Waiting for Godot

Published on: 15:38PM Oct 25, 2013


Market Watch with Alan Brugler

October 25, 2013

Waiting for Godot


Samuel Beckett’s absurdist play titled Waiting for Godot is about two characters waiting endlessly for a character named Godot to arrive on a train. The grain markets also appear to be waiting endlessly for USDA.  Volatility has declined and prices have been mostly range bound for the past month, i.e. since the government outage. It looks like we are waiting for current data on market conditions before making any major price move.  Some crop condition and cash market data was just never collected and thus lost. Numerous other series were held by those required to report, but the governmental agencies need to process them sequentially due to software restrictions. Here is a partial list of items that won’t be current until either October 31 or November 8: US crop acreage, national average yield, weekly export sales, and Commitment of Traders spec fund positions. Livestock traders will get caught up on October 31, with the release of the monthly Cattle on Feed, Cold Storage and Livestock slaughter reports. The grain markets may wait for November 8, but pre-report positioning could move them early. After all, Godot never arrived at the station!

December corn futures were down 0.34% this week. Export inspections YTD are now 148 million bushels, comfortably ahead of the 128 million shipped by this date in 2012. That data is through October 17. The weekly Export Sales report through only October 3, showed large net weekly sales of 1.3 MMT.  USDA will release an updated Crop Progress report on Monday, with the trade expecting harvest to be about 45% completed. Crop condition ratings are improving as the combine yield monitors revise opinions of what good corn looks like.

November soybean futures held on for a 9 cent (+0.7%) gain this week. Export inspections on Monday jumped to 59.3 million bushels, rising in typical seasonal fashion after a slow start. Cumulative shipments are 72 million behind year ago as of October 17. Weekly export sales totaled 947,800 MT in the week ending October 3 (the most recent report). Sales continue to show up regularly in the USDA daily system for sales larger than 100,000 MT.  On Friday USDA reported a sale of 120,000 MT of Soybeans to China. Soybean harvest was 63% done as of October 20,  and is expected to be 78-80% completed in Monday’s crop report.

Wheat futures were lower in all three markets this week. Chicago gained the most ground last week, and was the biggest loser this week at 2.13%. MPLS was down 2% and KC off 1.3%.  Cumulative export shipments are now over 572 million bushels. Last year they were only at 393 million bushels. The Argentine government had indicated that its crop might only be 8.8 MMT, but retracted that estimate and indicated it was based on incomplete numbers. The BAX estimate is still above 10 MMT. India is cutting prices in an effort to become more competitive in the export market and remove some excess supply from domestic inventory.  

Cotton futures plunged more than 5% this past week. Technical selling was a big part of the decline, breaking out of a bear flag to the downside and taking out the September low. That had a lot of previous bulls heading for the exit. Global ending stocks are still projected to be record large, and rumors continue about a change in Chinese inventory policies that could impair US exports. US harvest activity is lagging the average pace at 21% complete. The average for this date would be 34%.
















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Cattle futures rose $2.70 this week, a 2.1% gain. Cash cattle traded at $133 in Kansas and up to $206 in the north, up $2 from last week. Beef production YTD is down 0.9% from 2012. Production this week was 3.6% smaller than the same week in 2012.  Our calculations show that ready numbers should be declining into December, based on prior Cattle on Feed placement data.  Weekly slaughter was 618,000 head vs. 646,000 head a year ago. USDA announced that the monthly Cattle on Feed, Livestock Slaughter and Cold Storage reports would all be released on October 31. Wholesale beef prices were up 2.5% on a Thr/Thr basis in the Choice, and up 2.2% in the Select.

Hog futures were up 2.8% this week. Pork production YTD is down 1.3% from year ago. Production this week was 3.7% smaller than the same week in 2012, with slaughter down 4.5%. Thus, you might conclude that average carcass weights were a little higher. USDA estimates them up 2 pounds vs. year ago. The pork carcass cutout value was up only 8 cents for the week. Ham prices were the big gainer due to seasonal demand, but slippage in the ribs and bellies limited the overall increase in hog value.

Market Watch

This is the end of October, which means Halloween. There won’t be a market holiday, but there may be a few folks out for tricks and treats. End of month asset allocation adjustments can also produce some scary moves. Selling winners would seem to target cattle and hogs and wheat, while buying losers might make cotton and corn more attractive to the funds. USDA will be up to current date for the Export Inspections and Crop Progress reports on Monday. The Fed Open Market Committee will be meeting Tuesday and Wednesday, but they are expected to keep handing out the QE3 treats because of fall out effects from the government shutdown. Analysts will get a whole bag of candy on Thursday, with USDA issuing Cattle on Feed, Livestock Slaughter, Cold Storage and weekly Export Sales reports.  Thursday will also be first notice day for Nov soybean and rice futures deliveries. Thursday will also mark the expiration of October cattle and feeder cattle futures contracts. November cattle futures options expire on Friday.

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