The Twitching Hour

Published on: 16:12PM Apr 25, 2014


Market Watch with Alan Brugler

April 24, 2014

The Twitching Hour


Financial markets of all types seem to be "twitchy" right now. The dictionary definition for twitchy is jerky, spasmodic or restless. The stock market seems unable to sustain a move in either direction for more than 4-5 days at a time (see the Dow since March 1). Ditto for the bond market. Cattle and hogs have shown symptoms. Some would blame the Ukraine situation, but we see that as mostly noise from a strictly financial viewpoint. It is difficult to see the EU or US willing to actually put troops at risk to prop up a shaky Ukrainian government, even if a pro-Western government there would be desirable. There are too many similarities to Vietnam. Sanctions to date have been laughable. It is more likely a period where trends are trends to be ridden (grains) and sideways is sideways (equities, bonds, etc).  

Corn rallied 2.5% for the week, gaining three times what it lost the week before. USDA reported another rise in weekly export sales for the week ending April 17, with combined old and new crop just over 1 MMT for the week vs. 794,500 MT the previous week.  Total commitments are 97% of the newly raised USDA annual projection. It would typically be 86% of the full year figure by now. Daily average ethanol production slowed after hitting the highest level since December the previous week. Ethanol stocks rebounded 500,000 barrels due primarily to transportation limitations. Ethanol imports also showed up again for the third time this year. According to the IGC, global corn output for 2014-15 is forecast to reach 950 MMT, revised sharply lower from last month's estimate of 961 MMT. The Commitment of Traders report on Friday night showed that the large speculator funds were reducing their net long position as of last Tuesday, reducing it by 13,868 contracts.

Soybean futures were down a little over 1% this week, despite a sharply rally on Friday. Meal was up 0.47%, while soy oil was down 1.1%. The weekly US soybean export sales announced on Thursday totaled only 119,000 MT (including 118,200 MT for 14/15).  Total commitments as a % of total exports are now at 104% compared to 100% last year and the 5 year average of 96%. The Commitment of Traders report on Friday showed the spec funds reduced their soybean net long position by 21,386 contracts in the previous reporting week.
















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Wheat futures were higher again this week, up .13 to 2.3% across the various classes. The worsening of drought conditions in TX and KS this week was a supportive factor, along with more hard evidence about earlier freeze damage.  USDA put the weekly export sales at 610,800 MT (including 271,700 MT for 14/15) for the week ending April 17. Total commitments as a % of total US exports are now at 97% compared to 100% last year and the 5 year average of 101%.  The EU approved another 378,000 MT of wheat for export, taking the total for the year to roughly to 24.7 MMT.  Stats Canada reported Canadian acreage intentions of 24.9 million, a little larger than expectations but still down from year ago.

Cotton futures were up 3.1% this week. USDA put weekly export sales for Cotton at 152,000 RB, including 140,500 RB of upland and 11,500.RB of pima. China was the largest buyer despite recent government efforts to encourage more use of domestic stocks and reduce imports. Total US commitments as a % of total exports are now at 94% compared to 96% last year and the 5 year average of 99%.  Speculative longs added 3,982 contracts to their net position in the last reporting week, bringing the CFTC total to 57,248.

Cattle futures were up 0.55% this week. Cash cattle trade was slow to develop, but trading did start to develop around $145 and more cattle were available at $147. April futures were being supported all week by their discount to the cash market. Estimated weekly slaughter of 585,000 was above last week’s Easter weekend reduced number but 40,000 below year ago. Wholesale prices rallied sharply this week. Choice boxed beef was up 3.0%, while Select gained 3.1% on a Friday/Friday basis. USDA weekly beef export sales backed off to18, 000 MT. After the close on Friday, USDA released the monthly Cattle on Feed report. The April 1 On Feed number was smaller than expected at 99.4% of year ago, with placements during March at 95.3%. March marketings were about as expected, at 96.3%.

June Hog futures were down 0.24% this week. The pork carcass cutout lost 4.29% this week after falling the prior week. The product value is down $17.61/cwt since April 3. Weekly FI slaughter was projected at 1.938 million head vs. 2.088 million a year ago. That meant weekly slaughter was down 6.8% from last year, but due to higher carcass weights the pork production was only down 3.5%. USDA weekly export sales for pork responded to the drop in carcass prices, with USDA reporting a jump in weekly sales to 15,100 MT on Thursday.

Market Watch

Cattle traders will begin the week reacting to the Friday night Cattle on Feed report. Grain traders will be reacting to any surprise positions inherited via the May options exercises on Friday. USDA will give us the usual weekly Export Inspections on Monday morning, and the increasingly significant planting progress and crop condition ratings on Monday evening. Spec funds will be making asset allocation adjustments as we come into month end on Wednesday, selling winners and buying losers. April cattle futures will also expire on Wednesday.  USDA will release weekly Export Sales on Thursday morning, also May Day in some countries. Friday will mark the expiration of May serial cattle options.

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