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Choppy Water

Published on: 21:47PM Jan 22, 2016

 

Market Watch with Alan Brugler

January 22, 2016

Choppy Water

 

There is a market axiom that “choppy equals toppy”.  We’re definitely getting some choppy action in markets as diverse as cattle, crude oil and the S&P.  None of them appear to be particularly in a position for a top, making one wonder if the axiom also applies to bottoms.  We’re not aware of adequate research to support that hypothesis. We do know that the S&P and crude oil were very oversold as measured by their oscillators, and looking for an excuse to rally. It will take a few more days to figure out if Friday action was a turning point, or merely part of another old trader notion, the “dead cat bounce”.

Corn futures were up 1.9% this week on top of 1.7% the previous week. The weekly USDA export sales total was above trade expectations at 1.347 MMT (53 million bushels).  Accumulated shipments of 10.611 MMT are still 23% smaller than last year through the first twenty weeks of the marketing year. Milo sales totaled 210,714 MT, the largest in a month. The Argentinean ag ministry expects corn planting in the country to reach 5.69 million hectares this year, up from its previous forecast of 5.40 million hectares. Some switching occurred after the export tariffs were removed for corn and wheat, raising the farm price received. US ethanol production slowed in the most recent reporting week, with ethanol stocks rising and ethanol prices not competitive with plunging gasoline. Energy futures did rally sharply on Friday. The Friday CFTC report showed the spec funds reducing their bearish position by 28,621 contracts in the week ending 1/19. They were still net short 158,210 contracts.

Wheat futures were up 0.37% this week, while the hard wheat futures were lower as the spreads reversed dirction from the previous week. USDA reported weekly export sales totaled 437,200 MT for the week ending January 14. That was well above trade expectations. The weekly total included 75,190 MT of sales for 2016/17, the largest since the week ending September 10. The Argentinean government slightly increased its wheat production estimate to 11 MMT from a previous estimate of 10.9 MMT (USDA: 10.5 MMT). The Commitment of Traders report showed very comfortable fund shorts, holding a net 70,458 contract position in Chicago SRW. They bought back only 670 of them in the reporting week.

Soybeans were down 3 cents per bushel for the week in nearby March futures. USDA reported net soybean export bookings of 1.021 MMT during the week ending 1/14. China was the largest buyer as per usual. Weekly soybean meal sales were the largest of the marketing year at 280,600 MT for old crop and 300 for 2016/17 delivery. Soy oil bookings totaled 19,300 MT. As per usual, South American weather forecasts were bullish in some areas and bearish in others.  The Friday afternoon Commitment of Traders report showed the big spec funds exiting more than half of their short position. The net short shrank to -25,773 contracts as of Tuesday night.

March cotton futures rallied 1.7% this past week after being flat the previous week. The weekly Export Sales report showed that 215,400 RBs were booked for sale during the week ending 1/14, including 10,500 RBs of Pima. This was stronger than expected, with net sales the largest since the week ending November 26, and 81% larger than the previous four week average. China was in for 9,686 RBs. USDA reported that 644,350 RBs were ginned during the Jan 1 to Jan 14 time frame, down 11.6% from the 15 year average for the period. Accumulated ginnings of 11.739 million RBs are still down 22% from last year. The USDA AWP for this coming week is 47.01, with the LDP/MLG at 4.99 cents through January 28. It had been 5.1 cents.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

01/08/16

01/15/16

01/22/16

Change

% Chg

Mar

Corn

$3.570

$3.633

$3.703

$0.070

1.89%

Mar

CBOT Wheat

$4.785

$4.738

$4.755

$0.018

0.37%

Mar

KCBT Wheat

$4.728

$4.740

$4.708

($0.033)

-0.69%

Mar

MGEX Wheat

$5.01

$4.97

$4.97

($0.003)

-0.05%

Mar

Soybeans

$8.653

$8.790

$8.765

($0.025)

-0.29%

Mar

Soy Meal

$268.70

$270.70

$268.50

($2.20)

-0.82%

Mar

Soybean Oil

$29.64

$29.65

$30.50

$0.850

2.79%

Feb

Live Cattle

$132.875

$127.550

$132.075

$4.525

3.43%

Jan

Feeder Cattle

$159.43

$154.30

$159.43

$5.13

3.21%

Feb

Lean Hogs

$59.850

$62.025

$63.000

$0.975

1.55%

Mar

Cotton

61.40

61.41

62.45

1.040

1.67%

Mar

Oats

$2.108

$1.988

$2.055

$0.068

3.28%

 

Live cattle futures rallied 3.4% this week, not quite offsetting the more than 4% loss from the previous week. Some of this was short covering ahead of the Cattle on Feed and Cold Storage reports released by USDA on Friday afternoon. Wholesale prices were sharply lower. For the full week, Choice boxes were down 3.3% and and Select boxes were down were up 0.1%, which in the case of Select was a drop of 15 cents per hundred pounds. Cash cattle traded at $128 at mid-week but asking prices were mostly $134 and higher, limiting volume. Estimated weekly slaughter was down 2.1% vs. a year ago and up 0.2% from the previous week. Beef production YTD is down 1.8% from the same three weeks in 2015 despite higher carcass weights. The USDA Cattle on Feed report showed On Feed January 1 numbers were 99.5% of year ago, with December placements at 99.22% and marketings at 101.15%. The placement figure was larger than the trade had anticipated.  The USDA Cold Storage report showed no progress in shrinking the beef backlog, which was still 15.6% larger than on December 31 a year earlier.

Lean hog futures were up 1.55% this week, adding to the 3.5% advance from the prior week. The CME Lean Hog Index was $57.20, up $2.08 from the previous Friday. Estimated FI hog slaughter for the week was 2.329 million head, up 1.3% from the previous week and up 0.5% from the same week a year ago. Hog slaughter for the first 22 days of the year is down 1.1% from last year, with pork production down 1.9%. The pork carcass cutout price was up 3.76% on a Friday/Friday basis vs. 3.73% the previous week. All of the primals showed gains for the week.  The USDA Cold Storage report showed a draw down in pork inventory for the 4th consecutive month. The quantity in storage was still 8% larger than on December 31, 2014.

Market Watch

Livestock traders will start the week reacting to the Cattle on Feed and Cold Storage report results released on Friday afternoon. Grain traders will be reacting to any surprise positions following expiration of the February serial options, also on Friday. We go back to a regular report week structure, with USDA weekly export inspections on Monday,  EIA weekly ethanol production on Wednesday and USDA weekly Export Sales on Thursday. To complicate matters, the FOMC (Fed) meets on Tuesday and Wednesday. January feeder cattle futures will expire on Thursday the 28th.  USDA will also release the semi-annual cattle inventory report on Friday afternoon.

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! Ken Harrison is the latest addition to our speaker line up, leading a group discussion of non-market risks to your farming operation and how to plan for them. Registration links are now available from the home page of our web site at http://www.bruglermarketing.com.  The registration deadline for Dayton is this Thursday.

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 2016 Brugler Marketing & Management, LLC