More March Madness

Published on: 15:55PM Mar 21, 2014


Market Watch with Alan Brugler

March 21, 2014

Much March Madness

As followers of the NCAA Men’s Basketball Tournament can attest, the term March Madness is well deserved, as expected winners are upset with some regularity. Big names like Ohio State, Duke and Iowa were all one and done. The ag commodity markets are having their own flavor of March Madness, with big price swings driven by meat scarcity, drought issues with winter wheat, and skittishness ahead of the March 31 USDA reports (which have often yielded big price moves).

Corn futures lost 7 cents per bushel for the week in the May contract. Daily average ethanol production jumped to 891,000 bpd last week, and ethanol stocks tightened to only 15.3 million barrels. Imports have been zero for 24 weeks in a row. Weekly corn export sales were close to expectations as USDA put the actual figure at 745,800 MT. USDA shows that 94% of the projected corn sales for the year are already on the books. We would typically only be 75% by now. The CFTC Commitment of Traders report on Friday afternoon confirmed that spec fund buying continues. The Managed Money reporting category added another 18,299 contracts to their net long, which reached 227,860 contracts as of March 11.

Soybean futures were up 1.5% this week, aided by a 2.7% advance in soybean meal. Soy oil lost 3% on top of a 4.6% slide the prior week. Weekly US soybean export sales were 639,700 MT (including 437,500 MT for 14/15). Total US export Commitments for 2013/14 are now at 107% of the USDA forecast for the year. Projected US ending stocks were tightened to 145 million bushels but USDA still needs to find a way to show more exports.  As of the close on this past Tuesday, CFTC shows managed money accounts adding to their net long position for soybeans from the previous week by 6,024contracts bringing their overall net long position to 198,672 contracts.

Wheat futures were higher in all three classes. Chicago was up 0.9%, KC gained 2.6% and the MPLS May contract was up 1.3%. Weekly wheat export sales reported this week were 597,000 MT, up from 566,100 MT the previous week. Export commitments are 93% of the USDA forecast for the year, vs. the 5 year average of 95%. As of the close on March 18, managed money accounts were still expanding their new net long in CBT wheat to 24,036 contracts. The big spec funds were already net long and expanded that position to 37.051 contracts in KC.

Cotton futures rose another 1.21% this week after a 1% gain last week.  US Export commitments improved to 91% of the USDA forecast for the year. This compares to the 5 year average of 93%. This occurred despite fairly slow weekly sales of 50,800 RB of upland for old crop and 135,900 RB for new crop upland. The weekly Commitment of Traders report showed managed money accounts building up their net long position by 4,607 contracts to take their overall net long position to 67,576 contracts.















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Cattle futures were down 0.86% last week, mostly due to a sell off on Thursday. Cash cattle trade was $150-152, steady to $2 higher than the previous week and well above the April futures value. Wholesale prices were weaker.  Choice boxes lost 0.1%, and Select boxes were 1.2% lower on a Fri/Fri basis. Weekly estimated slaughter at 575,000 head was up 2% from the prior week but 4.8% smaller than last year. Estimated carcass weight was 6# higher than last year. Beef production YTD is down 6.8% from 2013. USDA weekly beef export sales totaled 16,300 MT, down only slightly from the 17,700 MT the previous week. The Cold Storage report on Friday night showed beef stocks on Feb 28 were 5% smaller than in January and 17% smaller than year ago. The Cattle on Feed report showed February placements 114.7% of year ago, with marketings the lightest since 1996 at 96.6%. That left On Feed at 99.5% of year ago.

Hog futures were up 5.34% this week after blistering gains of 5.6% and 5.8% the previous two weeks. That is a cumulative 17.6% rise in 3 weeks. Estimated weekly slaughter was 2.042 million head, up 0.9% from the previous week. That was still down 6.3% from the same week in 2013 and thus supportive to pork prices. Pork production was down 3.5% vs. the same week in 2013, with an extra 6# per carcass offsetting some of the loss in numbers. The pork carcass cutout gained 5.4% this week to add to the 11.5% from the prior week. USDA weekly export sales for pork were down 54% from the 4 week average, at only 5,200 MT. High prices do tend to slow exports and that is the goal of this entire hog rally. More than 20% of the US pork production is typically exported, and with a production shortfall expected more of it needs to stay home.  The Cold Storage report on Friday afternoon showed pork stocks up 6% from January, and 3% larger than year ago.

 Market Watch

Livestock traders will begin the week reacting to the USDA Cattle on Feed and Cold Storage reports released after the close on Friday afternoon. Grain traders will react to any surprise futures positions inherited via the expiration of the April grain options. USDA will release the usual Export Inspections report on Monday morning, with Export Sales on Thursday morning.

March feeder cattle futures will expire on the 27th. We’ll also be into month position asset allocation selling and buying by the hedge funds. USDA will give us a key piece of the Hogs puzzle on Friday night with the quarterly Hogs & Pigs report. Then we will be all lined up for the mega USDA reports on the following Monday, March 31 (Grain Stocks and Planting Intentions).

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