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Chinese Christmas

Published on: 22:34PM Dec 14, 2018

Market Watch with Alan Brugler

Dec 7, 2018

Chinese Christmas

On could be excused for thinking that the only suitable subjects for discussion in news media are Donald Trump and China. The volume of material discussing/blaming or otherwise incorporating the two is immense. Since the Trump/Xi meeting in Argentina, a Venn diagram would show a lot more overlap between the two subjects.  Here in the US, Christmas is December 25 and New Year’s Day is one week later.  Chinese New Year moves around the calendar like Easter does. In 2017 it was January 28, while in 2018 it was February 16. For 2019 it will fall earlier, on February 5. It looks to me like with their New Year moving up maybe the Chinese gave US producers an early Christmas present. They bought more than 1.4 MMT of soybeans per official USDA announcements and rumor has it there are more cargoes in the pipeline.  However, just like the old jokes about eating Chinese food and being hungry an hour later, the soybean market sold off on the actual news.  Sometimes when you open the present it isn’t what you asked Santa to bring!

Corn futures rose 2.9% this week in the March futures (December expired on Friday). The weekly USDA Export Sales report showed 18/19 corn sales in the week of 12/6 at 903,164 MT, a little shy of trade estimates. That was down 23.3% from last week but still 4.18% larger than this time last year. On Tuesday, USDA cut projected corn use for ethanol by 50 million bushels due to plant closures, and bumped up projected ending stocks to 1.781 billion bushels. There is speculation that China will buy corn, sorghum, or DDG’s as part of the ag commodity purchase package, but nothing has officially been announced. The CFTC Commitment of Traders report showed the large spec funds adding 44,872 contracts to their net long position, taking it to 98,617 contracts as of December 11.

Wheat futures posted gains in two of the three markets this week. Chicago SRW led the bulls with a 3% advance the previous week but sagged on unwinding of the CHI/KC spreads.  KC HRW was up another 1.2% as a beneficiary of that spread trade and some improved HRW export sales.  MPLS spring wheat rose 0.4% for the week. On Tuesday, USDA trimmed expected US exports for the year by 25 million bushels, because 6 months of the marketing year are in the books and we’re still behind last year’s pace. Weekly export sales totaled 754,054 MT, on the high side of estimates. That was a 5.9% jump from last week and 28.1% larger than a year ago. We’re gaining on year ago! More than half of the sales total was for HRW, at a MY high 418,161 MT and the largest weekly HRW sales total in 13 months. The CFTC Commitment of Traders report showed the large spec funds shedding 6,005 contracts from their net short position in CBT wheat, taking it to -22,402 contracts as of December 11.

Soybean futures were down 1.8% this week, walking back a gain of 2.5% from the previous week. Soybean meal and soybean oil were both down 0.9% for the week. China bought more than 1.4 MMT of soybeans confirmed in two announcements. Traders “bought the rumor and sold the fact”, with a few expressing disappointment that the totals weren’t higher. The weekly Export Sales report indicated 792,269 MT of 18/19 soybeans were sold in the week of 12/6. That was down 11.1% from the week prior and 42.7% lower than the same week in 2017. USDA made no changes to the US soybean balance sheet in the WASDE report, but once again increased projected world ending stocks (to 115.33 MMT or 4.24 billion bushels). The CFTC Commitment of Traders report showed the large spec funds trimming 6,525 contracts from their net short soybean position, taking it to -11,068 contracts as of December 11.

 

Commodity

 

 

 

Weekly

Weekly

Mon

11/30/18

12/07/18

12/14/18

Change

% Chg

Mar

Corn

$3.6650

$3.7400

$3.8475

$0.108

2.87%

Mar

CBOT Wheat

$5.1575

$5.3125

$5.3000

($0.013)

-0.24%

Mar

KCBT Wheat

$5.00

$5.12

$5.18

$0.063

1.22%

Mar

MGEX Wheat

$5.758

$5.815

$5.840

$0.025

0.43%

Jan

Soybeans

$8.95

$9.17

$9.01

($0.163)

-1.77%

Jan

Soy Meal

$310.50

$310.00

$307.30

($2.700)

-0.87%

Jan

Soybean Oil

$28.06

$28.74

$28.49

($0.250)

-0.87%

Dec

Live Cattle

$116.93

$117.90

$119.58

$1.675

1.42%

Jan

Feeder Cattle

$145.23

$144.38

$147.58

$3.200

2.22%

Feb

Lean Hogs

$67.55

$67.88

$65.50

($2.375)

-3.50%

Mar

Cotton

$78.91

$80.23

$79.60

($0.630)

-0.79%

Dec

Oats

$2.9225

$2.8800

$2.8750

($0.005)

-0.17%

Cotton was down 0.8% this week after gaining 1.7% the previous week. USDA raised projected US production on Tuesday when the trade had been leaning toward a further reduction. That bumped up ending stocks to 4.4 million bales from 4.3 million. The bigger concern was an eroding export market as measured by export commitments and shipments.  The weekly Export Sales report indicated that just 47,099 RB of 18/19 upland cotton was sold for export in the week of 12/6. That was well below this time last year and 50.35% lower than the week prior. Vietnam purchased 29,300 RB, with China the second largest buyer of 11,700 RB. The CFTC Commitment of Traders report on Friday afternoon showed the large spec funds adding 85 contracts to their net long position last week, taking it to 38,187 contracts as of December 11.

Live cattle futures ended the week $1.67 higher than last Friday. Cash trade was very slow to develop, with some at $188 in the north late on Friday. That was a dollar higher than the previous week. The FCE traded at $119 on Wednesday, close to the current location of futures. Feeder cattle futures shot up 2.2% on the firmer cattle prices and ignored higher corn costs. The CME feeder cattle index was $146.90, up $1.37 for the week. Wholesale beef prices mixed this week. Choice boxes were down 1.6%, while Select 600-900# carcass value was up 1.3%. Weekly beef production was down 1.9% from the previous week but 3.6% larger than the same week a year ago. US beef production YTD is up 2.6% over last year on 2.5% larger slaughter.  The CFTC Commitment of Traders report showed the large spec funds adding 3,261 contracts to their net long cattle position, taking it to 75,524 contracts as of December 11.

Lean hog futures were down 3.5% this week.  The CME Lean Hog index was at $55.36, down 83 cents for the week. The pork carcass cutout value was down $1.83 or 2.5% during the past week. The ham primal had the biggest selling pressure as processors and many retailers are done buying Christmas needs. Pork production this week was up 2.3% from last week and 1.1% larger than the same week a year ago. Pork production for the year has been 2.6% larger than in 2017. Estimated weekly slaughter is 2.612 million head. That would be 1.4% more than the same week a year ago. The CFTC Commitment of Traders report showed the large spec funds trimming 3,563 contracts from their net long position during the reporting week, taking it down to 35,806 contracts as of December 11.

Market Watch

This is the last full trading week for a while, with Christmas and New Year’s holidays interrupting the next two weeks. There will be an abbreviated session on December 24, but many traders are expected to take the day off. Report wise, we’ll start the week with the USDA Export Inspections report on Monday. Wednesday will show the weekly EIA ethanol production and stocks report. The weekly Export Sales report will be out on Thursday morning per normal.  USDA has moved up the monthly Cattle on Feed, Cold Storage and Hogs & Pigs report releases to Thursday instead of Friday.

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. Sound analysis and seasoned advice makes a difference to your bank account!

 

 

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