1 50 Cent Piece

Published on: 21:16PM May 13, 2016


Market Watch with Alan Brugler

 May 13, 2016


The US 50 cent piece is rapidly going out of style. Data shows decreased circulation and decreased availability in banking and retail channels. It isn’t as scarce as Anthony or Sacagawea dollar coins or $2 bills (police tried to arrest a Texas middle school student for using one to buy lunch at school in Texas). It is getting harder to find. Just like 50 cent moves in the grain market. They used to be so common! At least circa 2011, 2012. We hadn’t seen one for quite a while, but we did get a 50 cent pop in soybeans on Tuesday following a bullish USDA WASDE report.  Had it been the bearish tail of the coin it wouldn’t have been as welcome, but heads up was good. Maybe we’ll get another or Kennedy or Franklin this year if the weather cooperates!

Corn futures were up 3.4% this week, courtesy of the rally on Tuesday following the USDA report. USDA boosted old crop export estimates 75 million bushels from the previous figure, tightening old crop ending stocks to 1.8 billion bushels.  They also presented a more bullish 2016/17 demand picture than the trade had been anticipating. Weekly export sales were solid again, at 1.255 MMT (49 million bushels). Export commitments YTD are now 81% of the revised full year forecast from USDA, lagging the 5 year average of 94% for this date. Unshipped sales are 6% larger than year ago at this time. The Commitment of Traders report confirmed that spec funds are still net long, but they did trim their recently required position by another 28,063 contracts last week.  They were net long 42,969 contracts as of May 10. Going into the weekend, there were concerns about frost/freeze warnings for the Dakotas, MN and parts of NE and IA on Saturday, with WI and MI vulnerable on Sunday.  Early planted corn will grow out of singed leaves, but will require replant if the growing point is damaged.














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Wheat futures were higher in all three markets this week, with Chicago by far the strongest with a 2.3% gain. US weekly Export Sales jumped to 682,800 MT from only 318,860 MT during the week ending April 28.  USDA shows commitments for 87% of the full year export forecast, but we would typically be 104% by now. Unshipped sales on the books are 14% larger than last year, but they are included in that commitments number. USDA on Tuesday showed world ending stocks ballooning to an all time high of 257.34 MMT by May 2017.  Global production is seen shrinking slightly (mostl EU), but the carryover from the previous year is 26 MMT larger than the year before. US ending stocks for 2017 are projected at 1.029 billion bushels, the largest since 1987/88. Forecasts for frost in NE, SD, ND and MN were a concern going home on Friday, particularly the hard freeze forecasts for the Dakotas. The question to be answered before Globex trading starts on Sunday night is “How low, how long?”

Soybeans were up 2.8% for the week, a 30 cent net gain for the week which all came on Tuesday.  USDA dropped their old crop ending stocks estimate to 400 million bushels, and absolutely shocked traders with a 305 million bushel stocks number for 2017.  South American old crop production was cut about as expected, and Chinese 2016/17 imports were boosted 4 MMT from this year. USDA is likely understating 2016 US soybean acreage, as it has to use the March 31 Intentions number until June 30 and some producers did change their minds after that report showed such large corn intentions.

 USDA weekly Export Sales were poor, at just over 200 thousand MT.  Soybean commitments are now 90% of the upwardly revised full year forecast. Unshipped sales are now 6% larger than year ago. Argentine soybean harvest has been picking up with drier weather, but is still only 51% completed. The Commitment of Traders report confirmed that the spec funds were still adding ( 34,228 contracts) to their net long position as of May 10, taking it to 201,782 contracts (1.009 billion bushels).

July cotton futures were down 2.0% for the week. USDA recognized slow old crop exports, puttin their projection to 9 million bales. US Export commitments are still behind, with 81% of the full year total on the books, The average for this date is 102%, so we will need unusually large weekly export sales between now and July to catch up. The old crop marketing year ends July 31. The USDA figure for 2016/17 is even more bearish, with ending stocks at 4.7 million bales despite an assumed improvement of 1.5 million bales in exports. Chinese stocks are shrinking, albeit slowly. A government auction there successfully moved 1.145 million bales from government to private sector hands. Many of those were high quality imported bales rather than old domestic stocks. The LDP/MLG for this week is rose to 1.81 cents from 0.08 cents the week before. The USDA AWP for the week dropped to 50.19.

Live cattle futures were up 2.2% for the week. Wholesale beef prices were rising, and by Thursday the packers had put on their buying shoes. Cash cattle traded $7 higher than last week on Thursday. June futures are still well below the current cash market, at $123.42 going home on Friday.Beef production this week was up 2.1% from the previous week and up 6.1%  vs. the same week in 2015.  Slaughter was up 2.4% vs. year ago, with the rest made up by higher average carcass weights. Beef production YTD is up 3.1% from last year on 1.7% larger slaughter.  Wholesale prices were sharply higher this week, with Choice boxes up a hefty 7.3% for the week. Select boxes were up 6.0% from the previous Friday.

Lean hog futures were up 0.8% for the week. The CME Lean Hog Index at $76.05 was up $2.46 for the week. The average pork carcass cutout value was up a little over 1% for the week, at $82.50.  Bellies continued to grind lower, but all of the primals cuts were down on Friday. Weekly hog slaughter is estimated at 2.160 million head, down 2.4% from the previous week and still 1.6% larger than a year ago. Pork production YTD is down 0.8%% from last year at this time due to a 0.3% drop in slaughter. The CFTC Commitment of Traders report showed the spec funds net long 50,396 hog contracts on May 10, up 6,195 from the previous week.

Market Watch

We’ll start out the week with the USDA weekly Export Inspections report on Monday morning. The NOPA monthly crush report is also scheduled for release on Monday morning. The weekly Crop Progress report will be out on Monday afternoon at 3:00 pm CDT, with traders expecting relatively slow progress due to wet conditions. The weekly USDA Export Sales report will be out on Thursday morning. The main monthly USDA reports for this week are Milk Production on Thursday and the monthly Cattle on Feed report on Friday. Friday will also mark the expiration of June serial options in the grains, and most May equity options.

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