February Thaw

Published on: 16:01PM Feb 07, 2014


Market Watch with Alan Brugler

February 7, 2014

February Thaw 

No, we’re not talking about temperatures. Not when it is snowing in Dallas, Texas and showing single digit or negative temps across much of the eastern 2/3 of the United States. No, we’re talking about the grain markets. For the first time in a long time, all of them (except rice) were higher in the same week. The large blocks of bearish positions in corn and wheat were melting, thanks to persistently strong export sales, politically or financially driver disruptions in shipping from several countries, and pretty much a halt to rising production estimates for South America. Nearby corn futures settled at the highest price since October. 

Corn futures picked up another 10 cents per bushel this week, a 2.4% gain to go with the 1.3% advance from the previous week. Ethanol imports were zero for the 18th week in a row. US ethanol is now being imported into Brazil, and US weekly ethanol stocks dropped to 16.7 million barrels. RIN values rose to 50 cents per gallon as a major obligated party was forced to buy RINS. Weekly corn export sales were again huge at 1.7 million metric tonnes. Low prices cure low prices! Japan was the largest buyer at 798,900 MT.  One additional sale originally to China was re-sold to Vietnam. USDA shows that 91% of the projected corn sales for the year are already on the books. We would typically only be 64% by now. The largest commitment in recent years has been 76%. According to the CFTC on Friday night, managed money accounts decreased their net short position in corn by 46,803 contracts, bringing their position as of last Tuesday’s close only 5,314 contracts.

Soybean futures were up 3.8% for the week, aided by a 4.8% rally in nearby soybean meal. Weekly US export sales were 796,500 MT including 577,000 MT of old crop. Total US export Commitments for 2013/14 are now at 106% of the USDA forecast for the year, leading to expectations of a higher estimate in the Monday WASDE report. This afternoon’s CFTC Commitment of Traders report showed the large speculative traders added 24,902 new long futures and options positions in the week ending February 4. Their net long position was 146,533 contracts as of Tuesday night.

Wheat futures were HIGHER this week, with CHI up 3.9% and KC up 5.5%, while MPLS gained 5.8%. Total US export commitments are still a larger % of the USDA forecast than usual for this date, currently at 87% vs. the five year average of 84%.  Weekly wheat export sales through USDA increased to 733,600 MT. The Commitment of Traders report shows the large managed money specs are now net long KC wheat to the tune of 8,301 contracts, and reducing their short in Chicago.















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Cattle futures continued to retreat from the all time highs set two weeks ago, losing 0.34% on the week despite a triple digit gain on Friday. The Friday rally came on news of $140+ cash cattle trade in Nebraska, reinforcing the need for Feb futures to be $141-142 going into delivery notices on Monday. Choice boxed beef was down 5.7% dropping $12.72.  Select boxed beef lost 7% on a Friday/Friday basis. Weekly estimated slaughter was down 5.0% from the same week in 2013.  Carcass weights are about even. US beef export sales for December were announced this week, at 76,234 MT. That was up 17.3% from December 2013. Weekly export sales were 8,100 MT, with Hong Kong the largest buyer.

Hog futures were up 0.41% this week in the front month, getting a very modest assist from beef prices. February futures are still maintaining a couple dollar premium to the CME Index, one week from expiration/convergence. Estimated weekly slaughter totaled 2.171 million head, up 1.8% from last week and 1.4% larger than year ago. The PED virus is showing an impact, but breeding herd expansion is also underway. Estimated carcass weights are still running about 7 pounds above year ago. The pork carcass cutout value was up $2.90 or 3.25% this week. Hams had the strongest performance as processors accumulated curing inventory to prepare for Easter. USDA weekly export sales for pork slowed to 6,600 MT from 8,700 MT for the prior reporting week. For calendar 2013, US pork exports were down 7.7% to 1.672 MMT. The bulk of the shortfall was due to the "de facto racto embargo" by Russia.

Cotton futures rallied another 1.9% this week. Global ending stocks are still projected to be record large at more than 97 million bales or a 10 month surplus. Weekly US upland cotton export sales for the week ending January 30 slowed sharply to 179,800 RB of old crop and another 35,600 RB of new crop. Significant to the cash market, weekly export shipments were the largest of the year at 358,600 RB. US Export commitments improved to 88% of the USDA forecast for the year. This compares to 81% for this point last year, and the 5 year average of 83%. The CFTC weekly commitment of traders report showed managed money accounts added 1,295 contracts to their net long position, taking them to 45,242 contracts.

 Market Watch

USDA will start the week with the monthly WASDE supply/demand estimates on Monday morning. We’ll also get the usual Export Inspections on Monday and weekly Export Sales on Thursday morning. Monday is also first notice day for deliveries vs. February futures.  Friday, in addition to being Valentine’s Day, will mark the last trading day for the February hog futures contract.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

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