Spring Training

Published on: 21:08PM Feb 20, 2015


Market Watch with Alan Brugler

February 20, 2015

Spring Training

The USDA Outlook Forum this week was once again an opportunity for USDA to do a little armchair forecasting exercise, without the burden of actual NASS survey data.  The grain, cotton and livestock numbers floated by the acting Chief Economist, and the preliminary S&D balance sheets released on Friday, are not official forecasts. The first World Outlook Board estimates for 2015/16 aren’t released until May, and we don’t have any actual acreage data until the Prospective Plantings report is issued at the end of March. Still, this is kind of like spring training in baseball (also underway). Analysts and traders get to work off the supply side rust following a winter of looking at mostly exports and currency exchange rates. The initial USDA shot at corn acreage was perceived as close to the industry, while the smaller 2015 soybean plantings is generating a lot of “could they possibly be right?” discussions after earlier private surveys were mostly 5 million acres larger.

Corn futures gave back what it gained the previous week. Weekly ethanol production rose, using a little more corn. Weekly Export Sales featured 932,200 MT of old crop and 143,200 MT of new crop. Cumulative export commitments (contracts plus already shipped) are 77% of the full year forecast. This is pretty respectable for mid-February, when 72% has usually been committed.  In the Outlook Forum, USDA projected 89 million acres planted in 2015, with production of 13.595 billion bushels, but lower ending stocks of 1.687 billion. However, they expect a lower average cash price of $3.50 will be needed to clear that much inventory.















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Soybean futures added a net 8.5 cents per bushel for the week, up 0.87%. Old crop export sales for the week ending Feb 12 were pedestrian at 505,600 MT of old crop and 35,800 MT of new crop. Export commitments as a percent of total projected exports are at 96%, still ahead of the 91% average for this time of year. In the Outlook forum, USDA projected a drop to 83.5 million planted acres in 2015, part of an overall drop of 4.7 million acres for the 8 principal crops. The focus was on lower prices forcing marginal ground back out of production, rather than any spin about bad weather and prevented planting.

Wheat futures were lower on all three exchanges, with MPLS dropping the most (3.3%) after showing the largest gain the previous week. USDA weekly net export sales for the week ending February 12 were 409,800 MT, remarkably consistent with the 409,300 MT from the previous week and 486,900 MT the week before that. The bad news is that we aren’t selling enough. Export commitiments would usually be 88% of the full year forecast at this point, but are currently at 86% despite the downward revision made by USDA on February 10. At the Outlook Forum, USDA put 2015 wheat production at 2.125 billion bushels, with ending stocks growing to 763 millino bushels and the average cash price sagging to $5.10.  The current year (incomplete) estimate is $6.00.

Cotton futures were up another 3.1% this week after gaining 1.9% the previous week. The NCC acreage survey released earlier in the month showed intentions of 9.428 million acres, down more than 14% from last year. At the Outlook Forum, USDA used a little less bullish of 9.7 million, off 12% from 2014. The USDA LDP for this week dropped to 3.24 cents vs, 4.24 cents last week. Old crop export sales were net negative 69,700 RB for the week due to cancellations. Total commitments are still ahead of the average pace at 95% of the full year forecast vs. 90% average for this date.  

Cattle futures were down more than 2% for the week, with most of the decline on Friday ahead of the monthly USDA reports. Weekly beef production was down 0.3%  from the same week in 2014, with slaughter down 2.4%. Estimated carcass weights are now 18 pounds above year ago. Year to date slaughter has been down 6.8%,  putting beef production 5.1% below year ago at this point. The Cattle on Feed report showed slight expansion, with Feb 1 at 100.3% of year ago. January placements were slightly larger than the average trade estimate, while marketings were on the low side. The Cold Storage report showed beef in inventory up 14.36% from a year ago.

Hog futures were up 2% this week. This was the first higher weekly close since November! Weekly hog slaughter was 8.2% than the same week in 2014, and due to higher carcass weights the production was 9.3% larger. Higher sow numbers and lower PED death losses than year ago are a lethal combination, particularly with labor slowdowns and lockouts limiting US meat exports from West Coast ports. The monthly Cold Storage report on Friday night showed pork in the coolers totaled 596.532 million pounds, DOWN 3.5% from year ago.  Stocks did build 18.4% from December, reflecting the backing up of export inventories and loss of East Coast demand due to bad weather.

Market Watch

The grain market will begin the week reacting to any surprise positions inherited with the expiration of the March grain options on the 20th. The $10 pin attempt in soybeans failed, leaving us with a number of new short futures holders after put options exercise. Corn pinned the $3.85 strike. Livestock traders will react to the Cattle on Feed and Cold Storage reports released on Friday afternoon. The usual weekly USDA export inspections will be out on Monday and  the Export Sales report on Friday. The weekly EIA ethanol production and stocks will be on Wednesday. Friday will mark the expiration of the February live cattle futures contract, and first notice day for March grain futures deliveries.

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