The More Things Change

Published on: 20:53PM Feb 06, 2015


Market Watch with Alan Brugler

February 6, 2015

The More Things Change

One of my relatives (and maybe one of yours) used to say “The more things change, the more they stay the same”.  The quote is attributed to a French 19th century novelist, Alphonse Karr . This is a variant on a central commodity market theme, which is that there is nothing new under the sun. Freely traded markets are cyclical and prices are mean reverting over a long enough time frame. We need to flip the proverb this week. The news narrative for much of the past month has been the same, i.e. the rising dollar will continue to hurt commodities priced in dollars, crude oil is still going down, and all of the major ag commodities are in surplus supply situations. However, we saw this week that although the news may seem the same, things change! Crude oil mounted a nice rally this week. Ditto for the grains and the dollar. Some of the money is moving a different direction.

Corn futures cancelled out all but a penny of their previous week loss, up 4.07% for the week after a bounce from the 2/3 speedline chart support.  US Export sales this week were solid at 844,900 MT of old crop and 7,100 MT for new crop. That is below the pace needed to hit the USDA full year forecast, however.  Strength in the US Dollar is not helping US grain export prospects.  Ethanol stocks edged higher to 21.0 million gallons. Ethanol prices did drop back below gasoline.  















% Change










CBOT Wheat








KCBT Wheat








MGEX Wheat
















Soy Meal








Soybean Oil








Live Cattle








Feeder Cattle








Lean Hogs























Soybean futures were 12 1/2 cents higher this week, erasing the 11 ¾ cent loss from the previous week. USDA reported weekly US export sales of only 496,800 MT vs. 909,000 MT the previous week. The bull news is that they typically would have dropped more than that. Export sales commitments have already reached 94% of the full year estimate, vs. a more typical 90%. USDA shows that 76% of the full year forecast has already been shipped. Palm oil futures jumped on an Indonesian proposal (still in the legislature) to increase subsidies for biodiesel and absorb some of the expected record 2015 palm oil production. The firmer palm oil potential permitted a 5.8% rise in nearby soy oil futures and supported the soybean rally.   

Wheat futures were up 3 to 4% in all three markets. USDA weekly net export sales for the week ending January 29 were 486,900 MT, which was down from the 565,400 MT the previous week. Russian wheat export duties come into effect on February 1, which is expected to slow sales and shipments. There were rumors that they are not buying in the intended quantities for intervention stocks. Egypt most recently bought Romanian and French wheat for early March delivery, but is also openly discussing using a credit line for purchase of US wheat. As much as 18% of the Russian winter wheat crop is also believed to be in poor or very poor condition at the moment.

Cotton futures were up 3.9% for the week, a second strong week which came about despite slower weekly export sales and a strong US dollar index. At 422,800 RB, upland export sales were down 23% from the previous week. So where is the buying coming from? Asset allocation buyers are present, exiting bigger 2014 gainers like cattle and buying downtrodden commodities. We are also in the midst of the index fund “roll” period out of March futures and into May. The USDA LDP for this week dropped to 5.51 cents from 7.01 cents the previous week.  The AWP is 46.49.

Cattle futures were up 0.8% for the week. Pressure from weaker hog futures hit the market early, but there were triple digit short covering gains on Friday. Weekly beef production was down 2.2%  from the same week in 2014, with slaughter down 3.4%. Estimated carcass weights are now 9 pounds above year ago. Cash cattle traded at $161-162 on Friday afternoon. Even with the rally, February just barely cleared the $156 strike price at options expiration.

Hog futures were down another 5.2% this week. Weekly hog slaughter was 4.1% LARGER than the same week in 2014, and due to higher carcass weights the production was 5.5% larger. This slug of supply has the futures market nervous, since increased farrowings and intentions suggest larger numbers in the spring and smaller PED losses than had been dialed in. The current runs may in fact be boosted by producers pulling ahead hogs due to deteriorating margins. The incentive to add extra weight has been going away.

 Market Watch

The cattle market will begin the week reacting to the expiration of the February cattle options in the face of a big rally on Friday and a near pin of $156 strike price. USDA will issue updated supply and demand estimates for the US and world on Tuesday morning. The rest of the USDA report lineup is pretty standard, with the usual weekly USDA export inspections on Monday and  the Export Sales report on Thursday. The weekly EIA ethanol production and stocks will be on Wednesday. Friday will mark the expiration of  the February hog futures and options contracts. In case you missed it, the CME announced that it will shut down most of the futures pits in July due to lack of volume, going to electronic trading. Options trading will still be available in the pit as well as electronically.   

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