Friday Market Watch with Alan Brugler

Published on: 17:21PM Sep 13, 2013


Market Watch with Alan Brugler

September 14, 2013


September corn futures dove off the board today, losing 29 cents on the day and finishing at round number support of $4.50 per bushel.  December futures lost 9 ¼ cents on the week, and are now sitting 13¼ cents above the lowest price the Dec13 contract has seen since September of 2010.  The trade, particularly the spec funds, continues to be bearish but suspects that some yield has been lost to the drought conditions in the WCB. Offsetting that concern, the above normal heat in the Midwest and West is lessening the risk of an early freeze. The Commitment of Traders report on Friday showed the Managed Money added just 180 contracts to their net short position, which is now 64,686 contracts as of September 10. US ethanol production jumped sharply last week, but imports were smaller and ethanol stocks were up only 100,000 barrels. Stocks built up on the West Coast, but were drawn down in the Midwest due to a number of plants still taking pre-harvest down time. USDA provided a bearish input on Thursday with the 155.3 bushel national average yield projection and the 13.843 billion bushel crop estimate. Projected ending stocks rose to 1.855 billion bushels when the trade had been leaning smaller. They also provided a bullish input with a cut in estimated old crop stocks to 661 million bushels. The real tests will come with the Grain Stocks report on the 30th (tells us whether 661 million is accurate) and the acreage revisions in October (assumed to be lower due to additional Prevented Planting acres).


September Soybean futures expired with some fireworks, closing 46¾ cents higher on the day after being as much as 57½ cents higher than that during the session. November futures were up 14 cents for the week after gaining 37¾ cents on Thursday following the USDA reports. A Bloomberg survey showed an average estimate of 41.2 bushels per acre for US yield, and that is what USDA showed on Thursday. Old crop stocks were left UNCH, while new crop was trimmed to 150 million bushels. The average cash price estimate for the year jumped a dollar per bushel due to the price rationing needed to keep those ending stocks above pipeline levels. USDA did hike expected Brazilian production by another 3 MMT for 2014, due to the planting incentives created by the rally to $14 in November beans. The latest Commitment of Traders data reported today as of Tuesday Sept 10th showed managed money decreased their net long position in soybeans by 13,505 contracts bringing their total net long position to 145,933 contracts.


Wheat futures were lower on the week with the September contracts expiring today.  KC HRW was down 23 ½ cents for the week, losing 21¾ cents of that today.  The Chicago wheat September contract lost 14 cents on the day, but finished the week only 7¼ cents lower.  Minneapolis wheat saw the least damage to the September contract, losing only 2 ½ cents on the week and just a ¼ cent today.   Export sales continue to be well ahead of the most recent years, with 54.6% of the USDA forecast for the year already on the books or shipped out. Egypt bought Russian and Romanian wheat to extend coverage to mid-November. The US was not competitive due to higher freight costs. USDA showed larger expected world ending stocks for 2014 (176.3 MMT) after boosting Canadian production another 2 MMT.  US production was not changed on Thursday, but could be modified in the Small Grains report on September 30. The latest Commitment of Traders data for the reporting period between Sept 3rd – Sept 10th showed managed money increased their net short position in Chicago wheat by 8,618 contracts bringing their total net short position to 47,008 contracts.


Cotton futures traded at the highest levels in the October contract since August 21st during the last two sessions of the week.  Weekly export sales of Upland cotton were 134,400 running bales last week, and net American Pima sales were 16,000 RB.  Another 19,800 running bales of Upland cotton were purchased by Turkey for the 2014/15 marketing year. The large spec funds liquidated another 6,299 positions bringing their total net long position to 40,548 contracts according to the Friday afternoon CFTC commitment of traders report. December futures traded at their highest price since August 26th before closing 69 points lower than the high tick on Friday. USDA raised projected US old crop ending stocks to 3.9 million bales and cut projected new crop exports. That increased expected 2014 US stocks to 2.9 million bales. World ending stocks were also hiked for 2014 to a record 94.73 million bales. That is a stocks/use ratio of 86.4%, or 315 days at the current rate of use. Over 61% of that cotton would be held within China. China is rumored to be restructuring their price support program because it has resulted in larger than desired stocks accumulation. 
















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Cattle futures fell back 0.34% this week after a small loss the previous week. Beef production this week was 7.2% larger than the Labor Day week, but 5.8% smaller than the same week in 2012. Production year to date is down 0.9%. Weekly slaughter was 6.0% smaller than in 2012 with carcass weights continuing to run about 3 pounds higher than last year. Wholesale beef prices were lower this week despite the strong export sales and reduced slaughter, with Choice losing 1.3% and Select down 2.5% on a Friday/Friday basis. Cash cattle trade on Thursday $123, equal to the previous week. Feedlots were asking $124 for the rest. The latest Commitment of Traders data for the reporting period between Sept 3rd – Sept 10th showed managed money decreased their net long position in live cattle by 18,492 contracts bringing their total net long position to 39,342 contracts.


Hog futures lost 0.22% this week, falling back a bit from the strong rally from the previous two weeks. The estimated weekly slaughter was off more than 10% from the same period a year ago.  The pork carcass cutout value gained 2.85% on the week.  The belly primal was another 7.97% higher this week, and loins gained 4.77%. The USDA weekly export sales report showed another 7,331 MT booked, which is slightly below the weekly average for the month of August, and well above the weekly average for July.  The latest Commitment of Traders data for the reporting period between Sept 3rd – Sept 10th showed managed money increased their net long position in lean hogs by 11,688 contracts bringing their total net long position to 90,496 contracts. Estimated week to date slaughter (including Saturday’s estimates) came in at 2,172,000 head compared to 2,427,000 head for the same period last year.


Market Watch


This will be a little bit quieter week for the grain trade, now that we are past the Crop Production report. It will be kind of a lull in the grain news flow, peaking again with the Grain Stocks report on the 30th.   The regular Monday USDA reports (Export Inspections and Crop Progress) will be of interest, particularly the rate at which the crops are maturing. Traders are expecting further small declines in the % of the corn and soybean crop rated good or excellent. Weekly ethanol production and stocks will be out on Wednesday. USDA weekly Export Sales will be released on Thursday. There will still be some other reports out. The much awaited Federal Reserve meeting will be Tuesday and Wednesday, with potential rippled effects. The USDA Cattle on Feed report will be out on Friday afternoon. Friday will also mark the expiration of October grain options.


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