weeks. The surging US dollar made US cotton more expensive for foreign buyers and we started to see the effects. USDA reported net cotton export sales of 90,800 RB last week, including 5,300 RB of pima. The rest was of course upland cotton. The largest buyer was Turkey. The ICAC increased projected world production by 530,000 MT from their prior estimate, and cut 2014/15 consumption by 130,000 bales. If realized, the global cotton glut would get worse, going to 22.25 MMT from 20.56 MMT this year and the ICAC figure of 17.78 MMT for 2012/13.

Cattle futures were up $8.32 for the week, a two week gain of $12.75 or roughly $178 per steer. Wholesale beef prices were higher this week. Choice boxes were 1.0% higher on the week. Select boxes were up 0.8%. Weekly estimated slaughter was 8.9% smaller than the same Labor Day limited week in 2013. Smaller supplies and higher prices. That is the way it is supposed to work. Beef production YTD is down 6.3%, with slaughter down 7.1%. Higher carcass weights make up the difference. Weekly beef export sales were a lackluster 10,200 MT and decline in the last third of the year from where they are in the spring and early summer.

Hog futures were up a stout 7.64% this week. It is a futures market, looking past current weakness in cash hogs toward tight 4th quarter meat supplies overall. Thus far in 2014, hog slaughter is off 5.3% from the same point in 2013. Slaughter this past week was down 6.5% vs. year ago. Pork production is only down 1.6% YTD, due to substantially higher carcass weights. Carcasses are currently running 9# above year ago.  Pork carcass cutout values reversed direction this week, with the average price reported at $103.16 on Friday, a weekly gain of 1.42%. Zoetis announced a rollout of a new PED virus vaccine for sows and gilts. We need to remember that it is only for the mothers, and administered prior to birth. Even if it gains rapid market share and proves effective, it won’t alter the hog marketing curve vs status quo for at least 6 months if given right away to already bred sows, and 9 months or more for gilts not yet bred.  

 Market Watch

Cattle traders will begin the week dealing with any surprise futures positions inherited upon expiration of the September cattle options on the 4th. The big move last week might have caught a few folks who thought their options positions were safe. For grains, we will start off Monday with the usual USDA Export Inspections and Crop Progress reports. Thursday will be the big day, newswise, with the monthly USDA Crop Production and WASDE supply/demand updates scheduled for 11 am CDT. Traders are generally expecting USDA to hike both corn and soybean yield estimates from the August figures. USDA will also issue the weekly Export Sales report on Thursday morning.

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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