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Don't Get Too Comfortable

Published on: 16:06PM Jun 06, 2014

 Brugler

Market Watch with Alan Brugler

June 6, 2014

Don’t Get Too Comfortable

 

A little surprised at the big rallies in corn and wheat on Friday? Don’t be.  The big specs are able to lean on these markets pretty hard and take them to really oversold levels. When they decide to cash out ahead of the weekend or ahead of an upcoming government report or around month end, there may not be anybody to take the other side of the trade. That results in big corrective moves.  Producers who are long beans, cattle, feeder cattle or hogs shouldn’t get too complacent, it can happen to you as well, going the other way. 

Corn was down 1.45% this week. Ethanol stocks ballooned.  Daily production (and corn use) was up but outrunning consumption.  Weekly export sales were solid for old crop at 500,700 MT, but still sluggish at 19,600 MT for new crop.  China continues to unwind old crop commitments from the US. They are actively auctioning off reserve corn. Significant imports are not likely as they work off these Government stockpiles. The CFTC Commitment of Traders report this afternoon showed managed money decreasing their net long position in orn by 4,159 contracts as of June 3, giving them a net long position of 174,160 contracts.

Soybean futures were 36 cents lower this week, extending a 22 cent loss from the prior week. USDA reported weekly exports sales of 271,800 MT, down from 881,000 MT the previous week. Old crop export commitments continue to confound the skeptics. Those bushels are being shipped. One must conclude that the US crop was larger than reported, or that crushers are very comfortable with imported supplies and are letting the export beans go past them. As of the close on June 3, CFTC shows managed money accounts decreasing their net long position for soybeans from the previous week by 22,887 contracts bringing their overall net long position down to 104,150 contracts. 

Wheat futures were down 1.3% in Chicago this week, but the big Friday rally carried the hard wheat markets into plus territory. KC was up 1.7% for the week and MPLS was up 0.4%.  The market appears torn between ideas that rain has helped yield potential and ideas that the storms have damaged the crop, delayed harvest and increased disease problems for SRW. Weekly export bookings slowed to 343,400 MT. As of the close last Tuesday, managed money accounts sold 18,678 contracts in CBT wheat for the week, giving them a net long position of only 1,037 contracts.  They were still net long 30,017 contracts in KC.

Cotton futures were down 1.73% this week.  The weekly Commitment of Traders report showed managed money accounts decreasing their net long position in cotton by 4,353 contracts bringing their overall net long on June 3 to 31,311contracts.  Export sales commitments are running 104% of the USDA forecast for the year. They would typically be 105% by now, due to business typically carried over to the following marketing year.  ICAC continues to foresee further increases in global cotton stocks for both 2014 and 2015. They also expect a sharp reduction in Chinese imports.

 

 

Commodity

 

 

 

 

Weekly

Weekly

Month

05/16/14

05/23/14

05/30/14

06/06/14

Change

% Change

July

Corn

$4.84

$4.78

$4.66

$4.59

($0.07)

-1.45%

July

CBOT Wheat

$6.74

$6.53

$6.27

$6.18

($0.09)

-1.43%

July

KCBT Wheat

$7.68

$7.45

$7.23

$7.36

$0.12

1.69%

July

MGEX Wheat

$7.40

$7.25

$7.07

$7.09

$0.03

0.39%

July

Soybeans

$14.65

$15.16

$14.93

$14.57

($0.36)

-2.43%

July

Soybean Meal

$480.20

$502.60

$500.20

$487.60

($12.60)

-2.52%

July

Soybean Oil

$40.75

$40.38

$38.50

$39.01

$0.51

1.32%

June

Live Cattle

$137.90

$136.30

$137.80

$140.13

$2.32

1.69%

Aug

Feeder Cattle

$193.33

$194.15

$198.13

$200.52

$2.40

1.21%

Jun

Lean Hogs

$125.25

$123.73

$120.48

$124.98

$4.50

3.74%

July

Cotton

$89.82

$86.64

$86.27

$84.78

($1.49)

-1.73%

July

Oats

$3.37

$3.46

$3.71

$3.57

($0.14)

-3.84%

July

Rice

$15.40

$15.25

$14.99

$14.18

($0.81)

-5.41%

 

Cattle futures were up 1.7% this week to add to a 1.1% gain from last week.  Cash cattle trade was mostly steady at $144 and some $145 on Friday, with the north at $232-233.  Futures were supported all week by their discount to the cash cattle market.  June went home at $140.12. Estimated weekly slaughter of 614,000 was up 14.3% from the holiday week but down 5.2% from the same week in 2013. Beef production YTD is 5.8% below last year, with slaughter down 6.3%.  Average carcass weight is about even with year ago.  USDA reported weekly beef export sales improved to 16,700 MT.  Wholesale beef prices were lower this week, with choice boxed beef down 0.8%  and select boxes down 0.5%. 

June Hog futures were up 3.74% this week. They are still at a premium to the CME Index. Weekly FI slaughter was estimated at 1.93 million head, vs. 2.006 million a year ago. Slaughter YTD is down 4.2% but pork production is only down 0.8% due to higher carcass weights. Carcass weights are up an average of 11 pounds per hog vs last year!  The pork carcass cutout value was up nearly 4% for the week at $120.60 on Friday. Hams had the largest gain for the week.  Weekly pork export sales were up 43%% from last week at 13,000 MT.

Market Watch

Cattle traders will begin the week dealing with any surprise futures positions following June options expiration on Friday and the near pin of $140. USDA will release the usual Export Inspections and Crop Progress reports on Monday, with Weekly Export Sales on Thursday morning. The main monthly reports will be Crop Production and WASDE supply/demand, both out mid-morning on Wednesday.


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