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Dollar Hot, Commodities Melting

Published on: 22:12PM Jan 30, 2015

 

Brugler 

Market Watch with Alan Brugler

January 30, 2015

Dollar Hot, Commodities Melting Down

The rising US dollar index is putting a lot of heat on the commodities markets as January comes to a close. The January thaw saw corn and wheat lose 3 to 5% in the last week, with all three legs of the soy complex lower as well. Cattle rallied, pretty much because they had sold off sharply the week before. Hogs are still melting in the face of larger slaughter runs than a year ago. On the plus side for ag producers, fuel costs continue to be under pressure at the futures level, spilling over into lower transportation costs and better interior basis levels than might otherwise be seen.

Corn futures were nearly 17 cents lower than last Friday’s close, posting a weekly loss of 4.33%.  Export sales this week were solid, but not nearly as large as the previous week.  Ethanol stocks edged higher, and production was up 1000 barrels per day from the week before.  Strength in the US Dollar is not helping US grain export prospects.  On Friday, a Brazilian consultancy took 1 MMT off of its projection for total corn production in Brazil this year, the market did not seem to care.  Corn production in South America was already expected to be lower than last year. The market’s job here is to discourage safrinha (2nd crop) corn planting in Brazil. The world market doesn’t need it. An estimated 20% of the safrinha corn in Mato Grosso has now been planted.  

 

Commodity

 

 

 

 

Weekly

Weekly

Month

01/09/15

01/16/15

01/23/15

01/30/15

Change

% Change

Mar

Corn

$4.00

$3.87

$3.87

$3.70

($0.168)

-4.33%

Mar

CBOT Wheat

$5.64

$5.33

$5.30

$5.03

($0.273)

-5.11%

Mar

KCBT Wheat

$6.01

$5.77

$5.64

$5.40

($0.238)

-4.12%

Mar

MGEX Wheat

$6.02

$5.85

$5.76

$5.57

($0.193)

-3.29%

Mar

Soybeans

$10.52

$9.92

$9.73

$9.61

($0.118)

-1.18%

Mar

Soy Meal

$349.10

$326.20

$331.50

$329.90

($1.600)

-0.49%

Mar

Soybean Oil

$33.68

$33.39

$31.60

$30.00

($1.600)

-4.79%

Feb

Live Cattle

$160.60

$154.45

$150.35

$154.85

$4.500

2.91%

Mar

Feeder Cattle

$212.55

$204.85

$201.83

$205.35

$3.525

1.72%

Feb

Lean Hogs

$79.03

$74.50

$69.30

$67.48

($1.825)

-2.45%

Mar

Cotton

60.64

59.23

57.30

59.36

2.060

3.48%

Mar

Oats

$3.03

$2.89

$2.91

$2.76

($0.150)

-5.19%

Soybean futures were 11 ¾ cents lower this week, down 1.18% while posting the smallest weekly loss since the January crop reports.  USDA reported weekly US export sales that were above the published trade expectations at 909,000 MT. The report also showed China with new bookings (548,900 MT)  which were more than enough to make up for their cancellations touted by the market bears earlier in the week. Soybean meal was down less than half a percent on the week, helped by the export sales report showing the largest weekly total reported since early October.  Soybean oil export sales were relatively weak, and the EPA approved Argentine soybean oil for use in biodiesel blends. That pressured the US market and helped soybean oil slip to a new life of contract low for the March 2015 contract, taking it down 4.79% on the week. Palm oil futures fell 5.3% in January, the worst January drop since 2010. Record palm oil production is expected for both Malaysia and Indonesia in 2015.  

Wheat futures were off 3.2% to 5.11% this week, with Chicago the weakest, and MPLS wheat the firmest.  USDA weekly net export sales for the week ending January 22 were 565,400 MT, the largest weekly total reported since September 4, 2014.  Saudi Arabia is tendering for 660,000 MT of wheat from optional origins. Russian wheat export duties come into effect on February 1, which is expected to slow sales and shipments. The Russian ruble has collapsed to only 47.9% of its value on January 1, 2014. That effectively halved the price of the wheat to buyers whose currencies closely tracked the dollar.  Of course most slipped, but not by that much.

Cotton futures were up 3.48% for the week. The US dollar index was lower on the week, but approaching the highs at the end of the week. All cotton export commitments soared over the past three weeks to 9.162 million RB, 94% of the USDA estimate for the marketing year. At 546,174 bales, the net sales figure this week was up 16% from last week, with another 12,600 RB booked for 2015/16. USDA put the AWP for this week at 44.99 cents, and LDP was increased to 7.01 cents.

Cattle futures were up 2.9% this week, with feeder futures up 1.7%. Weekly beef production was down 02.%  from the same week in 2014, with slaughter down 1.6%. Wholesale beef prices were down sharply on the week, losing 4.5% in the Choice boxes and down 4.6% in the Select boxes. The USDA Cattle Inventory report on Friday night showed a 1.4% year over year increase in the All Cattle number. Cow numbers reflected the year long reduction in cow slaughter, at 101.85% of year ago. The calf crop was larger than expected at 100.5% of year ago.

Hog futures were down 2.45% this week. Weekly hog slaughter was 6.2% LARGER than the same week in 2014, and due to higher carcass weights the production was 7.8% larger. This slug of supply has the futures market nervous, since increased farrowings and intentions suggest larger numbers in the spring and smaller PED losses than had been dialed in. Wholesale prices were down $6.05 for the week, a 7.17% drop from the previous Friday.

 Market Watch

The first week of February brings asset allocation adjustments after some big moves in January. The report lineup is pretty standard, with the usual weekly USDA export inspections on Monday and  the Export Sales report on Thursday. The weekly EIA ethanol production and stocks will be on Wednesday. The February cattle options expire on Friday, February 6.

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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