Gobbling Up Bulls and Bears

Published on: 20:02PM Nov 28, 2014

 Brugler

Market Watch with Alan Brugler

November 28, 2014

Gobbling Up The Bulls and Bears

Holiday markets are notoriously difficult to trade, whether you are a hedger or a speculator. Traders are gone, liquidity is lacking. As in football, getting past containment can result in a big move. Friday was such a day in a number of markets. Crude oil futures dropped 9% on an OPEC decision to maintain production levels, which had been well advertised ahead of time. Gold sank $31 per ounce on a strong dollar and apparent month end profit taking. Soybeans lost 31 cents in the nearby January contract despite a strong historical tendency for gains on the day after Thanksgiving. You get the picture. Limited liquidity and big moves. It wasn’t all bearish, as the wheat bulls feasted on 5-6% gains for the week and double digit advances on Friday.

Corn ended the week 0.8% higher, a three cent per bushel gain.  Net weekly export sales were improved for a third week in a row, to 944,900 MT. The biggest buyer was “unknown destinations” at 243,200 MT. The cumulative commitments are 49%  of the full year USDA forecast. They would typically be 51% by now.It is worth noting that grain sorghum export sales are huge. The net sales were the largest of the marketing year at 461,700 MT this past week. China continues to allow sorghum in as a non-GMO feed alternative, with China buying another 177,500 MT. This is kind of sneaky feed grain demand but means corn will be fed somewhere else instead of sorghum. Corn consumption for ethanol use also hit the highest level of the year this week.

Soybean futures were down 2.2% for the week, due entirely to a meltdown on thin volume on Friday. Weekly soybean export sales were much larger than expected at 1.485 MMT (54.56 million bushels). Cumulative export commitments have already reached 83% of the current USDA forecast for the full year. They would typically be 73%, strongly suggesting an upward revision in the export number for the December WASDE report. Fundamentally speaking, the sell off on Friday was due to net negative weekly export sales in soybean meal, with cancellations of 22,300 MT. That said, meal export shipments this past week of 417,301 MT were the largest weekly total since April 1998 (excluding the multi-week lump from the government shutdown).  Meal export commitments are 56% of the full year forecast, ahead of the 49% average for this date.

Wheat futures were sharply higher on all three markets, with Minneapolis the strongest with a 6.6% weekly gain. US weekly export sales were an improved 496,500 MT.  Total commitments (shipped plus outstanding sales) are 66% of the USDA forecast for the year. The five year average for this date is 67%, so essentially we are on pace for the drop expected by the World Outlook Board in the monthly WASDE report. The EU continues to aggressively export wheat, with export licenses appoved for the year to date at 12 MMT vs. 11.2 MMT  a year ago at this time. The bull story comes mostly from projections that 2015/16 world wheat production could be 20-25 MMT smaller than this year.  The IGC did cut world 2014/15 production by 1 MMT in their latest update.

Dec Cotton futures were up 2% for the week after plunging to multi-year lows the preceding week. The weekly AWP is 46.09, resulting in a rise in LDP/MLG payments to 5.91cents per pound for any cash cotton sold by Thursday.The US dollar was sharply higher on Friday.  The lower cash cotton prices facilitated by the LDP are boosting cotton exports, with commitments already at 71% of the forecast for the year. They would typically be 69%.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

11/07/14

11/14/14

11/21/14

11/28/14

Change

% Change

Dec

Corn

$3.68

$3.82

$3.73

$3.76

$0.030

0.80%

Dec

CBOT Wheat

$5.15

$5.54

$5.47

$5.77

$0.300

5.48%

Dec

KCBT Wheat

$5.69

$6.05

$6.04

$6.37

$0.330

5.46%

Dec

MGEX Wheat

$5.46

$5.91

$5.83

$6.22

$0.385

6.60%

Jan

Soybeans

$10.37

$10.21

$10.39

$10.16

($0.230)

-2.21%

Dec

Soybean Meal

$390.40

$380.10

$378.40

$391.10

$12.700

3.36%

Dec

Soybean Oil

$32.40

$32.21

$32.69

$32.18

($0.510)

-1.56%

Dec

Live Cattle

$166.80

$170.20

$170.90

$168.88

($2.025)

-1.18%

Jan

Feeder Cattle

$232.45

$236.13

$236.35

$231.08

($5.275)

-2.23%

Dec

Lean Hogs

$88.78

$92.68

$90.65

$90.33

($0.325)

-0.36%

Dec

Cotton

$63.96

$59.80

$59.76

$60.96

$1.200

2.01%

Dec

Oats

$3.39

$3.39

$3.27

$2.95

($0.323)

-9.87%

Jan

Rice

$12.12

$11.97

$12.60

$12.34

($0.260)

-2.06%

Cattle futures lost 1.2% this this week following a bearish monthly USDA Cattle on Feed report the previous Friday. Wholesale beef prices were higher for the week, with both Choice 600-900 pound boxes and Select product up 1.1% on a Wednesday/Wednesday basis. Cash cattle traded at $173 at midweek, with asking prices still mostly $174 on Friday. Weekly estimated slaughter was 10.8% smaller than the same week in 2013, with beef production down 8.7%. Beef production for the YTD is down 6.0%, with slaughter down 7.3%.  Weekly beef export sales totaled 11,300 MT, down 16% from the previous week.

Hog futures lost 0.36% this week.  For 2014 YTD (year to date), hog slaughter is off 5.2% from the same point in 2013. Slaughter this past week was down 3.2% vs. year ago. Pork production was down 2.0% vs. year ago this week. Pork production for the year is down 1.8% vs. Jan-Nov 2013.  Pork carcass cutout values were up 0.16% this week on a Wednesday/Wednesday basis. Weekly pork export sales were 3.3% larger at 18,900 MT. China was a buyer of 3,600 MT. 

 Market Watch

The CFTC Commitment of Traders report is scheduled for release on Monday due to the holiday delay. This first week of December will get USDA reporting back to normal, with Export Inspections on Monday. Weekly Export Sales will be on Thursday. December futures contracts for grains are in delivery, with limited receipts currently registered for everything except soybean oil. The December cattle options will expire on Friday.

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.

Copyright 2014 Brugler Marketing & Management, LLC