Black Ink

Published on: 20:56PM Apr 02, 2015

 Brugler

Market Watch with Alan Brugler

April 2, 2015

Black Ink

 

The March 31 USDA reports have a reputation of delivering big price swings. With corn down 18 cents on Tuesday, it certainly looked like the reputation was being earned. From the perspective of the end of the week, we got some big moves but they were not the obvious ones. Wheat had neutral acreage and yield numbers from USDA , but Chicago was up 5.3% for the week. KC HRW was close behind with a 5.1% advance. Corn, with the obvious bearish fundamentals and Tuesday breakdown, actually lost only 1.16%. Soybeans posted a 2.5% gain. Hogs, which have been fallilng for moniths, were also in the big gainer category at 3.24% despite not even being involved in the end of month reports. They did ‘sell the rumor, and buy the fact” following the Hogs & Pigs report the previous Friday. It had confirmed big expansion of hog numbers. All in all, there was a surprising amount of black ink on the price table heading into the Good Friday and Easter holiday weekend.

Corn and oats were the only tracked ag commodidites that were down for the week. Corn was down 1.16%. USDA found producers intended to plant 89.199 million acres of corn in 2015. That was down 2% from last year, but less of a shift than the trade had expected. March 1 stocks were also above 7.7 billion bushels and seen as bearish. Weekly ethanol production slowed slightly to 952,000 barrels/day. Ethanol stocks dropped to a 10 week low at 20.547 million barrels. Weekly net export sales for corn in the week ended March 26 slowed to 431,600 MT from 502,288 metric tonnes the previous week. New-crop export sales were just 25,100 MT. The 2014/15 corn export sales commitments have now fallen behind the 5 year average pace, at 82% vs. 83% for the average. The outstanding (unshipped) sales book is 20% smaller than last year. Grain sorghum net export sales for the current marketing year were negative, with cancellations exceeding new sales. Japan cancelled 220,000 MT, the others avhe been willing to steup up.

Soybean futures were up 1.9% this week, with soybean meal up 1.8% and soy oil up 1.42%. Soybean export sales slowed to only 27,400 MT of old crop, but new crop bookings were 568,300 MT to buyers like “unknown destinations” and China. Soymeal sales also rose to a combined 397,600 MT of old crop and new crop.  The US now has export sales commitments to meet 100% of the WASDE full year forecast for soybeans. That is 4% ahead of the average pace. Outstanding sales are 15% larger than last year at this time, offering hope that shipments will exceed the very slow pace last year in the second half.  Outstanding meal bookings are nearly double year ago at 3.376 MMT, with 84% of the full year expectation on the books. The BAX (Brazil) has a crop production estimate of 58.5 MMT vs. the USDA figure of 56 MMT.

Chicago wheat futures shot up 5.3% this week, with KC up 5.1%.  MPLS was up a more modest 2.5%, with the very real possibility that any rally will attract additional spring wheat plantings. The rally was mostly driven by short covering, with Chicago showing a notably large fund short position last week. Some of those were clearly leaving this week. Dry weather in the Plains HRW area is a fundamental support. On the other hand, wheat export sales continue to be anemic. Net old crop sales for this week were only 106,100, which was in fact better than the previous week. The combined old and new crop total was 293,100 MT. Total old-crop commitments lag a year ago by 24%. Outstanding sales yet to be shipped total only 4.36 MMT, down 18% from last year at this time. USDA March 1 wheat stocks of 1.12 billion bushels were slightly below the trade estimate, but not enough to move the price meter.

 

 

Commodity

 

 

 

Weekly

Weekly

Month

03/20/15

03/27/15

04/03/15

Change

% Chg

May

Corn

$3.85

$3.91

$3.87

($0.045)

-1.16%

May

CBOT Wheat

$5.31

$5.08

$5.36

$0.285

5.31%

May

KCBT Wheat

$5.69

$5.53

$5.83

$0.297

5.11%

May

MGEX Wheat

$5.90

$5.76

$5.91

$0.150

2.54%

May

Soybeans

$9.71

$9.67

$9.86

$0.188

1.90%

May

Soy Meal

$323.00

$321.40

$327.30

$5.900

1.80%

May

Soybean Oil

$30.61

$30.60

$31.04

$0.440

1.42%

Apr

Live Cattle

$158.35

$162.63

$163.03

$0.400

0.25%

Apr

Feeder Cattle

$216.20

$218.93

$220.38

$1.450

0.66%

Apr

Lean Hogs

$58.45

$61.13

$63.18

$2.050

3.24%

May

Cotton

62.82

63.55

63.77

$0.220

0.34%

May

Oats

$2.73

$2.72

$2.69

($0.033)

-1.21%

Cattle futures rallied 0.25% this week, with a two week gain of more than $4.68 per cwt. Ready cattle numbers tightened in March but will begin to expand in April and May. On a Thursday/Thursday basis wholesale beef prices were higher, with Choice up 2.1% and Select up 1.4%. The Choice cutout value was the highest since mid-January. Beef exports were showing no signs of recovery, at only 5,300 MT.  Week to date FI cattle slaughter at 421,000 head was down 49,000 from the same point in 2014.

Hog futures were 3.2% higher, adding to a gain of 4.4% higher for the previous week. Through Thursday, weekly hog slaughter was 1.729 million had, off 4,000 from the prior week but 109,000 more than had been processed at the same point in 2014. USDA pork export sales jumped 45% from the prior week in the Thursday report. Total pork export commitments have been above a year earlier since the year began, and the lead is growing. Weekly exports were the highest of the calendar year at 22,700 MT.  Mexico and China were the largest buyers. On a Thursday/Thursday basis, the pork carcass cutout value dropped 4.2%, with picnic and belly primal both dropping more than 8%.

Cotton futures were up 0.34% for the week. The market got a little boost from USDA confirmation of the smallest cotton acreage since 2009. The figure released on Tuesday was 9.549 millino acres. Net cotton export sales improved slightly from the poor 58,883 in the week ended March 19. This week’s total was 65,400 RB of combined old and new crop.  The ICAC cut its projected world production, consumption, import and export trade numbers for 2015/16. The net result was world ending stocks expected to be 21.21 MMT vs. 21.77 MMT in the 2014/15 marketing year.

Market Watch

Cattle futures will begin the week reacting to the expiration/exercise of April options on Thursday. Monday will also be first notice day for deliveries against April futures.  USDA will have the usual Export Inspections report on Monday and Export Sales on Thursday. The first 18-state Crop Progress reports are also expected to be issued on Monday. The main USDA reports will be the monthly Crop Production and WASDE reports on Thursday morning at 11 am CDT.  Friday will mark the expiration of May cotton options.

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