Sorting Out Transitions

Published on: 21:08PM Feb 13, 2015


Market Watch with Alan Brugler

February 13, 2015

Still Sorting Out Transitions

This is the time of year we start to transition in the grains from a pure demand focus to at least a little anticipation of coming changes in supply. The market is forming the February averages of December corn and November soybeans for crop revenue insurance purposes, and perhaps trying to influence a few acreage switches ahead of the March 1 Planting Intentions survey by USDA. The US dollar index has slipped into a trading range, trying to decide how the negotiations between the new Greek government and creditors will turn out. With the dollar backing and filling, some profit taking and bottom picking has come into crude oil. There the transition is from crude oil production expansion mode (rig counts down sharply in 2015) to rising consumption being driven by cheap fuel prices.  

Corn futures squeaked out a gain of 1 ½ cents on the week, supported by smaller 2014/15 ending stocks published in the monthly WASDE report on Tuesday, and solid US Export Sales reported on Thursday.  USDA trimmed projected feed use by 25 million bushels, but increase projected ethanol grind by 75 million bushels due to higher gasoline use projections for 2015 by the EIA. That would allow more E10 ethanol volume.  The adjustments cut projected ending stocks another 50 million bushels to 1.827 billion. That figure was over 2 billion bushels a few months ago.


















% Change










CBOT Wheat








KCBT Wheat








MGEX Wheat
















Soy Meal








Soybean Oil








Live Cattle








Feeder Cattle








Lean Hogs























Soybean futures added 18 cents, or 1.87% since last Friday.  Ending stocks were cut 25 million bushels in the monthly WASDE report, which was a 6% change from the January USDA reports.  The projections for exports and domestic crush were both increased, and they also bumped up the projected imports.  Old crop export sales were stronger than most expected on Thursday, helped by Chinese importers booking another 603,300 MT during the week ending February 5.  They continue to purchase more than they are cancelling.  Export commitments as a percent of total projected exports are at 95%, even after taking into account the larger figure from the USDA on Tuesday.  USDA reports 78% of the total projection for the year has already been shipped.  Both bean meal and bean oil snuck in gains on the week, up 0.79% and 0.63% respectively.  The national average basis as we calculate it has strengthened a penny and a half since last Friday.

Wheat futures were up 1.6% in MPLS this week, but lower in the other two markets. USDA weekly net export sales for the week ending February 5 were 409,300 MT, down from 486,900 MT the previous week. USDA cut projected annual exports to 900 million bushels from 925 million based on the poor sales and shipping pace YTD.  They did raise spring wheat exports at the expense of HRW, and cut expected imports of Canadian spring wheat into the US as well. Poorer quality wheat globally is spurring demand for high protein wheat to blend. US export commitments are now 85% of the revised full year projection, in line with the 86% average pace for this date.

Cotton futures were up 1.9% this following, a third strong week.  Export sales have dropped sharply as the rally unfolded. Net sales of upland for the week ending Feb 5 were only 52,200 MT. The NCC acreage survey released last weekend was supportive,  showing producer intentions of only 9.428 million acres, down more than 14% from last year. The USDA LDP for this week dropped to 4.24 cents. It was 7.01 cents two weeks ago.  The AWP is 47.76, up from 46.49 the previous week.

Cattle futures were up 2.5% for the week, although there were days it didn’t feel like it. Weekly beef production was up 1.0%  from the same week in 2014, with slaughter down 0.6%. Estimated carcass weights are now 13 pounds above year ago. Year to date slaughter has been down 7.4%,  putting beef production 5.9% below year ago at this point. USDA raised projected  first quarter beef supplies from an even lower number in the WASDE report on Tuesday. A few cash cattle traded at $161-162 on Friday afternoon, with asking prices up to $164.  Wholesale prices were down 0.86% on a Thursday/Thursday basis in the Choice, with Select down only 0.08% as the spread collapses in typical seasonal fashion.

Hog futures were down another 4.5% this week after losing 5.2% the previous week. Weekly hog slaughter was 6.1% LARGER than the same week in 2014, and due to higher carcass weights the production was 7.5% larger. This slug of supply has the futures market nervous, and the nearby contracts have been in “death spiral” liquidation. Higher sow numbers and lower PED death losses are a lethal combination, particularly with labor slowdowns and lockouts limiting US meat exports from West Coast ports.  Wholesale pork prices were down 2.5% for the week on a Thursday/Thursday basis.


Market Watch


The hog market will begin the week reacting to the expiration of the February hog futures and options. The USDA report lineup is delayed a day by the Presidents Day holiday. The usual weekly USDA export inspections will be out on Tuesday and  the Export Sales report on Friday. The weekly EIA ethanol production and stocks will be on Wednesday. NOPA is expected to release their monthly soybean crush and soy oil stocks numbers on Tuesday.  The USDA monthly Cattle on Feed and Cold Storage reports are both scheduled for Friday, February 20.  Friday will also mark the expiration of the March grain options.


Visit our Brugler web site at, find our iPad app "AgMarket" in the Apple app store, or call 402-697-3623 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.


There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.


Copyright 2015 Brugler Marketing & Management, LLC