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Happy New Year and the Grim Reaper

Published on: 20:42PM Jan 02, 2015

 Brugler

Market Watch with Alan Brugler

January 2, 2015

Happy New Year From The Grim Reaper

 

The New Year’s celebrations are mostly over (other than the Chinese New Year which isn’t until February 19). There are a couple different themes as the holiday is marked. You see a number of retrospectives, whether lists of the sports stars or celebrities who have passed away or the market based year in review and top 10 news headlines pieces. It is a time (or opportunity) for evaluating what you did right, and what needs to change.  There is the Happy New Year wish for 2015 to be better. There is also the Grim Reaper theme, collecting people as time marches on. Nearly all of us baby boomers can count 10 or 12 peers, colleagues, neighbors or classmates who are no longer with us. The markets have their own version of the Grim Reaper. There is an axiom which states “Bulls win some, bears win some, pigs get slaughtered”. It is a useful warning about overstaying positions, but it is probably more accurate to state that bulls get slaughterd and bears get slaughtered! Prices move up, down and sideways. In 2014, all of the bulls were slaughtered except, ironically, the cattle and feeder cattle markets. We would argue that those two will eventually be on the reaper’s 2015 list, likely with poultry and hog producers as accessories to the deed.  That said, it won’t take much of a weather event to tighten up those grain stocks and take out the bears.

Corn was down  4.6% this week, ending a string of weekly gains. Year end profit taking was a big factor, with prices up substantially since the quarter began on October 1. Fundamental news was so-so, with the weekly ethanol production down from the record level of the previous week, and ethanol stocks building 500,000 barrels. US weekly export sales for the week ending December 25 were released on Friday morning, with sales at 895,100 MT.

 

Commodity

 

 

 

 

Weekly

Weekly

Month

12/12/14

12/19/14

12/26/14

12/26/14

Change

% Change

Mar

Corn

$4.08

$4.11

$4.15

$3.96

($0.190)

-4.58%

Mar

CBOT Wheat

$6.07

$6.32

$6.11

$5.81

($0.295)

-4.83%

Mar

KCBT Wheat

$6.34

$6.66

$6.44

$6.17

($0.273)

-4.23%

Mar

MGEX Wheat

$6.21

$6.48

$6.32

$6.11

($0.205)

-3.25%

Jan

Soybeans

$10.47

$10.31

$10.48

$10.03

($0.450)

-4.30%

Jan

Soybean Meal

$367.00

$363.50

$379.70

$356.50

($23.200)

-6.11%

Jan

Soybean Oil

$32.36

$31.97

$32.46

$31.95

($0.510)

-1.57%

Feb

Live Cattle

$162.18

$160.10

$162.48

$165.68

$3.200

1.97%

Jan

Feeder Cattle

$225.60

$220.15

$213.73

$223.95

$10.225

4.78%

Feb

Lean Hogs

$83.25

$81.90

$81.55

$81.30

($0.250)

-0.31%

Mar

Cotton

$60.54

$60.89

$61.63

$59.58

($2.050)

-3.33%

Mar

Oats

$3.13

$3.11

$3.06

$3.02

($0.038)

-1.23%

Jan

Rice

$12.35

$12.31

$12.17

$11.29

($0.875)

-7.19%

Soybean futures dropped 4.3% for the week.  Cumulative export shipments are running 211 million bushels above last year, but that is “baked into the cake”. Both the sales pace and shipments tend to slow in late December and early January, and the former will likely not recover as the market looks ahead to South American availability in March. Export shipments in the second half of the marketing year (Mar-Aug) were less than 20% of the first half total in the 2013/14 marketing year. We published a Special Research Report with the details last week and our projection for the 2014/15 final total.  Weekly export sales through December 25 were 611,000 MT, with soybean meal at 159,300 MT.

Wheat futures were down sharply this past week, losing 3.2% to 4.8%. Chicago was the weakest class as some Russian shipments resumed. Profit taking was a major feature of the futures trade, as wheat had a substantial premium to corn and also a substantial premium to EU offers that has priced it out of much of the export market. US weekly wheat export sales for the week ending December 25 were 354,100 MT.  

Cotton futures were down sharply on Wednesday and weak again on Friday. The US dollar index surged to a new multi-year high this week, making US cotton expensive in terms of third party countries with floating currencies. The dollar doesn’t affect China trade much because of the managed value of the yuan. However, China is still sitting on huge cotton inventories built up since 2011 and has announced a WTO minimum import quota for 2015. That is presumed to be part of an effort to pare stockpiles by limiting imports. The AWP for the week of 1/2-1/8 is 48.74, with the LDP at 3.26 cents.    

Cattle futures rallied sharply this week as the cash market disagreed with the big futures meltdown in mid-December. Nearby futures were up 1.97%, with feeder cattle up 4.8%. Cash cattle traded at $166 on Wednesday, with rumors of up to $168. February futures were only $163 and change on Wednesday when they became lead month. Weekly beef production was up 15.2% from the previous week, but 12% below year ago. Weekly slaughter was down 13.9% from the same week in 2013/14.  Average carcass weights are estimated to be 17 pounds above year ago.

Hog futures were down 0.3%  this week.  On Friday, USDA reported weekly pork export sales through December 25 totaled 49,500 MT for combined 2014 and 2015 sales. Low pork prices may be beginning to attract more buyers despite the strong US dollar. The carcass cutout value has dropped $40.05/cwt from October 6 to December 31, a 32% decline.  Weekly hog slaughter was 0.3% above year ago, and 15.0% larger than last week.  

 Market Watch

USDA will issue the weekly export inspections report at 10 am CST on Monday. Things pretty much return to normal after holiday disruptions, with the EIA weekly ethanol report due on Wednesday and the USDA weekly Export Sales on Thursday morning. Of course, this is all the “calm before the storm”.  The quadruple USDA reports due for release a week from Monday (January 12) will be driving a lot of positioning trades this week as the various surveys and estimates are released. As a reminder, those reports include the final 2014 Crop Production, the monthly USDA WASDE supply/demand report, the quarterly Grain Stocks report and the Winter Wheat seedings report.

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.

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