Market Madness

Published on: 15:37PM Mar 22, 2013



                                                Market Watch with Alan Brugler

March 22, 2013

Market Madness


This week marks the beginning of the NCAA college basketball tournament, popularly nicknamed "March Madness" because of the frequency of shocking game outcomes and the unpredictability of the final winner. The ag world has its own version of March Madness, with the USDA quarterly Grain Stocks and Planting Intentions reports coming up on March 28. We call it madness because the release of the numbers has frequently been followed by limit price moves. The market tends to be surprised by these survey based reports. Last year, May corn was limit up following the March 30 reports. May soybeans were up 47 ¾ cents. Historically, the market has under-estimated corn acreage and overestimated soybean planting intentions, but the Grain Stocks numbers have tended to be a larger surprise because they define otherwise fuzzy feed & residual use estimates.

Corn futures gained 9 cents per bushel for the week, a 1.3% advance and the second consecutive higher weekly close. They shook off a profit taking sell off on Friday which trimmed the weekly gain by 7 cents. The EIA showed increased daily average ethanol production for last week, and dropped US ethanol stocks to a multi-month low. Ethanol imports did rebound after two weeks of zero activity, but that volume was absorbed by the market. RIN values eased back a little, but should still be sending the signal for expanded voluntary blending and export sales. The RBOB/Ethanol spread still says it is a no-brainer to use as much ethanol as you can if you are a blender.  US weekly export sales were 275,500 MT, but weekly corn shipments hit their highest level since Jan 24. Accumulated exports to date are running at 71% of the USDA projection, down 7% from the 5-year average.

Soybeans were up just a little over 1% this week, thanks to a matching gain in soybean oil futures. Meal crawled 0.12% higher. China’s Feb soybean imports totaled 2.9 MMT, down 24.3% over the previous year. Combined Jan-Feb imports were 7.681 MMT according to Chinese Customs, down 9% from last year. Supplies at Chinese port elevators are less than one month of use. Chinese imports of rape and palm oil were up in Jan-Feb, while soy oil imports were down vs. the same period in 2012. US weekly export sales data was disappointing for soybeans but strong for bean oil and meal. Soybean total commitments stand at 97% of the USDA projection compared to the 5-year average of 89%. Soybean meal commits stand at 95%.

KC Wheat regained 10 cents of the 20 cents per bushel lost the previous week. A threat of frost/freeze damage over this weekend and into Monday had traders putting a little weather premium back into the market. Chicago was up .9%, and MPLS was up 1.29%. Weekly export sales were much smaller than the previous week at 573,300 MT in total sales. Wheat total commitments stand at 89% of the USDA total for the year compared to the 5-year average of 97% for this date. US SRW wheat at the Gulf is currently cheaper than corn. There is an improved chance of moisture for some of the hard red winter wheat growing areas over the next few days.

Cotton was 5.7% lower this week, ending a string of gains that had December futures up 18% from their November bottom. Weekly export sales were down a little bit, but cumulative sales are already at 91% of the USDA’s revised forecast for the year. The five year average pace would be 92% for this date. Global ending stocks remain burdensome, but much of that cotton is locked up in China, and China continues to be an active buyer in the world market. US weekly shipments fell to the lowest level since Dec 20. Trade estimates for Thursday’s Planting Intentions are running from 10 to 11 million acres, down from year ago but up from earlier expectations because of the rise in futures prices.















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Cattle futures eked out a 0.34% gain for the week. As we had anticipated, a strong basis triggered some midweek cash cattle sales at lower numbers. Boxed beef had a weekly change of -2.2% or $4.33 for Choice. The Select boxes were only off $1.65 or 0.9%, resulting in the Choice/Select spread becoming inverted for the first time since last April. Feedlots are being paid zero for adding finish to cattle right now. Weekly beef export sales were again above 15,000 MT. Beef production was up 0.7% from the same week in 2012, but slowed 1.1% from last year. Average carcass weights are still running about 9 pounds higher than year ago.  USDA on Friday afternoon showed that the number of cattle in US feedlots continued to shrink in February, with placements only 86.5% of year ago and the smallest for that month since the data series began in 1996. The March 1 On Feed inventory was 93.0% of year ago, vs. trade expectations of 93.5%. These bullish numbers were offset a little by the Cold Storage report and its larger beef inventory. Beef in storage was up 1% from January, and 4% larger than year ago. Keep in mind that March 1 was before the large Japanese purchase was made.

Hog futures dropped more than 2% this week. Similar to cattle, the trade is concerned over export and retail demand for pork. The loss of the Russian market, and restrictions on Chinese pork imports, have backed up product into the US market.  Pork production for the week was up 2.1% from the same week in year ago. Pork production YTD is down 1.1% from last year. Carcass weights are still running about a pound below year ago, helping to offset the larger slaughter.   The Cold Storage report showed total pork in the cooler up 5% from January and up 2% from year ago. Ribs and picnics were particularly abundant at the end of February.

Market Watch: The ag markets will begin the week dealing with the aftermath of Friday afternoon. USDA released Cattle on Feed and Cold Storage reports, and the April grain options also expired. The "pin" battles were in the soybeans at the 1440 strike price and in May wheat at the 730 strike price. USDA will have the usual weekly Export Inspections report on Monday and Export Sales on Thursday, but the big reports of the week will be on Thursday morning. That is when the quarterly Grain Stocks and Prospective Plantings reports will be released. Trading activity will be compressed, because the US markets are closed on Friday for Good Friday and the 3-day Easter holiday weekend.

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