Ducking and Dodging

Published on: 20:08PM Sep 25, 2015

Market Watch with Alan Brugler

September 25, 2015

Ducking and Dodging

 

Like a boxer in a ring, the ag and financial markets seem to be doing a lot of ducking and dodging right now, trying to avoid a knockout punch thrown by the bears. With the reduced market participation by some of the investment banks, it is our opinion that liquidity isn’t quite as good as it was. This means more erratic moves and bigger potential price swings. For exhibits A, B and C look at the wheat market, S&P 500 stock market and the cattle market on Friday. All have been doing a little back and forth while establishing value.

 

Corn futures picked up 11 ¾ cents, or about 3% on the week. The USDA Export Sales report yesterday morning showed export sales of 426,300 MT during the week ending 9/17, down 20% from the week before. Mexico and Columbia were the two largest buyers, purchasing nearly 74% of the total sales. Accumulated exports are down 24% from last year through the first three weeks of the marketing year.  Ethanol production reported this week was the slowest since early May.  Stocks were up 3.28% on the week.  Trade estimates for the September 1 Grain Stocks average 1.739 billion bushels.  The report is scheduled for Wednesday the 30th.  In the COT report form the CFTC, Managed Money (MM) accounts decreased their net long position in corn by 3,171 contracts  during the week ending September 22.

 

Wheat futures were higher this week.  The front month SRW and HRW contracts were up 21 and 18 cents on the week, 4.1% and 3.6% respectively.  The market rallied this week on dry planting conditions in Russia and potential reductions in the Australian crop. Then eastern Australian rainfall forecasts improved and the Russians decided to lower tariff rates in an effort to increase exports. The new rate will be 10 rubles per MT vs. the previous 50 rubles/MT. It will take effect on October 1. That is of course not positive for US sales prospects. Total US old crop commitments (sales and shipments) are 14% behind the pace set in 2014, due to cheaper wheat sources around the globe and projected record large world ending stocks. The average trade estimate for September 1 wheat stocks is 2.157 billion bushels. Only minor changes are expected in the Small Grains numbers. The Commitment of Traders report showed the large speculative traders getting another net 4,017 contracts less bearish on Chicago SRW, with a net short position of -35,365 contracts as of Tuesday night. 

 

November soybeans were up 21 ¼ cents on Friday, finishing the week 22 cents higher, up nearly 2.5% from last Friday. USDA tightened old crop carryover to 210 million bushels in the WASDE report. The official number will come on September 30 in the Grain Stocks report. The average trade estimate is 208 million bushels. The big news of the week was the signing of the 13.18 MMT purchase agreement by the Chinese. They committed to purchases in 24 separate deals spread out over 2015/16 and some 2016/17 deliveries. Tha actual transactions still need to be reported under the USDA Export Sales report system as details are finalized. The main impact will be a narrowing of the “gap” between US export sales to China last year and those on the books for this year. The Commitment of Traders report confirmed that the large spec funds increased their  bearish bets from the previous week as of the Tuesday close. They added a net 21,228 short positions during the week ending 9/22 and were net short -46,250 contracts on that date. 

 

October cotton futures were down 201 points for the week, down 0.35% following a 7.1% loss the previous week. October delivery notices began this week, with 29 contracts put out on Thursday night. There were only 45,995 certified bales in stock on September 24 as most of the old crop has been shipped out and little new crop has been ginned at this point. USDA weekly Export Sales for the week ending 9/17 totaled  95,766 RB. Export commitments are 32% of the full year forecast, lagging the 51% average pace for this date. As of Tuesday night, managed money accounts were shown to be a net -15,494 contracts less-long than the previous week in the Commitment of Traders report from the CFTC.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

09/11/15

09/18/15

09/25/15

Change

% Chg

Dec

Corn

$3.870

$3.773

$3.890

$0.118

3.02%

Dec

CBOT Wheat

$4.850

$4.868

$5.078

$0.210

4.14%

Dec

KCBT Wheat

$4.823

$4.823

$5.003

$0.180

3.60%

Dec

MGEX Wheat

$5.115

$5.110

$5.228

$0.118

2.25%

Nov

Soybeans

$8.743

$8.673

$8.893

$0.220

2.47%

Oct

Soy Meal

$310.900

$309.000

$308.700

($0.30)

-0.10%

Oct

Soybean Oil

$26.650

$26.050

$27.720

$1.670

6.02%

Oct

Live Cattle

$140.600

$136.000

$133.700

($2.300)

-1.72%

Oct

Feeder Cattle

$195.10

$185.83

$184.60

($1.22)

-0.66%

Oct

Lean Hogs

$67.325

$71.050

$71.875

$0.825

1.15%

Oct

Cotton

64.090

59.850

59.640

(0.210)

-0.35%

Dec

Oats

$2.300

$2.305

$2.313

$0.007

0.32%

 

Live cattle futures were down $2.30 on the week in the October contract, despite finishing Friday up the daily limit.  October cattle posted a $9 trading range from Monday to Friday.  October feeders were down $1.22 on the week and were also limit up today.  Wholesale prices were sharply lower for the week. Choice boxed beef was down $14.07/cwt (6.2%) for the week, with Select product down $9.46/cwt (4.3%). Year to date cattle slaughter is down 6.4% compared to a year ago.  The weekly COT report from the CFTC showed MM accounts taking their net long position down to just 4,903 contracts as of the Tuesday close.

Front month lean hog futures were up 82.5 cents from last Friday. The October contract finished the week up 1.15% at $71.85. The CME Lean Hog Index was $71.83 for the 9/23 average. Weekly FI slaughter including Saturday was estimated at 2.276 million head, down just 2,000 head from last week.  YTD slaughter is 8.1% larger than a year ago. Wholesale pork prices were up $1.04/cwt or 1.25% from Friday to Friday. The USDA quarterly Hogs & Pigs report showed All Hogs on September 1 were 103.7% of year ago. The trade average guess was 103.6%. Of more immediate interest, Kept for Breeding was 101.1% of year ago, with the trade anticipating 100.3%. Farrowing intentions for Sept-Nov are down 2.5% from a year earlier, with the trade on average anticipating a slightly larger cutback of 2.8%. Intentions for the Dec-Feb period are 99.3% from last year, while traders on average had been looking for 99.2%.  Weekly data on the commitment of Traders report from the CFTC showed the managed money accounts increasing their net long in lean hogs by 3,941 contracts from the previous week.

Market Watch

 

Hog traders will begin the week adjusting to the new information from the Hogs & Pigs report released on Friday afternoon. USDA will issue updated Crop Progress and Export Inspections data on Monday. Weekly EIA ethanol data is expected on Wednesday, with the usual weekly Export Sales numbers from FAS on Thursday morning. The USDA “main event” for the week will be the Small Grains and Grain Stocks reports on Wednesday morning at 11 am CDT.  There will also be monthly Grain Crushings and Oilseeds crushing reports on Thursday, and a Stats Canada Crop Production report is scheduled for Friday. Friday will also mark the expiration of the October live cattle options.

 

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.

 

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

 

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