Market Watch with Alan Brugler
September 20, 2019
Change of Seasons
The air temperature isn’t (thankfully, given crop maturity) suggesting a change of seasons yet, but the calendar and the TV schedule sure are. I don’t watch much TV, but when I do it is mostly sports. This fall season tends to be a big black hole, sucking time away from other projects. If you have a favorite baseball team still in playoff contention, a Top 5 college football team, another school your kids attended and an NFL team that just started a new season (and hope springs eternal) you can spend a lot of time in front of screens or monitoring feeds. That change of seasons might be just what the grain markets need to change their ways. Global wheat buyers have become a lot more active as Northern Hemisphere harvest wraps up and Australia’s crop is struggling. Corn and beans are set up for conventional harvest lows on the charts, but those can fall anytime from September to November in most years. A frost or freeze scare would be the surest way to convince the market it is fall, but the calendar says Autumn begins on Monday!
Corn futures gained another 0.5% this week, adding 2 cents the much larger advance from the previous week. Crop maturity remains a concern, with only 18% of the crop having reached black layer by last Sunday. Export sales for the week ending September 12 were much improved at 1.464 MMT, including Mexican business of 1.16 MMT. Most of the Mexican business had been previously announced under the daily reporting system. CFTC data released on Friday afternoon showed the large managed money spec funds adding another 34,227 contracts to their net short position. That put them at -170,626 contracts as of September 17. Commercial elevators continued to unwind their large short hedge position as they worked down out cash inventory ahead of the delayed harvest.
Wheat futures were higher in all three markets this past week. MPLS spring wheat led the bull charge with a 3.6% advance. There are some concerns about harvest delays and the milling quality of the crop remaining in the field. KC was up 1.9%, with Chicago up only 0.16%. The CHI/KC spread narrowed to 76 cents. Weekly export sales for the week ending September 12 were disappointing at only 286,600 MT. Friday’s Commitment of Traders report indicated money managers in Chicago wheat futures and options cut 1,812 contracts from their net short position last week, taking it to -12,577 as of September 17. They cut 3,995 contracts from their net short in KC wheat last week to put it at -37,571 contracts. They reached yet another record large bear position in MPLS wheat, adding another 266 contracts to the all-time record net short, putting it at -23,071.
Soybean futures fell back 1.8% this week after a 4.8% pop the preceding week. Soybean meal was down 2.3% to pressure product value. Soy oil was only down 0.03% after a 3% rise the previous week, but fell 53 points on Friday. Confirmed Chinese purchases topped the rumors of 600,000 MT from the previous week, with 720,000 MT confirmed under the daily reporting system. In the weekly FAS Export Sales report, China was credited with 593,200 MT through September 12. Total export sales for that week were excellent at 1.728 MMT(63.5 million bushels). Export commitments for this young marketing year are 23% of the full year forecast. That is 37% behind last year at this time. Spec fund money managers cut their CFTC soybean net short position almost in half during the week ending September 17. They exited 43,556 contracts, to drop the bearish net soybean position to -48,181 contracts.
Cotton futures were down 2.75% this week after popping 6.3% the previous week. Weekly export sales were sluggish, with 85,000 running bales of upland booked, and Chinese cancellations of 39……RB. Export commitments for the year to date are 55% of the full year USDA forecast. That is better than the 47% average pace, but outstanding sales on the books are down 11% from year ago. CFTC data indicated the large managed money spec funds trimmed another 9,674 contracts from their previous record net short position, taking it down to -24,890 contracts as of Tuesday.
Live cattle futures were up 1.3% for the week. Cash cattle trade was $101-102. Feeder cattle futures were up 2.8% for the week. The CME feeder cattle index was $138.53, up $2.44 on the week. Wholesale beef prices continue their post-Labor Day decline. Choice boxes were down $3.91, or 1.8% for the week, with Select product dropping $6.88 or 3.5%. Weekly beef production was up 4.8% from the holiday week, but 0.8% smaller than the same week in 2018. Year to date beef production is only 0.1% larger than year ago on 1.1% higher slaughter. The Commitment of Traders report shows spec fund money managers still net short cattle futures for the first time in history, adding another 653 contracts this week to take the net to -6,885 contracts on September 17. The USDA Cattle on Feed report on Friday showed a sharp 9% year/year decline in feeder cattle placements during August. Poor cattle crush margins and decent pasture conditions kept the lighter weight cattle out of the feedlot a while longer. August marketings were down 1.51% from year ago. Overall, Cattle on Feed September 1 were 98.7% of year ago, a smaller number than the average trade estimate.
Lean hog futures sank 9.2% this week, cancelling out the 4.7% rise from the previous week. China had indicated they were buying soybeans and pork, but no pork business was seen in the weekly USDA export sales data. Several large Chinese hog production companies announced expansion plans, suggesting that pork shortages were being aggravated by gilt withholding. At the same time, Chinese government was selling state reserve stocks purchased from the EU and US to alleviate shortages. The CME Lean Hog index was $56.32, down $4.37 for the week. The pork carcass cutout value was $0.94 higher this week (+1.4%). The pork belly primal recovered 8.9% this week after sinking 49% in 30 days. Weekly pork production was down 0.6% from the previous week, and 11.1% larger than the same week in 2018. YTD pork production is now 3.9% above year ago on 3.4% more hogs. The managed money spec funds did add 1,908 contracts to their CFTC net long position in hogs last week, taking it to 21,334 contracts (futures + options) by September 17.
Cattle traders will begin the week reacting to the COF report released on Friday night after the futures close. We’re expecting a regular schedule for the weekly reports. The Export Inspections report will be on Monday, as will the USDA weekly Crop Progress report. The monthly NASS Cold Storage stocks report will also be released on Monday afternoon. The weekly EIA ethanol production and inventory report will be out on Wednesday. USDA’s weekly Export Sales will be published on Thursday morning at 7:30 a.m. CDT. September feeder cattle futures and options will expire on Thursday. The quarterly Hogs & Pigs report is scheduled for release on Friday afternoon, September 27. The quarterly Grain Stocks and Small Grains reports will be looming on the horizon for release on September 30.
Visit our Brugler web site at http://www.bruglermarketing.com 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. Similar risks exist for cash commodity producers. Past performance is not necessarily indicative of future results.
Copyright 2019 Brugler Marketing & Management, LLC.