Many Questions, Fewer Answers

Published on: 16:20PM Aug 09, 2013


Market Watch with Alan Brugler

August 9, 2013

Many Questions, Few Answers


The sense of urgency has slacked off a bit in grains, due to the oncoming US corn and soybean harvest and the raw numbers of acres involved. The perception or attitude is that the crops are monster large, and that USDA is likely to show them even larger on Monday. There are still a lot of questions, however. First and foremost is acreage. USDA will issue an updated soybean planting figure on Monday. This will also be the first report of the year where USDA is measuring objective yield plots for corn and will have some "harder" numbers from NASS. Due to the lagging crop maturity, they won’t have as much as usual in the way of actual grain samples. That same crop maturity is an issue when it comes to frost/freeze risk (and the NWS 8-14 day is still below or much below normal on temps). However, that answer on dodging the Jack Frost bullet isn’t likely to be available until September. 

September corn futures were down 10 cents per bushel, or 2.15% for the week. December futures were down 10 ½ cents. The trade, particularly the spec funds, continues to be extremely bearish. The Commitment of Traders report on Friday showed the Managed Money category adding another     4,983 contracts to their net short position. Weekly ethanol production rebounded while ethanol imports were the largest in months. Ethanol stocks rose again as combined production and imports were larger than domestic off take. RIN values dropped back below $1 as EIA extended the period in 2014 for blenders to prove 2013 compliance on mandated use. Old crop weekly export sales were 290,100 MT, but new crop sales were a little slower at 220,900 MT. China has also been aggressively buying DDGs from the US, confirming over 700 thousand MT’s in the month of July.

Nearby August soybeans were up 10 cents for the week on a mini-squeeze in the soon to expire August meal contract. There have still be zero deliveries against either August beans or August meal. The weakened basis has created at least a threat of same, taking the starch out of the bulls. Meal was up 2.04%  for the week. Soy oil was down 2.3%. Weekly soybean export sales were a slow 79,400 MT for old crop, but a stout 1.017 MMT for new crop (37.3 million bushels).

Wheat futures were guilty by association. The tight stocks forecast for US wheat (lowest in 5 years) is dependent in part on feeding wheat. Sliding corn prices have made it a little more questionable about whether that wheat feeding activity will continue past September. USDA reported weekly export sales last week were 726,200 MT. Outstanding export commitments are now 47% of the USDA forecast for the year vs. the 5 year average of 37% for this date.
















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Cotton futures were down 1.33% this past week. Weekly export sales totaled 81,400 running bales (RB) of upland and 14,700 RB of pima. USDA also rolled 899,500 RB of previous year sales that had not been shipped into the new crop sales slot. Global stocks projections continue to be record large, but much of that cotton is tied up in China. As long as China doesn’t decide to dump it into the market, prices are being supported.

Cattle futures exploded at midweek and ended the week 1.53% higher. Feeder cattle were up only 0.08%.  The big news of the week was a decision by Tyson to suspend purchases of cattle fed the Zilmax beta agonist. That implied lower average carcass weights for fourth quarter marketings, although some feedlots will choose to just switch to Optiflexx (ractopamine) in order to retain some of the feed efficiency. Russia and China both prohibit imports of beef from cattle fed the latter, so this may not be a long term solution. Wholesale beef prices were higher this week, with Choice up 1.0% and Select up 0.6% on a Friday/Friday basis. Weekly US beef production was up 1.3% from the previous week but down 1.0% from the same week in 2012. YTD beef production is still 0.8% below last year. USDA reported weekly beef export sales had slowed to 8,900 MT last week.

Hog futures hit new contract highs, but did not take out the high on the continuation chart. Nearby hogs were up 1.28% for the week. The estimated weekly slaughter is 2.019 million head. That was down 0.1% from last week, and 0.2% smaller than the same week in 2012. Pork production YTD is down only 0.3%. The pork carcass cutout value gained 1.42% this week. Pork butts were up more than 5% for the week. The USDA weekly export sales report slowed to only 4,800 MT.

Market Watch

Grain traders will begin the week with the USDA Crop Production and WASDE supply/demand estimates at 11 am CDT on Monday morning. USDA will issue the usual weekly Export Inspections and Crop Progress reports on Monday. The Export Sales report will be on Thursday morning. Wednesday will mark the expiration of the August hog and soybean complex futures.


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