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Goodbye and Good Riddance

Published on: 21:28PM Dec 31, 2015

Market Watch with Alan Brugler

December 31, 2015

Goodbye and Good Riddance

 

Benjamin Franklin is alleged to have said that “Guests, like fish begin to smell in three days”.  Some of us have experienced house guests (or roommates) who fit that description. Hopefully we were not on the other side of that remark.  The 2015 commodity markets have all the attributes of that smelly fish if you are in the business of producing them. Nearly all were down sharply in 2015 due to a strong dollar, tepid global economic growth, OPEC oil politics and in many cases oversupply resulting from record high prices seen earlier (see 2012 corn, 2013 hogs or 2014 cattle). Active hedgers were able to mitigate the effects of these price slides to a degree, but ag income was still down sharply in 2015. End users welcome the lower input costs, but for most in production agriculture, it is goodbye and good riddance to 2015.

 

Corn futures were down 1.6% for the week. Argentine efforts to open up their market are having a short term bearish effect on US exports and perceptions of such exports down the road. The latest step was to remove export quotas (which had tended to bottle up surplus bushels at home). The market may also be trying to discourage notions of winter crop (safrinha) corn planting in Brazil. The weekly USDA Export Sales report showed bookings of 705,200 MT through December 24, slower than the 803,600 MT during the week ending December 17. Ethanol production was solid, rising to 992,000 bpd and consuming about 103 million bushels of corn and milo for the week. Ethanol stocks dropped 200,000 barrels to 20.2 million barrels.  Grain sorghum export sales dropped back to a pedestrian 134,800 MT. China and Mexico continue to be the major players in the market.  

 

Wheat futures were fractionally higher in CHI and KC but settled lower in MPLS on Thursday. The weekly Export Sales report showed wheat sales of 382, 400 MT, continuing an uptrend. The two previous weeks were 370,300 MT and 320,200 MT. Several countries are in the market right now, looking at the lowest prices in years. The US is still more expensive than similar quality wheat offerings. Some trader types have tried to kill off the Russian and Ukrainian crops more than once this winter. There are definitely areas with poor stands and/or no snow cover. It is more difficult to assess whether it got cold enough or windy enough to sufficiently stress the crop.

 

Soybeans were down 4 cents per bushel for the week. Weekly US Export Sales during the week ending 12/24 were a bust, totaling only 579,400 MT, and that included 2016/17 sales. The prior week was 2,069,700 MT.  Meal dropped another 1.2% for week. Export sales at 78,900 MT were very slow. Domestic basis still suggests too much product backing up in the country. You can get any Brazilian weather forecast you want to pay for right now. They say all politics is local.  Perceptions of yield potential are also very localized!  First crop Brazilian planting has pretty much wrapped up, with a very few scatted fields already harvested. Argentine planting is later, and close to the same progress as year ago.

 

March cotton futures were down 38 points for the week. The weekly USDA Export Sales report showed 123,400 RB of cotton sold. That was down from 137,000 RB of cotton booked during the week ending December 17. USDA showed that the average world price (AWP) raised the LDP/MLG back to 4.18 cents on the 24th. The update for this week was not available at the time of writing.

 

Live cattle futures retreated by 22 cents for the week. That’s not much of a correction after the 8.35% jump the previous week. December futures expired in style with a $2.80 gain to $135.80. They were catching up with a surprisingly strong cash cattle market from Wednesday featuring some $136 trades. Improved export sales were a feature last week, but not in this week’s report (6,400 MT).  Estimated weekly slaughter was up 5.94% vs. a year ago.  Wholesale beef prices were sharply higher for the week, with Choice up $14.96 (7.57%), and select up $15.75 (8.31%) from Thursday to Thursday.

 

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

12/18/15

12/24/15

12/31/15

Change

% Chg

Mar

Corn

$3.745

$3.645

$3.588

($0.058)

-1.60%

Mar

CBOT Wheat

$4.868

$4.675

$4.700

$0.025

0.53%

Mar

KCBT Wheat

$4.823

$4.675

$4.685

$0.010

0.21%

Mar

MGEX Wheat

$5.06

$4.95

$4.93

($0.018)

-0.35%

Jan

Soybeans

$8.923

$8.753

$8.713

($0.040)

-0.46%

Jan

Soy Meal

$281.00

$269.00

$265.80

($3.20)

-1.20%

Jan

Soybean Oil

$30.53

$30.87

$30.55

($0.320)

-1.05%

Feb

Live Cattle

$125.525

$137.025

$136.800

($0.225)

-0.16%

Jan

Feeder Cattle

$148.75

$163.48

$166.90

$3.43

2.05%

Feb

Lean Hogs

$56.625

$58.300

$59.800

$1.500

2.51%

Mar

Cotton

63.69

63.66

63.28

(0.380)

-0.60%

Mar

Oats

$2.265

$2.195

$2.173

($0.023)

-1.04%

 

Lean hog futures were up 2.5% for the week on top of a 2.9% gain the previous week. The CME Lean Hog Index was $52.97, down $23.60 for the week.  Carcass weights continue to run below year ago, but by less than a pound. USDA reported solid pork export sales on Thursday, at 23,200 MT. With only 7 days remaining in 2015, most of the business was for 2016. China booked another 6,300 MT, which was slower than the 15,100 MT the previous week but continues to be a much stronger level of interest for them. Opening up additional suppliers seems to be facilitating additional trade. Pork carcass cutout prices were down 83 cents, or about 1.2% on a Thursday/Thursday basis.

 

Market Watch

 

We get back to a full trading week this week, having passed the various US holidays. The CFTC Commitment of Traders report will be out on Monday as the government was closed on Friday. We’ll see the usual weekly Export Inspections on Monday and Export Sales on Thursday morning. Some fund traders will be making asset allocation adjustments, or putting money back into play after parking it before year end. USDA will release the monthly Grain Crushings, Fats & Oils (soy crush) and Cotton Consumption reports on Monday.  All of this will be pre-amble to the raft of month reports to be released on January 12.  Thos include final Crop Production, quarterly Grain Stocks, Winter Wheat acreage and the WASDE supply/demand estimates.

 

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! Registration links are now available from the home page of our web site at http://www.bruglermarketing.com.

 

 

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 2015 Brugler Marketing & Management, LLC