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Let's Go Crazy

Published on: 20:29PM Apr 29, 2016

 

Market Watch with Alan Brugler

 April 29, 2016

Let’s Go Crazy

While I am emphatically not a Prince fan (I grew up with 70’s rock, country, and my parents 1940’s oldies playing on the radio in the barn), he was such a big star that we all can likely name a few of his songs.  Little Red Corvette, Purple Rain, 1999 (as in let’s party like it’s), and Let’s Go Crazy come to mind. The last one is particularly poignant with his death this week,as some of the lyrics focus on the afterlife. I focused on the title, since it sure seems appropriate to what we’ve seen in the grains, livestock and US dollar over the past two months.  One line in the song (according to www.metrolyrics.com) is “And if the elevator tries to bring you down, go crazy, punch a higher floor”. All the gloom and doom talk tied to large US ending stocks estimates became irrelevant for a while as the bulls got some friendly news out of South America and punched the buttons labeled $10 and $4.  Cattle and the DX apparently couldn’t reach the buttons and were still stuck on the elevator as of Friday.

Corn futures jumped 4.7%  for the week, more than offsetting the loss from the previous week. Tightening stocks outside China and the US are boosting export interest, and a weaker dollar is making the US competitive. As a result,  USDA Weekly export sales were excellent again  in the week ending April 21, at 2.6 MMT (102 million bushels of combined old and new crop sales). Export commitments YTD are now 88% of the full year forecast from USDA, still lagging the 5 year average of 91% for this date but definitely closing the gap.  Unshipped sales on the books are 2% larger than last year at this time (13.733 MMT). The Commitment of Traders report confirmed that spec funds totally flipped their position. They added 110,690 longs and/or covered shorts, taking their position to net long 79,781 contracts as of April 26.  This is the first time they have been long corn since November!

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

04/15/16

04/22/16

04/29/16

Change

% Chg

May

Corn

$3.785

$3.718

$3.903

$0.185

4.74%

May

CBOT Wheat

$4.598

$4.670

$4.780

$0.110

2.30%

May

KCBT Wheat

$4.578

$4.618

$4.653

$0.035

0.75%

May

MGEX Wheat

$5.24

$5.26

$5.40

$0.145

2.69%

May

Soybeans

$9.560

$9.870

$10.210

$0.340

3.33%

May

Soy Meal

$295.90

$311.70

$332.10

$20.40

6.14%

May

Soybean Oil

$33.38

$33.99

$32.88

($1.110)

-3.38%

Jun

Live Cattle

$122.175

$114.650

$114.925

$0.275

0.24%

May

Feeder Cattle

$150.55

$142.45

$140.43

($2.02)

-1.44%

Jun

Lean Hogs

$77.625

$78.825

$81.700

$2.875

3.52%

Jul

Cotton

60.02

63.69

63.77

0.080

0.13%

May

Oats

$1.895

$1.975

$1.935

($0.040)

-2.07%

 

Wheat futures were higher on Friday, particularly in the MPLS spring wheat.  MPLS led the wheat complex for the week with a 2.7% gain, while Chicago was up 2.3% and KC lagged with a 0.75% advance. Wet weather is seen as generally positive for yield, although it has delayed some spring wheat planting in the Dakotas. The weak dollar has been a boon for wheat export sales. Net export sales during the week ending April 21 reached 806,591 MT, which exceeded the highest pre-report expectations of 600,000 MT. This was the largest weekly total since the week ending July 30, 2015. That said, USDA is likely to reduce their estimate of 2014/15 exports in the May WASDE report, as sales have not met the pace needed to hit their full year number.  They are at 95% of the full year forecast, but would typically be 102% by now. The Brugler500 crop condition rating for winter wheat rose 4 points to 359.

Soybeans shot up 3.3% this week, adding to similar gains for the two previous weeks.  They hit the highest price for nearby futures since the week of August 14. USDA Weekly Export sales during the week ending 4/21 totaled 946,475 MT, the largest weekly total in three months. New crop bookings of 720,449 MT were the second largest weekly total of the marketing year. Soybean commitments are 98% of the full year forecast, close to the 99% average for this date. Unshipped sales are 7% smaller than year ago.   Argentine soybean harvest has been picking up with drier weather, but is still only 24% completed. It would typically be more than 50% by this date. The Commitment of Traders report confirmed that the spec funds were still adding ( 24,715) to their net long position as of April 26, taking it to 160,125 contracts.

May cotton futures were up only 0.13% as they became mired in the delivery process and open interest shrank rapidly. Heavy rains slowed planting progress in the US. US export sales of Upland cotton  for the week ending 4/21 were the smallest of the marketing year. Exports shipped out to China were the largest of the marketing year at 51,001 RB. US Export commitments are still behind, with 87% of the full year total on the books, The average for this date is 101%, so we will need unusually large weekly export sales between now and July to catch up. The old crop marketing year ends July 31. There is no marketing loan gain or LDP this week, with the AWP high enough to take the redemption back to zero.

Live cattle futures eked out a 0.24% gain for the week, thanks to the post-USDA report rally on Monday and Tuesday. Prices retreated for the rest of the week due to weakness in carcass values and particularly hamburger beef.  Beef production this week was up 0.3% from the previous week and a huge 6.3% larger than the same week in 2015.  Slaughter was up 4.6% vs. year ago, with the rest made up by higher average carcass weights. Beef production YTD is now up 3% from last year on 1.3% larger slaughter.  Wholesale prices were sharply lower this week, with Choice and Select boxes both down 4%. Cash cattle trade was soft, with live sales at $124 down $3 from the previous week. Dressed sales were mostly down $4 from the previous week.  June futures are well below the current cash market, at $114.92 going home on Friday.

Lean hog futures were up 3.5%, a week after a 1.7%  gain. The CME Lean Hog Index was up $2.45 for the week to $69.81.  That firmed the basis to -$8.09K from -$8.34K  the previous Friday. The average pork carcass cutout value rose $2.78 last week,  to $82.54. Weekly hog slaughter is estimated at 2.139 million head, down 4.6% from the previous week and 0.6% smaller than a year ago. Pork production YTD is down 1.2% from last year at this time due to a 0.6% drop in slaughter for the first four months of the year. USDA weekly export data showed US pork exports were 60,934 MT, with 20,371 MT in new sales to China. That figure added 33.55% to the previous YTD total US pork purchases by Chinese buyers.

Market Watch

The calendar turns to May, with USDA rolling out their monthly Grain Crushings, Fats & Oils (Soybean crush) and Cotton Consumption reports on Monday. Funds with new commodity allocations will also be putting those to work. Monday will also see the regular weekly Export Inspections and Crop Progress reports.  EIA ethanol production is scheduled for Wednesday, with weekly USDA Export Sales on Thursday. Friday will be the last trading day for May cotton futures, and the expiration date for May cattle serial options.

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