Auld Lang Syne 3

Published on: 19:40PM Dec 24, 2015

 

Market Watch with Alan Brugler

December 24, 2015

Auld Lang Syne-3

One of the hazards of writing 670 of these columns is that of repeating oneself. Repeating holidays are particularly treacherous, and I’m fairly certain I’ve used some variation on Auld Lang Syne for a late year column since 2003. Still, the opening lines seem appropriate to 2015. In the English translation (don’t go near the original Scotch version) the song asks “Should old acquaintance be forgot, and never brought to mind?” The implied answer is no, with the other verses focusing on remembering jointly shared past history.

I would argue that both yes and no answers are appropriate relative to our commodity markets in 2015. Would we like to forget the sharp declines in just about every traded commodity? If you are a producer, the answer is probably yes. The argument for a “no” response is the duty to learn from our mistakes, and to reinforce our awareness that markets are mean reverting. They go too high, they go too low, and then move back to average in between. This has been a mean reverting year. As you celebrate Christmas and New Years, review what you did right in the markets this year, and examine what could be improved. And do share “a cup of kindness” with old friends and good market advisors!

Corn futures were down 10 cents for the week.   The weekly USDA Export Sales report showed bookings of 803,600 MT during the week ending December 17. Shipments were solid at 823,600 MT. Next week will likely be smaller, due to the Christmas holiday. Ethanol production slowed last week, but stocks still crept up 100,000 barrels to 20.4 million barrels.  Grain sorghum export sales for last week were up 95% from the previous week at 328,600 MT. China continues to be active in the market.

Wheat futures were lower in all three markets again this week, with Chicago the weakest with a loss of more than 4%. The weekly Export Sales report showed wheat sales of 370,300 MT, up from 320,200 MT the previous week. The big bearish news of the week was the sale of 120,000 MT of Argentine wheat to Egypt at prices well below recent tenders. This hinted at the impact of the devalued Argentine peso, and also the grain company commitment to quickly complete sales and generate foreign exchange for the Argentine government. Russia is considering reduction or elimination of export tariffs in order to compete. The US market just worked lower.

Soybeans were down nearly 2% for the week. Weekly US Export Sales during the week ending 12/17 totaled 2,069,700 MT, more than double the 1,023,800 MT reported the previous week. China was a buyer of 1.5 MMT, including the 424,000 MT reported under the daily system last week and some switches from “unknown”.  Soy oil was well supported by renewal of the US biodiesel blend credits, and by strong weekly export sales totaling 39,800 MT. Meal dropped a hard 4.46% for the week. Export sales at 252,500 MT were “OK” but domestic basis suggests too much product backing up in the country. Board crush margins have deteriorated from well over $1.00 per bushel to 65 cents in the March spread on Thursday.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

12/11/15

12/18/15

12/24/15

Change

% Chg

Mar

Corn

$3.753

$3.745

$3.645

($0.100)

-2.74%

Mar

CBOT Wheat

$4.905

$4.868

$4.675

($0.193)

-4.12%

Mar

KCBT Wheat

$4.825

$4.823

$4.675

($0.148)

-3.16%

Mar

MGEX Wheat

$5.08

$5.06

$4.95

($0.113)

-2.27%

Jan

Soybeans

$8.708

$8.923

$8.753

($0.170)

-1.94%

Jan

Soy Meal

$273.70

$281.00

$269.00

($12.00)

-4.46%

Jan

Soybean Oil

$31.36

$30.53

$30.87

$0.340

1.10%

Dec

Live Cattle

$121.450

$120.150

$131.100

$10.950

8.35%

Jan

Feeder Cattle

$152.13

$148.75

$163.48

$14.73

9.01%

Feb

Lean Hogs

$60.550

$56.625

$58.300

$1.675

2.87%

Mar

Cotton

63.71

63.69

63.66

(0.030)

-0.05%

Mar

Oats

$2.325

$2.265

$2.195

($0.070)

-3.19%

 

March cotton futures were down only 3 points for the week. The weekly USDA Export Sales report showed 137,000 RB of cotton was booked during the week ending December 17, including 11,800 RB of Pima. USDA showed that the average world price (AWP) raised the LDP/MLG back to 4.14 cents on the 17th. The update for this week was not available at the time of writing.

Live cattle futures jumped 8.35% in a single week, extending the gains begun with a limit up move last Friday. Improved export sales were a feature (19,600 MT last week), but most of the buying consisted of previous bears trying to exit the market with some of their profits still intact. Feeders were up a stout 9% for the week, with cattle higher and grains lower.  Cash cattle trade took place in the north at $200 on both Wednesday and Thursday. Southern trade was slow to develop, but expected to be sharply higher as well. Weekly beef export sales were 19,600 MT, with all but 400 MT for 2016 shipment. There were only 14 days left in the year to ship the beef, so most of the business is for 2016.   

Lean hog futures were up 2.9% for the week. The CME Lean Hog Index was $55.57, down $1.03 from the previous Friday. Carcass weights continue to run below year ago, but by less than a pound. 2015 pork production through December 18 was 7.1% larger than last year at this time, on 7.80% larger slaughter. Wednesdays’ USDA Hogs & Pigs report showed a slightly larger than expected breeding herd at 101.1% of year ago, but some reduction in market hog numbers in the lightest weight group. Farrowing intentions for Dec-Feb are below year ago, but with a record number of pigs saved per litter in Sep-Nov we could still be above year ago for the Dec-Feb pig crop. USDA reported improved pork export sales on Thursday, with 10,400 MT of 2015 business and 23,000 MT for 2016. China booked 15,100 MT for 2016, a much larger purchase than we’ve seen in recent weeks.

Market Watch

We’ll have an abbreviated  trading week this week, with New Years Day falling on Friday and the markets closing early on Thursday. That will delay some reports until the following Monday. The markets will be closed on Friday for the holiday, and it is likely that trading volume will be lower than typical all week. The exception might be some year end asset allocation adjustments. USDA Export Inspections are still anticipated for Monday, with weekly Export Sales on Thursday.  December cattle futures will expire on Thursday. Thursday is also first notice day for January futures contract deliveries.

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 to Omaha!

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.

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.  Copyright 2015 Brugler Marketing & Management, LLC