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Beware the Buck

Published on: 20:13PM Apr 17, 2015

 Brugler

Market Watch with Alan Brugler

April 17, 2015

Beware The Buck

The Wall Street types were focused on the Greek debt situation this week, notably the schedule of payments and whether the Greeks could meet them. That was followed by more speculation about the impact of a Greek exit from the Euro. Some were calling for the euro to plunge in that event, with the dollar rising to 110. On Friday, focus shifted to new Chinese rules designed to curb stock market speculation. For some reason, that cause a sharp drop in the US stock market. Our main point is to see what the money is doing, and not what it is saying. The weekly continuation chart for the US dollar index has a freshly minted MACD sell signal to go with earlier RSI and stochastics sell signals. This suggests somebody wants out of long dollar positions, and the news flow is likely trying to get fresh money to come in long so the earlier long can get out.  This activity also has a bearish on ag commodities, since any weakness in the DX tends to inflate the price of commodities priced in dollars.

Corn eked out a 0.72% gain for the week, particularly interesting given the drop in wheat.  Weekly export sales were larger than the trade expected, at 616,700 MT. China bought 65,200 MT to go on top of the previous purchase, spurring talk of additional potential. The Chinese are beginning to offer intervention stocks back to the market a month early, but getting few takers at the reported price of $10.10 per bushels. They are now indicating a likely subsidy to processors who will use the corn. Early planting delays were also supportive to US corn, with only 2% done as of Sunday.  The number will probably be close to double digits this Monday. On the bear side, Celeres hiked projected safrinha corn production by 3.5 MMT taking their estimate over 80 MMT for Brazil. US Corn use for ethanol also dropped off for the week.

Wheat was under pressure all week, with harvest fast approaching and yield enhancing rains in the forecast seeming to have a bullseye on the droughty western NE and KS production areas. KC May was down 9.7%, with MPLS close behind at 9.1%. SRW bears were expecting ample moisture to boost yields although not quality. Chicago was the long leg of inter-market spreads and lost only 6.5%. The Brugler500 Index for all winter wheat dropped 6 point from the previous week. Combined old and new crop US export sales totaled only 120,400 MT for the most recent reporting period. Global competition is stout, with cumulative EU wheat sales at 28.2 MMT for the year and up 2.3 MMT from the previous year.   Late on Friday, Egypt tendered for wheat to be delivered in early June.

 

 

Commodity

 

 

 

Weekly

Weekly

Month

04/03/15

04/10/15

04/10/15

Change

% Chg

May

Corn

$3.87

$3.77

$3.80

$0.027

0.72%

May

CBOT Wheat

$5.36

$5.27

$4.95

($0.320)

-6.47%

May

KCBT Wheat

$5.83

$5.59

$5.09

($0.495)

-9.72%

May

MGEX Wheat

$5.91

$5.81

$5.33

($0.483)

-9.06%

May

Soybeans

$9.86

$9.52

$9.69

$0.172

1.78%

May

Soy Meal

$327.30

$309.20

$315.00

$5.800

1.84%

May

Soybean Oil

$31.04

$31.09

$31.52

$0.430

1.36%

Apr

Live Cattle

$163.03

$158.80

$157.80

($1.000)

-0.63%

Apr

Feeder Cattle

$220.38

$212.45

$213.00

$0.550

0.26%

May

Lean Hogs

$68.35

$71.78

$70.53

($1.250)

-1.77%

May

Cotton

63.77

65.06

63.29

($1.770)

-2.80%

May

Oats

$2.69

$2.67

$2.63

($0.040)

-1.52%

 

Soybeans gained 17 cents this week, about half of what they lost the previous week. USDA left Brazilian production at 94.5 MMT.  Celeres raised their production estimate to 93.9 MMT. Total US export commitments are now 100% of the forecast for the full year. There are 3.55 MMT still to be shipped (130.4 million bushels). Total sales last week were 538,800 MT. NOPA crush was also record large for the month of March so we are drawing down bushels both domestically and for export. Soybean meal export sales are 85% of the full year USDA estimate, just ahead of the 84% average for this date. Shipments are lagging, however, with outstanding sales over 3 MMT, and 198% of last year at this time.

Live cattle futures were limit down on Friday, a duplication of the meltdown on the previous Friday. In this case it erased gains from earlier in the week and resulted in a net weekly loss of $1 per cwt. Weekly beef production was up 6.1% from the holiday influenced prior week, but still 2.7% below the same week in 2014. Beef production YTD is still down 5.4% from last year. Carcass weights are up an estimated 25 pounds per animal, offsetting the light slaughter run. Wholesale prices were mixed, with Choice boxes up 0.77% for the week, while losing 0.59% in the Select.

Lean hog futures were down $1.25 for the week in new lead month May. They had a big premium to the expired April contract. Pork production YTD is up 5.6% from last year at this point. A week ago it was only 5.6%, so we’re piling it up. Weekly slaughter was up 3.2% from the previous week and 10.7% larger than the previous year. Weekly pork exports reported by the USDA were 16,200 MT. The USDA pork carcass cutout value was UNCH on a Thursday/Thursday basis, with higher ham primal values offsetting losses in other cuts.

Cotton was down 2.8% for the week. This morning, USDA reported net weekly cotton export sales of 42,600 running bales, including 11,900 RB of pima.  Old crop upland sales were a net reduction of 21,800 RB.  China bought about 56% of the Pima total.  Celeres estimates Brazil cotton production will be 1.44 MMT.  Certified stocks for April 15 are 64,508 bales with 4,855 new certs, and another 1,338 bales awaiting review. Stocks are building ahead of May futures deliveries. The USDA dropped the AWP for the week ending 4/23 to 50.31, boosting the LDP/MLG for this week to 1.69 cents from 0.91 cents last week.

Market Watch

The market gets back to somewhat of a regular news flow this week. USDA will release weekly Crop Progress and Export Inspections reports on Monday. Milk production will be out on Tuesday afternoon. The monthly USDA Cold Storage report is scheduled for Wednesday at 2 pm CDT.  USDA weekly Export Sales are on tap for Thursday morning. On Friday, we will see first notice day for May cotton futures deliveries. The May grain options will expire, and USDA will release the monthly Cattle on Feed report.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-289-2330 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

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