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Holy Sky Rocket Batman!

Published on: 20:37PM Aug 07, 2015

 

Market Watch with Alan Brugler

August 7, 2015

Holy Sky Rocket, Batman!

Well, OK, so soybeans were only up 2.8% for the week. It was still worthy of one of Robin’s actual exclamations in the 1960’s TV series. Nearby August beans (deep in the delivery period, with no deliveries and thin) shot up 23 1/2 cents on Friday.  That was their largest single day rally since July 9. And wheat at least got away from its Holy Bankruptcy downtrend, having lost $1.27 3/4 (20%) in the Dec KC contract high to low from June 30 to August 3. In case you were wondering, Wikipedia documents more than 100 different “Holy…..” lines used by the character in the series. With the USDA reports on Wednesday, we’re all hoping that we don’t hear “Holy Bat Trap!”

Corn futures eked out a 0.47% rally for the week. Record yield prospects in the western Corn Belt are keeping a lid on things, but the trade previews expect that NASS will cut projected US yield to 164.6 bushels per acre, thereby reducing production and tightening up expected 2015/16 ending stocks to an average estimate of 1.427 billion bushels. Ethanol stocks dropped to the lowest level since January at 19.2 million barrels. Corn use for ethanol production is still running just over 100 million bushels per week. The Friday Commitment of Traders report showed the large spec funds liquidated 1/3 of their big spec long position in a single week, leaving them net long 163,799 contracts as of August 4.

 

Commodity

 

 

 

Weekly

Weekly

Mon

07/24/15

07/31/15

08/07/15

Change

% Chg

Sept

Corn

$3.925

$3.710

$3.728

$0.018

0.47%

Sept

CBOT Wheat

$5.118

$4.993

$5.105

$0.113

2.20%

Sept

KCBT Wheat

$5.073

$4.923

$4.930

$0.007

0.15%

Sept

MGEX Wheat

$5.450

$5.235

$5.250

$0.015

0.29%

Aug

Soybeans

$9.913

$9.808

$10.090

$0.283

2.80%

Aug

Soy Meal

$354.800

$354.600

$352.600

($2.00)

-0.57%

Aug

Soybean Oil

$30.480

$29.980

$30.030

$0.050

0.17%

Aug

Live Cattle

$143.025

$145.700

$149.650

$3.950

2.64%

Aug

Feeder Cattle

$209.68

$210.73

$214.03

$3.30

1.54%

Aug

Lean Hogs

$77.675

$78.500

$77.425

($1.075)

-1.39%

Oct

Cotton

65.840

64.010

62.770

(1.240)

-1.98%

Sept

Oats

$2.288

$2.413

$2.360

($0.053)

-2.22%

 

Wheat futures are trying to pull out of their nose dive, with Chicago up 2.2% this week. KC has had to deal with reports of high protein and high yields for spring wheat, which is still being harvested. Bulls finally got some evidence that low prices are curing low prices, with USDA weekly export sales popping to 838,500 MT last week.  The US is still not competitive into Egypt due to freight costs, but other destinations are in play. Russian exports were down sharply in July due to the weak ruble and its impact on their export tariff.  Traders are looking for USDA to hike wheat production by about 10 million bushels next week, with the average ending stocks estimate up 27 million from last month at 869 million.

Soybeans were up 28 1/4 cents or 2.8% for the week in nearby August. The products did very little, which means crush margins were squeezed. Weekly export sales were bearish for beans on Thursday, with net cancellations of 447,300 MT of old crop.  This was badly mis-interpreted by some brokerage house types who should know better. Only 200,000 MT were actually cancelled, and that had been announced days earlier.  The rest were just rolled to new crop delivery. You will see more of that, with the marketing year ending on August 31. The trade average guesses for old crop and new crop ending stocks are 247 million and 305 million bushels respectively, mostly on larger old crop use and smaller expected 2015 production. The Commitment of Traders report confirmed that the large spec funds still had a very modest net long position of 50,866 contracts as of August 4 and that they had reduced it by 11,429 contracts between 7/28 and 8/4.

October cotton futures dropped 2%, extending the 2.9% decline from the previous week. USDA reported combined old and new crop cotton export sales were 114,000 RB. US export commitments (previous ships plus outstanding sales) were 107% of the full year USDA number. Shipments were 2% above the official WASDE forecast, with 1 day remaining in the marketing year. Outstanding sales were quite small at only 474,000 RB.  USDA dropped the average world price (AWP) to 48.34 and increased the LDP for this week to 3.66 cents vs. 2.46 cents last week.  CFTC reported today that the large spec funds were still long 41,349 contracts as of Tuesday night.

 Live cattle futures posted a nice gain of 2.6% for the week on top of 1.8% the previous week. The cycle low appears to be in place, with tighter finished cattle numbers expected in August, September and October. The big question is whether packers can move the product at a high enough price to pay up for the cattle. Pork and chicken supplies are larger than year ago, and exports aren’t bleeding them off.  Weekly beef production was up 0.8% from the previous week and 5.1% smaller than a year ago for the same week. Year to date beef production is down 4.7% on 6.9% fewer cattle slaughtered.  Wholesale beef prices were up 1.3% for the week in the Choice, and up 0.4% for Select 600-900# boxes. Cash cattle trade was slow to develop, with packers likely living off of some contract inventory and dragging their feet in paying the $151 asking prices.

Lean hog futures were down 1.5% this week. The CME Lean Hog Index was $79.08, up 57 cents from the previous week. Weekly FI slaughter was 2.126 million head, down 0.3% from last week but 10.3% larger than the same week in 2014. Pork production YTD is now 7.1% larger than last year at this time, on 7.6% larger slaughter. Wholesale pork prices firmed another 3.4% this week, led by picnics, hams and bellis.  

Market Watch

The Main Event this week is the USDA monthly Crop Production report on Wednesday, scheduled for 11 am CDT. The numbers NASS releases will drive the changes in the WASDE supply/demand report to be released at the same time. We will have the usual Export Inspections and Crop Progress reports on Monday, and Weekly Export Sales on Thursday. Cattle traders will be reacting to any surprise futures positions inherited when August options were exercised on Friday. There was no $150 pin, with the settlement at $149.57.

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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