Red Week

Published on: 16:53PM Nov 01, 2013

Market Watch with Alan

November 1, 2013

Red Week

The thing that jumps out at you from our weekly change report is the color. Net changes that are red mean prices dropped this week. The only commodity on our list that didn’t drop was soy oil, which benefitted from rising palm oil prices and the tightest US inventory in years. Everything else posted losses for the week. The ag commodities were not the exception, as crude oil and gold also had big losses. Why all the selling in a week when the Fed decided to keep spiking the punch bowl? The two most obvious candidates are the rising stock market (drawing new money away from commodities) and the strong US dollar. A stronger dollar makes commodities more expensive for buyers in third party currency terms. Looked at another way, it takes fewer "strong" dollars to buy the same amount of value in a commodity, i.e. a lower price.
















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December corn futures were down 2.9% this week. They traded at the lowest level since August 2010 for that Dec 13 contract. USDA reported a huge 3 week accumulation of US corn export sales, 5.29 MMT (208 million bushels). That didn’t stop prices from dropping on a litany of rising yield estimates. On Friday, Informa and FCS both boosted projected national average corn yield to 161.2 bpa, with production estimates of 14.01 and 14.36 billion bushels respectively based on different harvested acreage assumptions.

November soybean futures were down 2.6% this past week, and are now trading at about the same price they were on October 11. There were plenty of bullish inputs, but no bullish price action. Weekly export inspections for the previous week were near record large at more than 83 million bushels. Weekly Export Sales announced on Thursday, while actually a 3 week accumulation, totaled 4.742 MMT (174 million bushels). The US has now booked more than 80% of the expected sales for the entire year in less than two months.

Wheat futures were lower in all three markets this week, with MPLS slightly stronger than the other two on ideas that millers are upping the % of spring wheat in their flour blends. Cumulative export shipments are now over 572 million bushels. Last year they were only at 393 million bushels. The US ag attaché cut projected Argentine wheat production to 10.5 MMT compared to the official September estimate of 12 MMT.

Cotton futures sank another 2.95% this week after losing more than 5% the prior week. Technical selling was a big part of the decline. Global ending stocks are still projected to be record large. US harvest pace is lagging behind the 5 year average, but the big story is slower export sales. Upland sales commitments are only 49% of the USDA projection for the year. They would typically be 56% by now.

Cattle futures gave back $.90 for the week after rising $2.70 the week before on strong cash cattle trade of $133. Producers were having trouble getting that on Friday, with a few trades at $132. Beef production YTD is down 1.0% from 2012. Production this week was 2.3% smaller than the same week in 2012.  Our calculations show that ready numbers should be below year ago into December, based on the Cattle on Feed placement data.  Weekly slaughter was 624,000 head vs. 645,000 head a year ago. The USDA Cattle on Feed report confirmed that numbers are still down more than 7% from last year. However, the Cold Storage report showed total beef stocks up 3% from August, and up 5% from year ago. Wholesale beef prices were up 1.8% on a Fri/Fri basis in the Choice, and up 2.6%% in the Select.

Hog futures were down 2.3% this week.  Pork production YTD is down 1.3% from year ago. Production this week was 2.4% smaller than the same week in 2012, but up 1% from the previous week. The slaughter run was down 3.7% from year ago. Thus, you might conclude that average carcass weights were a little higher. USDA estimates them up 3 pounds vs. year ago. The pork carcass cutout value was down 33 cents for the week, due mostly to a 2.7% seasonal decline in the pork belly primal.

Market Watch

We’ll get the rest of the back data cleaned up this week, with USDA releasing the first Crop Production and Supply/Demand reports in two months on Friday morning. CFTC is also scheduled to be caught up with their Commitment of Traders data by November 8 (pm). In the mean time, we will get the regular Monday USDA Export Inspections and Crop Progress reports. Weekly Export Sales will be out on Thursday morning, and that series is now back to its typical 1 week lag.  December cotton options expire on Friday. November cattle options expired on the 1st and that will leave a couple folks with surprise positions to deal with on Monday morning.


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