Impossible Things Prevail

Published on: 21:53PM Mar 09, 2018


Market Watch with Alan Brugler

March 9, 2018

Impossible Things Prevail

Alice laughed. “There’s no use trying,” she said: “one can’t believe impossible things.”
“I daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”

(Through the Looking Glass, Chapter 5)

I doubt I’ve ever used an Alice in Wonderland quote in a Market Watch column, and I’ve written nearly 800 columns! But this quote popped into my head when I thought about some of the events of the week. Those included the Republican administration imposing steel and aluminum tariffs on allies as well as geopolitical adversaries, USDA tightening their corn carryover estimate by 225 million bushels in one shot, and President Trump agreeing to meet with Kim Jong Un in person.  Figuring out the ripple effects of those seemingly impossible things from a few months back will tax the market’s imagination for quite some time. For now, enjoy the show and don’t forget to sell something when prices are at profitable levels!

Corn futures were 1.36% higher in the soon to be nearby May contract this week. Private export sales announcements totaled 370,000 MT during the week as reported by the USDA. Export sales continued their hot streak at 1.857 MMT reported for the week ending March 1, as total commitments climbed to within 5.3% of last year. Thursday’s USDA supply and demand report showed US ending stocks being trimmed another 225 mbu to 2.127 bbu. That was helped by a 175 mbu jump in projected exports and a 50 mbu increase in corn used for ethanol. The South American production estimates were cut in both Argentina and Brazil. The Brazil number was reduced just 0.5 MMT to 94.5 MMT vs. the new CONAB projection of 87.28 MMT. Argentina’s estimated was cut another 3 MMT to 36 MMT, compared to the Buenos Aires Grain Exchange’s 34 MMT. World ending stocks for 17/18 were also dropped 3.92 MMT to 199.17 MMT. Friday’s CFTC Commitment of Traders report showed the largest reported managed money net long position since July 5, 2016 at 163,534 contracts. That was a movement of 104,414 contracts from the previous week as of Tuesday.

Wheat futures were lower in all three markets this week, with MPLS holding most if its ground and down just 0.44%. Chicago SRW was down 2.15%, with KC 2.48% lower. Individual state condition ratings on Monday showed most conditions staying fairly steady to slightly improving. KS was down 2 on the Brugler500 to 249, while OK and TX saw improvement of 5 and 14 points respectively. Wheat export sales totaled 391,476 MT last week, and shipments rose to 361,416 MT. Commitments for all wheat exports are now 12.3% lower than this time in 2017. The WASDE report released on Thursday showed US ending stocks 25 mbu higher than the February projection at 1.034 mbu, due to slower exports. That along with higher ending stocks in India and the EU boosted the World ending stocks number by 2.79 MMT to 268.89 MMT. Russia’s ending stocks number was trimmed by 1.51 MMT on higher exports, now at 37.5 MMT for the year.

Soybean futures showed a drop of 31 3/4 cents during the week, with a majority coming on Friday. Soymeal was down 4.91%, while soy oil lost 2.2% for the week. The USDA reported three separate private export sales totaling 508,000 MT during the week. Those will show up in next week’s report. Weekly export sales blew past most expectations, hitting 2.51 MMT for the week of 3/1. That helped total export commitments to gain a little ground on last year, now lagging by 8.6%. On Thursday, the USDA showed projected US ending stocks increasing to 555 mbu. That was propelled higher with by a 35 mbu reduction in exports but limited by 10 mbu higher crush. The world numbers were a little friendlier, as the USDA cut projected Argentina production by 7 MMT to 47 MMT. Brazil production was raised just 1 MMT to 113 MMT, below expectations and even with CONAB. That helped the world ending stocks number to be reduced by 3.74 MMT to 94.14 MMT. Spec traders in soybean futures and options showed their most bullish position since June 28, 2016 at a net long position of 183,711 contracts. During the week that ended 3/6, they added 36,311 contracts to that net position.














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Cotton futures rose 2.96% on the week in lead month May. Export sales of old crop upland cotton were up 30% from the previous week to 383,926 RB, with new crop at a MY high of 252,120 RB. Shipments were also at a MY high of 524,187 RB, but still slightly lagged last year. Thursday’s monthly USDA supply and demand report showed the USDA adding 300,000 bales to the export projection, as ending stocks were trimmed to 5.5 million bales. World ending stocks for 17/18 were raised slightly to 88.85 million bales. The USDA Cotton Ginning’s report showed that 1.9599 million RB had been ginned as of March 1. Total upland export commitments through 3/1 were 20.2% larger than last year. The Adjusted World Price or AWP was updated to 74.13 cents/lb on Thursday, up 104 points from the previous week.

Live cattle futures were slightly (0.78%) higher on the week. Feeder cattle futures went the opposite way, down 0.8%. Cash cattle traded fairly steady on the week and a little higher in some places at $126-127, with $205-205 reported in the North. Wholesale beef prices were higher this week, gaining $1.62 in the Choice boxes and $2.62 in Select. Weekly beef production was down 2% from the previous week, and 0.7% larger than the same week in 2017. Year to date beef production is up 2.9% on 2.4% larger slaughter.  Exports during January totaled 243.674 million pounds according to Census data, which was a record for that month. It was also 15.3% larger than a year ago but down 6.6% from December. First quarter beef production was trimmed 90 million pounds lower by the USDA on Thursday to 6.48 bil lbs, with second quarter production up 50 mil at 7.225 bil lbs. Total 2018 production was trimmed 40 million pounds to 27.685 billion pounds.

Lean hog futures eked out gains of 0.41% this week. The CME Lean Hog index lost another 72 cents over the past week to $67.64. Weekly pork production was down 0.3% from the previous week and up 4.6% vs. the same week in 2017. Pork production YTD is now 2.5% above last year. Weekly slaughter was reported at 2.410 million head, down 0.3% from the previous week but 4% above a year ago. The pork carcass cutout value was down $4.68 for the week (5.99%). Most of the pressure came from the pork belly primal, down 16.02% for the week, with the ham 7.05% lower. Trade data from Census shows January pork exports were the second largest ever for January at 476.448 million pounds. That was down 5.4% from December but 6.2% above Jan 2017. The USDA trimmed first quarter pork production by 80 million pounds to 6.59 bil lbs on Thursday. Total pork production for 2018 was increased 25 million pounds to 26.91 billion pounds.

Market Watch

Don’t forget to set your clocks forward an hour this Saturday, March 10, as daylight savings time begins! (This means Spring is near, right?) Next week will start out with Monday morning’s usual routine of the the USDA Export Inspections report. Following that, Wednesday will show the weekly EIA report per normal. Also on that day the March contracts for Corn, Soybeans, Meal and Oil, and the three Wheat exchanges will expire. Thursday will present us with the weekly Export Sales report in the morning following this last week’s good showing for corn and soybeans. Finally on Thursday the NOPA crush report for February will be released.

Visit our Brugler web site at or call 402-289-2330 for more information on our consulting and advisory services for farm family enterprises and agribusinesses. Sound analysis and advice makes a difference!

There is a risk of loss in futures and options trading. Similar risks exist for cash commodity producers. Past performance is not necessarily indicative of future results.

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