Flashing Plenty of Green

Published on: 15:47PM Mar 14, 2014


Market Watch with Alan Brugler

March 14, 2014

Flashing Plenty of Green 

With St. Patrick’s Day coming up on Monday, it seems appropriate that some of the commodity markets have been putting a lot of green in producer pockets. Hogs are the most obvious example, up 5.58% this week. In that case, it depends on whether your operation suffered PED losses. If you have the hogs, you are making serious money. Ditto for cattle. Wheat also posted strong gains even though a goodly portion of the winter wheat crop has yet to in fact leave dormancy and turn green.

Corn futures lost 3 cents per bushel for the week in the May contract. Daily average ethanol production slowed to 869,000 bpd last week due to rail logistics issues, but ethanol stocks tightened to only 15.9 million barrels. Weekly gasoline use was the largest of the calendar year, and imports have been zero for 23 weeks in a row. Plant margins continue to be excellent. Weekly corn export sales were slow as USDA put the actual figure at 787,000 MT (including 103,800 MT for 14/15). USDA shows that 93% of the projected corn sales for the year are already on the books. We would typically only be 72% by now. USDA raised projected exports for the year by 25 million bushels on Monday to reflect the blistering pace of sales activity. The CFTC Commitment of Traders report on Friday afternoon confirmed that spec fund buying continues. The Managed Money reporting category added another 51,439 contracts to their net long, which reached 209,561 contracts as of March 11.

Soybean futures were down 4.75% this week. Soybean meal was down 3%, but soy oil lost 4.6% after a bounce of 6.2% the prior week. With both products under pressure, the beans about had to go down. Weekly US soybean export sales were 890,400 MT (including 776,900 MT for 14/15). Total US export Commitments for 2013/14 are now at 106% of the USDA forecast for the year after USDA hiked projected exports by 20 million bushels on Monday. Projected US ending stocks were tightened to 145 million bushels.  As of the close on this past Tuesday, CFTC shows managed money accounts reduced their net long position for soybeans from the previous week by 15,845contracts bringing their overall net long position to 192,648 contracts.

Wheat futures were up sharply in all three classes. Chicago was up 5.1%, KC gained 4.2% and the MPLS May contract was up 4.1%. Weekly wheat export sales reported this week were 566,100 MT. vs. 600,500 MT the previous week. Export commitments are 91% of the USDA forecast for the year, vs. the 5 year average of 94%. As of the close on March 11, managed money accounts had flipped to net long (+10,515 contracts) in CBT wheat for the first time since October 29. The big spec funds were already net long and expanded that position to 32,944 contracts in KC.















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Cotton futures rose another 1% this week.  US Export commitments improved to 75% of the USDA forecast for the year. This compares to the 5 year average which is also 75%. This occurred despite fairly slow weekly sales of 60,000 RB of upland for old crop and 120,400 RB for new crop upland. Export shipments slowed to 264,200 running bales. The weekly Commitment of Traders report showed managed money accounts building up their net long position by 8,362 contracts to take their overall net long position to 62,969 contracts.

Cattle futures were up 1.4% last week. Cash cattle trade was $148-150, with most of it at $150 on Friday. Wholesale prices were strong until midweek.  Choice boxes gained 1.9%, and Select boxes were 1.6% higher on a Fri/Fri basis. Weekly estimated slaughter at 564,000 head was up 2.9% from the prior week but 7.2% smaller than last year. Estimated carcass weight was 7# higher than last year. Beef production YTD is down 7% from 2013. USDA weekly beef export sales totaled 17,700 MT, showing little effect of the higher wholesale prices on overseas buyers. The CFTC Commitment of Traders report showed managed money spec accounts reducing their net long position in live cattle by 779 contracts, bringing their overall net long position to 131,294 contracts. 

Hog futures were up 5.6% this week after a 5.8% advance the previous week. Estimated weekly slaughter was only 2.024 million head, down 2.1% from the previous week. That was also down 7.7% from the same week in 2013 and thus supportive to pork prices. Pork production was down 5.4%, with an extra 5# per carcass offsetting some of the loss in numbers. The pork carcass cutout gained 11.5% from Friday to Friday.  USDA weekly export sales for pork were down 25% from the previous week at only 7,100 MT and down 44% from the 4 week average. High prices do tend to slow exports and that is the goal of this entire hog rally, to keep more of the pork at home. More than 20% of the US pork production is typically exported. The managed money accounts (per CFTC) increased their net long position by another 2,709 contracts bringing their total net long position to 72,351 futures and options contracts.

  Market Watch

 We’ll start the week with St. Patrick’s Day, traditionally a big celebration for both New York and Chicago traders. NOPA is also expected to issue their monthly crush report. We will also get the usual weekly Export Inspections report on Monday, and weekly Export Sales on Thursday. Spring officially starts on Thursday! On Friday, USDA will release the monthly Cattle on Feed and Cold Storage reports at 2 pm CDT.  Friday also marks the expiration of April grain options and is the last trading day for most of the March financial options. Not to be overlooked, the FOMC will meet on Tuesday and Wednesday, and is expected to continue to reduce their bond buying program.

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