All Dressed Up But Is There Anywhere to Go?

Published on: 22:17PM Jan 08, 2016

 

Market Watch with Alan Brugler

Jan 8, 2016

All Dressed Up, Anyplace to Go?

The world equity markets were in turmoil this week, with sharp declines in the Chinese stock market and the US market.  The grain markets were an oasis of calm by comparison, with weekly changes of less than 2% and some of them in the plus direction.  Cotton and cattle had a worse time of it, thanks to selling pressure on Thursday. A wire service survey uncovered farmer plans to increase US cotton acreage sharply in 2016. Cattle just saw garden variety profit taking on Thursday, with feeders taking an extra hit from higher feed costs. The calm in the grains suggests that positions are pretty well in place for the Tuesday USDA reports. The flak jackets and helmets are on because of the drumbeat of bearish news, but there is plenty of “equity refugee” money on the sidelines that will come in on a good bull story.

Corn futures were down 1 3/4 cents this week. Argentine efforts to open up their market are having a short term bearish effect on US exports and perceptions of such exports down the road. The market may also be trying to discourage notions of winter crop (safrinha) corn planting in Brazil. While admittedly a holiday week, the weekly USDA Export Sales report showed sales of only 252,900 MT vs. 705,200 MT through December 24.  Ethanol production was solid, rising to 996,000 bpd. Ethanol stocks rose sharply, however, to 21.1 million barrels from 20.2 million.  Grain sorghum export sales were a bright spot, increasing to 174,100 MT last week. That was 29% above the previous week, with most of it going to China and “unknown destination”.  Nov 15 DDG exports totaled 939,917 MT, still up 49% from Nov 2014, but 90,000 MT smaller than Oct 15. The trade average estimate for US corn ending stocks on Tuesdday is 1.781 billion bushels, down 4 million from the December figure.  

Wheat futures were higher in all three markets. The weekly Export Sales report showed wheat sales of a paltry 76,500 MT, vs. 382, 400 MT last week. That ended a string of three consecutively higher weeks. Several countries are in the market right now, looking at the lowest prices in years. The US is still more expensive than similar quality wheat offerings. Russia saw some heavier snow activity, which should protect the crop from any further freeze damage for the time being. Midwest temps were expected to go below zero F this weekend, which could be a problem for areas without snow cover. Traders are looking for USDA to bump up projected US ending stocks by 5 to 10 million bushels from the 911 million shown in December. USDA often “finds back” feed and residual bushels in the January Grain Stocks report.  Export have also been poor.

Soybeans were almost 1% higher this week, aided by a 1.3% advance in nearby meal. Traders are looking for USDA to bump up projected US soybean ending stocks, but the average change is only 8 million bushels (473 million). The assumption is that both crush and export use are too high, an opinion which could be changed if the crop size is adjusted lower.  Private estimates have the Brazilian crop shrinking in Mato Grosso, but there is plenty of doubt about whether USDA will feel it has enough evidence to make the cut this early in the growing season. Weekly soybean export sales were a modest 638,800 MT during the holiday week ending December 31

March cotton futures were down more than 3% this week. The stock market meltdown in both China and the US suggested something is rotten in the demand sector.  USDA reported that 92,121 RBs of cotton were sold during the week ending last Thursday, including 9,400 RB of Pima. The holiday week cotton sales were the smallest since the week ending October 22. However, China purchased 26,409 RBs during the week, their largest purchase this marketing year. USDA cut the AWP to 47.60 and raised the LDP/MLG to 4.40, vs. 3.30 last week.

Live cattle futures dropped nearly 3% this week.   Cash cattle trade was unable to match the $135-136 from the previous week, with Friday activity at $133 but many feedlots passing on that price. Estimated weekly slaughter was up 4.0% vs. a year ago on 1.5% larger slaughter. Believe it or not, average carcass weights are coming down, but they are still nearly 20# above year ago.  Wholesale beef prices were sharply higher for the week, with Choice up $18.00 (8.47%), and select up $18.67 (9.1%) from Thursday to Thursday.  Weekly USDA beef export sales were below the previous week at 5,700 MT from 6,400 MT.  

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

12/24/15

12/31/15

01/08/16

Change

% Chg

Mar

Corn

$3.645

$3.588

$3.570

($0.018)

-0.49%

Mar

CBOT Wheat

$4.675

$4.700

$4.785

$0.085

1.78%

Mar

KCBT Wheat

$4.675

$4.685

$4.728

$0.043

0.90%

Mar

MGEX Wheat

$4.95

$4.93

$5.01

$0.077

1.55%

Jan

Soybeans

$8.753

$8.713

$8.795

$0.082

0.94%

Jan

Soy Meal

$269.00

$264.30

$267.90

$3.60

1.34%

Jan

Soybean Oil

$30.87

$30.55

$29.45

($1.100)

-3.74%

Feb

Live Cattle

$137.025

$136.800

$132.875

($3.925)

-2.95%

Jan

Feeder Cattle

$163.48

$166.90

$159.43

($7.47)

-4.69%

Feb

Lean Hogs

$58.300

$59.800

$59.850

$0.050

0.08%

Mar

Cotton

63.66

63.28

61.40

(1.880)

-3.06%

Mar

Oats

$2.195

$2.173

$2.108

($0.065)

-3.08%

 

Lean hog futures were up 0.8% for the week. The CME Lean Hog Index was $53.50, up from $52.97 the previous week. Carcass weights continue to run below year ago by about 2 pounds. USDA estimated weekly slaughter at 2.375 million head. That was up 17.2% from the holiday week and 10.6% larger than the same week in 2015.  USDA reported less exciting pork export sales on Thursday, at 9,600 MT. China continued to be a buyer. Pork carcass cutout prices were up 95 cents on a Thurs/Thurs basis, more than offsetting the 83 cent drop from the previous week.  Bellies and loins were the strongest components.

Market Watch

We’re in full government report mode this week. We’ll get the usual Export Inspections on Monday and weekly Export Sales on Thursday morning. The main reports will come out on Tuesday at 11 am CDT, with USDA releasing Annual Crop Production, quarterly Grain Stocks, Winter Wheat Seedings, and the monthly WASDE supply/demand estimates. Thursday will mark the expiration of the January soy complex futures.  NOPA is expected to release member crush for December on January 15.

Mark Your Calendars

The Brugler Marketing Winter Seminars will be held on Feb 1-2 in Dayton, OH and Feb 4-5 in West Des Moines, IA. These will feature comprehensive fundamental and technical analysis for both 2015 and 2016 field crops, as well as cattle and hogs. This is the first time the winter seminar has been in Iowa since 2005, so we’re looking for a show of support from those of you who can’t travel west to Omaha. The Dayton meeting is always good, too! Registration links are now available from the home page of our web site at http://www.bruglermarketing.com.

Visit our Brugler web site at http://www.bruglermarketing.com or call 402-289-2330 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.Clients can also get one touch access to our cash market and hedging recommendations via our mobile web site.  You will be taken to the mobile home page automatically if you visit our web site with the mobile device. Three times daily fundamental news from Brugler is available on the free side of the mobile site.

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