Seeing Green

Published on: 16:04PM Feb 14, 2014


Market Watch with Alan Brugler

February 14, 2014

Seeing Green 

Spring still isn’t here, but a spell of warmer weather is being welcomed by most of the US, and the commodity markets are showing signs of thawing. The CRB Index has been rallying since the January crop report, and hasn’t even been slowed by a simultaneous rally in the US equity markets over the past 8 trading sessions. A weaker US dollar is clearly a part of that equation, lifting commodities priced in dollar terms. Global growth may also be in the background. While industrial production and other US numbers show slow activity over the Nov-Jan period, most of that appears to be tied to bad weather. Demand for commodities such as corn and soybeans has been stellar in the global export market at these lower 2014 prices. 

Corn futures eked out a 0.23% gain for the week, and are up 15 cents in three weeks. Ethanol imports were zero for the 19th week in a row. US ethanol is now being imported into Brazil. US weekly ethanol stocks rose to 17.1 million barrels as bad weather limited driving. Weekly corn export sales were again large at 1.34 million metric tonnes. Low prices cure low prices! USDA hiked projected exports for the year another 150 million bushels on Monday, reducing projected ending stocks to 1.48 billion bushels. USDA shows that 85% of the projected corn sales for the year are already on the books. We would typically only be 67% by now. The largest commitment in recent years has been 77%. According to the CFTC on Friday night, managed money speculator funds are now net long 34,340 corn contracts after adding 39,654 contracts in the week ending 2/11/14.

Soybean futures were up 0.45% this week, with soybean meal up 0.8%.  Weekly US soybean export sales slowed to 296,200 MT including 173,600 MT of old crop. Total US export Commitments for 2013/14 are now at 105% of the USDA forecast for the year, despite a USDA hike in projected exports last Monday. This afternoon’s CFTC Commitment of Traders report showed the large speculative traders added 29,593 new long futures and options positions in the week ending February 4. Their net long position was 176,126 contracts as of Tuesday night.

Wheat futures were sharply higher this week in all three markets. CHI was 3.6% and KC up 3.9%, while MPLS gained 4.3%. Following USDA’s 50 mbu hike in projected exports, total US export commitments are now matching the 5 year average pace at 86% of the annual total. Weekly wheat export sales on Thursday were 626,600 MT. The Commitment of Traders report shows the large managed money specs are now net long KC wheat to the tune of 13,034 contracts, and reduced their short in Chicago by another 9,738 contracts last week.

Cotton futures advanced another 0.09% this week. Global ending stocks are still projected to be record large at more than 96 million bales, although USDA did trim the number a little bit on Monday. US old crop ending stocks are still seen at 3 million bales. US Export commitments improved to 89% of the USDA forecast for the year. This compares to 82% for this point last year, and the 5 year average of 85%. The National Cotton Council survey projected 11.26 million acres to be planted in 2014, up from 10.41 million in 2013.















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 Cattle futures gained 1% this week, or $1.40 per cwt. Cash cattle traded at $142 mid-week, but volume was limited. Choice boxed beef was down 1.5% this past week.  Select boxed beef lost 1.1% on a Friday/Friday basis. Weekly estimated slaughter was down 3.9% from last week and down 9.6% from the same week in 2013.  Carcass weights are up a pound from year ago. Beef production was down 3.7% for the week and down 9.4% vs. year ago. Weekly beef export sales were 16.600 MT vs 8,100 MT the prior week.

Hog futures were up 1.6% this week in the front month, getting a very modest assist from beef prices. February futures held in place and waited for the cash market to come to them. February expired at $86.52.  Estimated weekly slaughter totaled 2.113 million head, down 2.7% from last week and 1.2% below year ago. The PED virus is showing an impact, but breeding herd expansion is also underway. Estimated carcass weights are still running about 6 pounds above year ago. Pork production year to date is down 0.7% from last year. The pork carcass cutout value was up $2.13 or 2.31% this week, with the pork belly primal up 6.7%. USDA weekly export sales for pork almost doubled to 12,600 MT.

 Market Watch

Monday is a market holiday, President’s Day in the US. That means a three day weekend for traders. NOPA will issue its January soybean crush estimate on Tuesday. USDA weekly Export Inspections will also be delayed until Tuesday. Weekly Export Sales will be delayed until Friday. The main USDA monthly reports will be on Friday, with Cattle on Feed and Cold Storage.  Friday will also mark the expiration of the March grain options contracts, as well as those in the equity markets.

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