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I See Nothing

Published on: 20:59PM May 01, 2015

 Brugler

Market Watch with Alan Brugler

May 1, 2015

I See Nothing

In the old TV comedy Hogan’s Heroes, the German guard Sergeant Schultz had a stock phrase of “I see nothing” , usually when the Heroes were pulling a fast one on him or the camp commander. The commodity markets seemed to have a little Sergeant Schultz in them this week, seeing only benign growing seasons ahead in the Northern Hemisphere and blithely removing weather premium from the new crop futures. Livestock traders were seeing nothing in terms of avian flu impacts on meat supplies, while grain types were assuming big losses in feed demand. It is true that the biggest impact to date will be higher egg prices, as the disease has hit mostly turkey farms and laying operations. It is also true that the weather allowed for some rapid planting in the WCB this week, and is expected to provide a good watering for the newly seeded corn next week. Still, a market that is this confident early is often surprised later, when the phrase becomes “I see something”.

Corn dropped another 1.3% after a 4.2% loss the previous week.  Weekly export sales were larger than the trade expected, at 945,800 MT.  Planting progress was slower than some had expected on Monday night, and ethanol stocks dropped 500,000 barrels as consumption exceeded production. That didn’t stop prices from declining. Rapid planting progress in the WCB was a bearish input, with some in the trade expecting 50% of the US crop will be planted by Sunday. Some traders were also lowering their corn feed use estimates due to poultry flock liquidations because of the H5N2 avian flu outbreak. The outbreak continues to afflict more and more operations. The Commitment of Traders report on Friday night showed the large spec traders adding 27,085 contracts to their net short position in corn last week.  They were short 92,383 lots as of April 28.

Wheat tried to rally out of oversold conditions on Tuesday and Wednesday, but ended the week with losses of 1.8% to 3.4%. Chicago SRW was the weakest, with crop condition ratings improving week to week and reports of larger crop prospects out of the EU and Russia than had been seen earlier. The Brugler500 Index for all winter wheat was down 2 points from the previous week, with improvement in SRW offset by further deterioration in HRW.  USDA reported large cancellations (actually deferrals of 449,200 MT of old crop wheat into the 2015/16 marketings year. Export commitments are now  only 97% of the USDA forecast vs. 99% previously. They would typically be 102% by now, with 6 weeks remaining in the marketing year. New crop bookings popped 852,900 MT but that doesn’t tighten up old crop carryover. Forecasts call for above to much above normal rainfall this coming week from TX to MN. The news would be if it didn’t happen.

 

 

Commodity

 

 

 

Weekly

Weekly

Month

04/17/15

04/24/15

05/01/15

Change

% Chg

May

Corn

$3.80

$3.65

$3.60

($0.047)

-1.32%

May

CBOT Wheat

$4.95

$4.86

$4.70

($0.160)

-3.40%

May

KCBT Wheat

$5.09

$5.02

$4.93

($0.090)

-1.82%

May

MGEX Wheat

$5.33

$5.35

$5.20

($0.148)

-2.84%

May

Soybeans

$9.69

$9.70

$9.69

($0.012)

-0.13%

May

Soy Meal

$315.00

$314.60

$314.70

$0.100

0.03%

May

Soybean Oil

$31.52

$31.67

$31.44

($0.230)

-0.73%

June

Live Cattle

$149.00

$151.20

$149.18

($2.025)

-1.36%

May

Feeder Cattle

$208.53

$214.08

$213.63

($0.450)

-0.21%

May

Lean Hogs

$70.53

$71.95

$76.00

$4.050

5.33%

May

Cotton

63.29

66.50

66.85

0.350

0.52%

May

Oats

$2.63

$2.42

$2.29

($0.125)

-5.46%

 

Soybeans lost 10 cents on Friday, tipping the week into a loss of 1 1/4 cents. Old crop export sales were a stout 433,400 MT, but new crop bookings were in reverse due to a Chinese cancellation of 134,000 MT. The market got a little bullish bounce from a port strike in Argentina. It is expected to be over after Monday due to government pressure to solve it ‘or else’. Soybean meal export sales are 87% of the full year USDA estimate. That is typical . Shipments are still lagging, however.  Unshipped meal business is still unusually large at 2.784 MMT, 92% more than last year at this time. Bean oil sales were just 7,300 MT for 14/15, but Mexico booked 24,500 MT for 15/16.

Live cattle futures were down 1.36% for the week, erasing a 2.1% gain from the previous week. Weekly beef production was up 4.1% from the previous week but down 4.0% from the same week in 2014. Beef production YTD is still down 5.2% from last year. Estimated carcass weights are 28# bigger than year ago. Wholesale prices were lower, with Choice boxes down 0.9% for the week, while losing 1.8% in the Select.  US beef exports typically increase each month until July. Any improvement in 2015 is glacial, with last week’s sales 3% over the 4 week average pace and down from the previous week. Cash cattle did trade at $160-162 on Friday, with dressed prices expectd to be $255-256.

Lean hog futures were up 5.3% to add to the 2% gain from the prior week. We are beginning to see the seasonal drop in numbers, and exports have also picked up. Carcass weights are now an estimated 3# below year ago. Pork production YTD is up 5.8% from last year at this point. Weekly slaughter was down 0.9% from the previous week. However, it was still up 6%  from the previous year. Weekly pork export sales reported by the USDA were 24,600 MT vs. 22,600 MT the previous week. Shipments to China were noted, although Mexico was the big buyer for the week. The USDA pork carcass cutout value was up a whopping 5.6% for the week, with the picnic primal up 13% and loins gaining more than 10%.   

Cotton was up 0.52% for the week, due to a big sell off on Friday. It had been up 4.8% for the previous week. The US dollar index broke support and made multi-month lows, but bounce back up on Friday. USDA reported net weekly export sales of 176,400 RB.  China booked another 19,800 RB of old crop, 8,800 RB of new crop, and 4,100 RB of Pima. Last night, USDA put the weekly AWP at 51.70 and lowered the LDP/MLG to 0.30 for now through May 7. The Commitment of Traders report on Friday night showed the managed money funds net long 49,120 contracts as of last Tuesday night, up 13,775 from the previous week.

Market Watch

 

USDA will issue the usual growing season reports this week, with Export Inspections and Crop Progress on Monday, and weekly Export Sales on Thursday. Wednesday will mark the last trading day for May cotton futures, where open interest is already down to a couple hundred contracts. The main report for the month will be the WASDE supply/demand on May 12th, with its first look at global 2015/16 production and ending stocks.

 

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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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