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A Classic Tale

Published on: 23:00PM Mar 04, 2016

 

Market Watch with Alan Brugler

March 4, 2016

A Classic Tale

I’m writing this from the Commodity Classic down in New Orleans, one of the biggest farm meetings of the year. There are an estimated 6000 farmers and spouses here. While we are of course adding to our customer base, we’re also collecting market sentiment. Most markets bottom when bearish opinion is at its maximum. A classic test of a bottom is when bearish news fails to make it move lower. We aren’t quite to that point, as bearish export numbers or weather in Brazil still tends to nick the prices. Producer sentiment is getting toward the bearish extreme, however. These are folks who can afford to travel to a winter meeting where things are warm, but they are very concerned about over producing world demand for 2016/17. That said, the main tale from the Classic is optimism ahead of planting, just like it is every other year!

Corn futures were mostly steady on a quiet week. US weekly export sales were 1.098 MMT, a 3% increase from the week before. Weekly EIA ethanol production averaged 987,000 barrels per day, a decrease of 7,000 bpd from the week before. Ethanol stocks dropped by 500,000 barrels to 22.6 million barrels, the smallest total in a month. USDA data on Tuesday showed that 441.259 million bushels of corn was crushed for ethanol during January, down 2.2% from December, and 0.6% smaller than January 2015. The CFTC Commitment of Traders report on Friday afternoon showed managed money held a net short position of 206,252 contracts as of the March 1 close. This was a week over week increase to the net short position of 71,918 contracts.

Wheat futures were higher in all three markets this week, with KC the strongest at 3.3% for the week. Above normal temps are pushing maturity of the winter wheat crop, and the 8-14 day weather forecast has a drying trend in the Plains. A weaker US dollar aided export sales perceptions, although Egypt essentially took itself out of the market by rejecting a new Canadian cargo while also announcing it was moving inspections from port of departure to port of arrival. That will save them some travel money, but raises the risks of expensive cancellations after arrival. Exporters will want higher prices for Egyptian sales to offset the freight risk. US Weekly export sales were 410,630 MT for the week ending 2/25. Total commitments are still not running at the pace needed to meet the USDA full year forecast. Commitments are 85% of the full year estimate.

Soybeans were up 1.8% this week. USDA reported net soybean export bookings of 442,258 MT for the week ending Feb 25, an increase of 71% week over week.  Export commitments (already shipped plus outstanding sales) are 91.6% of the full year estimate. Wire service surveys show traders expecting a small increase in US soybean ending stocks in the March 9 USDA report, with a cut in projected exports.  The Friday afternoon Commitment of Traders report showed managed money held a net short position of 69,927 contracts as of close on Tuesday. This was an increase to the net short position of 47,868 contracts from the week before. Some of those new bears were being chased away on Friday.

May cotton futures dipped by 0.75% for the week. Larger US acreage and production forecasts continue to weigh on the market. The USDA Export Sales report Thursday morning showed cotton bookings totaling 193,122 RBs during the week ending Feb 25, including 15,600 RBs of Pima. China was in for 9,976 RBs. Outstanding (unshipped) US cotton export commitments are now 37% smaller than last year at this time. The USDA AWP for the upcoming week is 43.29 cents, with the LDP/MLG up to 8.71 cents for the week.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

02/19/16

02/26/16

03/04/16

Change

% Chg

Mar

Corn

$3.655

$3.545

$3.545

$0.000

0.00%

Mar

CBOT Wheat

$4.618

$4.433

$4.548

$0.116

2.54%

Mar

KCBT Wheat

$4.570

$4.425

$4.578

$0.153

3.34%

Mar

MGEX Wheat

$4.93

$4.89

$5.03

$0.136

2.69%

Mar

Soybeans

$8.783

$8.550

$8.705

$0.155

1.78%

Mar

Soy Meal

$264.50

$257.20

$267.70

$10.50

3.92%

Mar

Soybean Oil

$31.39

$31.03

$30.73

($0.300)

-0.98%

Apr

Live Cattle

$133.950

$137.000

$136.425

($0.575)

-0.42%

Mar

Feeder Cattle

$155.88

$158.65

$158.18

($0.47)

-0.30%

Apr

Lean Hogs

$68.900

$70.850

$70.975

$0.125

0.18%

May

Cotton

59.54

57.53

57.11

(0.420)

-0.74%

Mar

Oats

$1.920

$1.710

$1.703

($0.007)

-0.41%

 

Live cattle futures slipped by 0.4% this week, with a firmer tone to Choice product value. Choice wholesale beef prices were up 1.5%, while Select boxes were unchanged from last Friday. Cash cattle business was slow to develop, but we were starting to see some sales from $133 to $137 in KS and $214 in the north as this went to the Web on Friday afternoon. Estimated weekly slaughter was down 1,000 head vs. last week and down 2,000 head from the same week in 2015.  Beef production YTD is up 0.5% vs. 2015. The CFTC Commitment of Traders report showed managed money held a net long position in live cattle of 22,197 contracts as of Tuesday, a week over week increase to the net long position of 6,035 contracts. Feeder accounts held a net long position of 2,881 contracts on Tuesday, an increase of 1,309 contracts from the Tuesday before.

Lean hog futures were up 0.2% this week. The CME Lean Hog Index was $66.91, up 14 cents from the day before. Estimated FI hog slaughter for the week was 2.225 million head, up 14,000 head from the previous week and 12,000 head larger than the same week a year ago. Hog slaughter for the year to date is down 0.4% from last year. with pork production down 1.2%. The pork carcass cutout price was up 1.5% on a Friday/Friday basis. Friday’s Commitment of Traders report showed managed money held a net long position of 43,036 contracts as of the close on March 1. This was a week over week reduction to the net long position of 978 contracts.

Market Watch

Cattle traders will begin the week dealing with any surprise positions inherited from the expiration of March serial options on the 4th. USDA will issue the usual weekly grain export data, with Export Inspections on Monday and Export Sales on Thursday morning. The main USAD report will be the WASDE Supply/Demand estimates on Wednesday at 11 am CST. USDA is typically conservative in this report for the grains, as it will have been consumption data after the March 31 Grain Stocks report. Adjustments are usually on the export line. And don’t forget that Daylight Savings Time is scheduled to begin overnight on March 12-13th. Clocks will be rolled ahead an hour in most parts of the United States.

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