Riding the Roller Coaster

Published on: 17:49PM Feb 28, 2014


Market Watch with Alan Brugler and Ryan Palmer

February 28, 2014

Riding the Roller Coaster


The first part of a roller-coaster is arguably the most boring part of being on one… click, click, click, click, click, click, click… notching higher and higher while the excitement builds.  Then… here we go… "WhooooHooooo!"  Then "Whooooaaaa!" and "Whoops, lookout!!!!" or "I want to get off!".  "Oh wait, I like it….  AHHHHHH, it’s over?!?! I want to go again…."  It’s probably easy to see where I am going with this, just look at the charts this week.  The cattle market climbed higher all week, but lost some significant ground on the expiration of the front month contract.  March feeders started the week lower, then put in new highs before ending the week with two down days.  Lean hogs hesitated on Wednesday, but made new highs on Thursday and Friday with the April hogs limit up on two days.  March Corn futures tried to go lower on Monday, traded at new highs for the move on Wednesday, then followed the bean bears lower on Thursday before posting a 9.5 cent rally late on Friday.  The soybeans… well the soybeans had quite an unusual week; lots of bears jumped off the roller coaster on Thursday as it appeared to be headed for trouble, but the buying came back strong with a weaker dollar on Friday.       


Corn futures gained 4 cents for the week, and the March contract notched a new high close for the move. Ethanol production was up from last week, and stocks were smaller.  Weekly corn export sales were larger than last week 853,097 MT of the 2013/14 crop. USDA shows that 89% of the projected corn sales for the year are already on the books. We would typically only be 71% by now. The largest commitment in recent years has been 81%.  The CFTC Commitment of Traders report tonight showed managed money added 42,264 contracts to their net long position in corn last week, giving them a net long position of 87,516 contracts.  This is the largest net long position in corn for speculators since June 4, 2013.


Soybean futures were up 3.17% this week, with soybean meal gaining 2.65%.  Concerns about the Brazilian crop helped bring some support to the US market this week.  Back on Tuesday morning, the USDA reported old crop export sales of more than half a million metric tonnes to China under the daily reporting system.  This was a relief to the bulls who had been leery of potential Chinese cancelations.  Weekly US soybean export sales were more than 642K MT this week, with China in for 287,800 MT of old crop and 232,500 MT of new crop. Total US export Commitments for 2013/14 are now at 106% of the USDA forecast for the year. The 5 year average for this point in the marketing year would be 88%.  The bears thought they had won after a spike above nearby technical objectives took the market back down to the bottom of a 60 cent trading range on the day.  Panic selling ensued for the rest of the Thursday session, but the bulls took back more than 20 cents in the front two contracts today with some help from the dollar getting down below the low-levels posted last October.  As of the close on this past Tuesday, CFTC shows managed money accounts increased their net long position for soybeans from the previous week by 7,504 contracts bringing their overall net long position to 202,996 contracts. This is the largest net long position in soybeans for MM since Sept 18, 2012.

Wheat futures were lower in KC and Chicago contracts, but posted a nearly 1% gain in MPLS this week.  Chicago was down 11 cents or 1.76%.  KC wheat lost 6 cents or .84% this week. MPLS March futures were 6 cents higher on the week, gaining nearly 1%. Weekly wheat export sales reported this week were higher than last week at 564,900 MT. Export commitments are 88% of the USDA forecast for the year, vs. the 5 year average of 90%.  Unrest and uncertainty  in the Ukraine has spurred some fears with regard to the reliability of wheat and corn exports out of the region.  That element, along with the sharply lower dollar helped the wheat market recover much of the ground it had lost earlier in the week.  All three exchanges gained about 15 cents in the March contracts today.  As of the close on last Tuesday, managed money accounts decreased their short position in CBT wheat from the previous week by 14,091 contracts bringing their overall net short position to 20,311 contracts. 















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CBOT Wheat








KCBT Wheat








MGEX Wheat
















Soybean Meal








Soybean Oil








Live Cattle








Feeder Cattle








Lean Hogs































Cotton futures lost another 0.57% this week.  The May contract posted a 432 point range on the week, trading at its highest level since March 2012.  US Export commitments improved to 90% of the USDA forecast for the year. This compares to 85% for this point last year, and the 5 year average of 89%. The weekly Commitment of Traders report showed managed money accounts decreasing their net long position by 5,247 contracts bringing their current overall net long position to 53,202 contracts.

Cattle futures were up a huge 5.12% this week, or $7.40 per cwt.  The Feb contract tapped $153.00 before settling at $151.95 on expiration.  The April contract closed at a nearly $7 discount to February as it takes over as lead month on Monday.  Cash cattle trade averaged mostly $150 in the five-area report, with tops at $152.50 on Thursday.  Dressed sales were mostly reported at $240. Wholesale prices were strong towards the end of the week.  Choice boxes gained 5.5%, and Select boxes were 5.8% higher than last Friday. Weekly estimated slaughter at 567,000 head was up 3,000 head from the same period a year ago. The CFTC Commitment of Traders report showed managed money accounts decreasing their net long position in live cattle by 1,115 contracts bringing their overall net long position to 128,324 contracts. 


Hog futures were up 7.55% this week in the front month, posting new life of contract highs in the front months.  April lean hogs closed limit-up for the last two days in a row. Estimated weekly slaughter was 2.169 million head, up slightly from a year ago when it was reported at 2.162 million head for the same period last week. The pork carcass cutout gained 7.22% from Friday to Friday.  The loin cutout was up 8.75% and bellies were up 12.39%.  USDA weekly export sales for pork were 12,875 MT.  News of Russia looking to get back into the US pork market in March added some support to the market.  The managed money accounts (per CFTC) increased their net long position by 5,744 contracts bringing their total net long position to 65,506 contracts.


 Market Watch


We’ll start the week looking for new, first of the month money flows into commodities from the spec fund investors. Will they add to winning positions from February, or cash out and go back to the stock market. USDA will report weekly export inspections on Monday morning, and weekly Export Sales on Thursday. Friday will be the last trading day for March cotton, and also mark the expiration of March live cattle options.  Daylight savings time will begin on Saturday, March 8.


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