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Cold and Blue (or Black and Blue)

Published on: 22:37PM Nov 13, 2015

 

Market Watch with Alan Brugler

November 13, 2015

Cold and Blue (or Black and Blue)

I’m looking at a cold blue November sky out my window this afternoon. Omaha just tied the record for the latest first freeze on record. Whether that is a symptom of global climate change or just the short term El Nino pattern we are in can be debated. The late freeze definitely helped all crops to mature make it safely to the bin in this part of the world. The markets this week had a little more of a black and blue feel to them, in part due to that same crop dynamic. Record crops in the WCB didn’t sustain freeze damage or much in the way of harvest loss, and USDA had to raise US yield and production estimates to reflect that reality. Now the grain futures are just acting a bit beat up.  

Corn futures lost 4.1% this week after a 2.5% drop the previous week. The USDA report on Tuesday was the main value driver, with NASS hiking the US average yield and production, while the supply/demand analysts cut expected corn use for ethanol and trimmed likely exports. They cut the average cash price estimate for the year by 15 cents per bushel. increased by 13,000 barrels per day vs. last week, up to 982,000 barrels per day during the week ending 11/6. Ethanol stocks rose by about 100,000 barrels to a still snug 18.9 million barrels. Estimated corn use for the week for ethanol was 103 million bushels although some new cellulosic production is coming on line and complicating the calculation. Several plants are also increasing milo use at the expense of corn. Weekly corn export sales totaled 640,600 MT during the week ending Nov 5, on the high end of trade estimates. Sales were 14% larger than the previous 8-week average. Weekly shipments were only 270,852 MT, down 45% from the previous week, marking the lowest amount of weekly shipments since the week ending September 5, 2013. Total commitments lag year ago by 5.9 MMT, an improvement from last week

Wheat futures were down 5.5% in Chicago on the week, with losses of 5.3% in HRW and 2.9% in the Minneapolis spring wheat futures. The WASDE report on Tuesday bumped up projected US ending stocks to 911 million bushels, as exports continue to under perform.  The Aussie crop estimate was reduced, but world stocks are still burdensome in the major exporting countries. USDA export sales data showed wheat sales of 236,738 MT during the week ending last Thursday, 2.2 times larger than the depressed sales figure from the previous week, but still the third smallest sales figure of the marketing year which began on June 1.  Total old crop commitments (shipments sales) through the first 23 weeks of the marketing year are 17.4% smaller than last year. The Ministry of Trade and Industry in Jordan purchased 100,000 MT of wheat for $234/ton, calling for January 2016 delivery.

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January soybeans were 8 1/4 lower this week. The average trade estimate for 2015/16 US ending stocks was 435 million bushels. USDA bumped up projected crush and exports but still had to put the ending stocks at 465 million bushels because of record production.  The USDA Export Sales report showed bookings of 1.319 MMT during the week ending last Thursday, nearly doubling the amount from the week before. It isn’t a bullish market when bullish export numbers are met by lower futures trade. Outstanding export sales are 7.5 MMT behind year ago at this time, but shipments are running ahead of last year’s record pace. Buyers see little urgency to extend ownership, and instead are taking a more hand- to- mouth approach.

December cotton futures were almost UNCH for the week, with a 0.03% gain. USDA left projected US ending stocks UNCH on Tuesday, giving the market little to act on. Global stocks were tightened slightly. The USDA Export Sales report showed cotton sales of 136,900 RB during the week ending Nov 5, including 7,900 RB of Pima. Sales of upland cotton were 16.7% smaller than the previous week, but the fourth largest net sales figure since the marketing year began on August 1. Net sales to China totaled 11,219 RB, setting a marketing year high. The weekly AWP set by the USDA dropped to 46.59 last night, boosting the LDP/MLG for this week from 4.84 cents to 5.41 cents per pound.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

10/30/15

11/06/15

11/13/15

Change

% Chg

Dec

Corn

$3.823

$3.730

$3.583

($0.148)

-4.12%

Dec

CBOT Wheat

$5.220

$5.233

$4.958

($0.275)

-5.55%

Dec

KCBT Wheat

$4.938

$4.903

$4.655

($0.248)

-5.32%

Dec

MGEX Wheat

$5.26

$5.19

$5.04

($0.145)

-2.88%

Jan

Soybeans

$8.858

$8.673

$8.590

($0.082)

-0.96%

Dec

Soy Meal

$304.40

$295.70

$288.80

($6.90)

-2.39%

Dec

Soybean Oil

$28.20

$28.04

$27.04

($1.000)

-3.70%

Dec

Live Cattle

$141.725

$134.925

$130.675

($4.250)

-3.25%

Nov

Feeder Cattle

$190.90

$181.63

$175.08

($6.55)

-3.74%

Dec

Lean Hogs

$59.200

$55.000

$54.800

($0.200)

-0.36%

Dec

Cotton

63.32

61.66

61.68

0.020

0.03%

Dec

Oats

$2.273

$2.238

$2.315

$0.078

3.35%

 

Cattle futures took a pounding, losing 3.25% for the week on more evidence of poor export demand and seasonal competition from hams and turkeys. Estimated weekly beef production was down 1.5% from the previous week, but up 1.1% vs. the same week in 2014. Year to date production is still down 3.2% . Wholesale prices were sharply lower this week, with choice boxes down 2.9% and Select product down 4% from Friday to Friday. Cash cattle trade was light this week, with the South still not established as this went to distribution. Dressed sales averaged $197-202 but were fading late on Friday. Feeder cattle futures were down 3.7%.

Lean hogs flattened out this week, losing 0.36% for the week. Weekly pork production was up 1.5% from the previous week according to USDA, and 6.2% larger than the same week in 2014. Year to date pork production is up 7.1% on 7.9% larger slaughter. Obviously average weights have been below year ago. Estimated weekly slaughter was 2.388 million head this week. Pork carcass cutouts were down $1.92/cwt for the week (2.55%). The average price for bellies was up 1.7% but the loins lost nearly 10% for the week.

Market Watch

We will see the regular USDA Crop Progress and Export Inspections reports on Monday, along with the Commitment of Traders report delayed from Friday by the holiday. The NOPA crush estimate for October should also be forthcoming. The USDA Weekly Export Sales report is scheduled for Thursday. Thursday will also mark the last trading day for November feeder cattle. They expire earlier than normal due to the Thanksgiving holiday . Friday will feature the monthly USDA Cattle on Feed report, and also the expiration of the December grain futures options.

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There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

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