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Looking For The Big One

Published on: 20:37PM Mar 24, 2016

 

Market Watch with Alan Brugler

 March 24, 2016

Looking For the Big One

It is officially spring, and a young man’s thoughts turn to …tornado sirens! OK, so I’m not so young, but I did hear the tornado sirens in Omaha this morning. There was no tornado, they were presumably just testing the system so that those responsible for our safety can warn us if the Big One is approaching. The grain markets have their own version of the Big One. It is called the Grain Stocks report, and comes around every three months. The March and June editions have a particular reputation for major price chart re-arrangement. Just like the tornado situation, there are plenty of analyst warnings ahead of the NASS report (this edition is on March 31), and suggestions for your protection are issued. When I was a kid, the Big One was a nuclear attack, and the safety drill was lining all the students up in the interior hallway of the school basement with your hands or arms covering your head and neck. I’m sure that would really have helped with the radiation! Let’s hope that your marketing response plan is well thought out and effective when this Big One occurs! It has greater certainty of occurring than the other examples.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

03/11/16

03/18/16

03/24/16

Change

% Chg

May

Corn

$3.650

$3.670

$3.700

$0.030

0.81%

May

CBOT Wheat

$4.758

$4.630

$4.630

$0.000

0.00%

May

KCBT Wheat

$4.830

$4.695

$4.718

$0.023

0.48%

May

MGEX Wheat

$5.15

$5.09

$5.12

$0.030

0.59%

May

Soybeans

$8.958

$8.975

$9.105

$0.130

1.43%

May

Soy Meal

$273.50

$266.60

$275.30

$8.70

3.16%

May

Soybean Oil

$32.13

$33.42

$33.18

($0.240)

-0.72%

Apr

Live Cattle

$139.800

$139.825

$135.850

($3.975)

-2.93%

Apr

Feeder Cattle

$162.73

$162.20

$155.83

($6.38)

-4.09%

Apr

Lean Hogs

$71.825

$71.450

$69.625

($1.825)

-2.62%

May

Cotton

57.15

57.16

57.72

0.560

0.97%

May

Oats

$1.915

$1.880

$1.870

($0.010)

-0.53%

 

Corn futures were 0.8% higher this week. It didn’t seem like they were even that strong. USDA reported slower corn export sales of 903,100 MT for the week ending March 17. Unshipped commitments are now 83% of last year at this time, with 74% of the full year USDA estimate either shipped or on the books. Weekly EIA ethanol production averaged 995,000 barrels per day last week, about 4,000 bpd smaller than the previouis week. At 2.8 gal/bu, that represents about 104 mbu of corn/milo consumption for the week. That would be an annual rate of 5.43 billion bushels if we could sustain that pace all year, which of course has not been the case. Ethanol stocks dropped 400,000 barrels to 22.5 million barrels.

Wheat futures were steady to higher at all three exchanges.  MPLS was the firmest, with a 0.6% advance. A weaker US dollar aided export sales perceptions a week ago, but the dollar has been rising this week.  Little freeze damage has been confirmed from the US cold snap a week ago, and temps in the current outbreak are not as extreme. US Weekly export sales were 73% larger than the previous week, at 368,900 MT for old crop. Another 118,800 MT was committed for 2016/17 delivery. US wheat is still on the high side of the market compared to French origin.

Soybeans were up 0.2% this week, with an assist from another 3.8% gain in nearby soy oil. The USDA Export Sales report showed only 440,100 MT sold last week. Shipments are in better shape. Weekly export inspections have been above year ago for each of the past six weeks, allowing the YTD totals to come within 6% of last year. Soybean export commitments are 95% of the full year figure, down 1% from the multi-yead average. Soy oil export sales totaled 24,400 MT, up from 17,547 MT the previouis week.  The real bull story on Thursday was for soybean meal, with the largest weekly export sales total of the marketing year at 468,700 MT for old crop. Sales the previous week were only 83,478 MT. The big buyer was the Philippines at 201,800 MT.  

May cotton futures were up 1% for the week. World ending stocks are now seen slightly smaller than last month, but there is some skepticisim about how much the Chinese government has been able to get producers to cut back planting. Old crop US cotton export sales slowed significantly last week, with upland bookings of only 84,400 RB and pima sales of 8,500 RB for 2015/16. US Export shipments reported on Thursday morning were 214,900 RB for upland, a 22% increase from the previous week. Cotton export commitments have reached 81% of the USDA number. They typically would be 98% of that figure by now. The marketing year ends July 31. The USDA AWP for the upcoming week is 44.84 cents. The LDP/MLG was set at 7.16 cents, down from 7.24 cents last week.  

Live cattle futures dropped 3% this week. The larger than expected placements in the monthly Cattle on Feed report weighed on the market all week, along with some pressure from the wholesale market.  USDA weekly export sales for beef dwindled to 3,900 MT in the week ending March 17. The USDA Cold Storage report showed that beef stocks in storage dropped more than 5% from January to February, and were 0.3% smaller than last year. They were still the second largest ever for the end of February. Dressed sales in NE and the WCB were reported at $118, at least $4 lower than last week, with live cattle at $136. Reported volume was still light as of Thursday afternoon. Choice wholesale beef prices plunged $9.80 this week (-4.2%), while Select boxes were down $5.66 (-2.54%).  Estimated weekly slaughter through Thursday was 437,000 head, about 5,000 head last year at the same point.   

Lean hog futures were down 2.6% this week. The CME Lean Hog Index @ $65.89 was down 89 cents from the previous Friday. The USDA average pork carcass cutout value was down 40 cents on a Thursday/Thursday basis, a 0.5% drop. Estimated weekly FI hog slaughter through Thursday was 1.681 million head, 19,000 head larger than last year through the same Thursday.  Pork production YTD is down about 1.3% from last year. On Thursday, USDA reported net weekly export sales of 19,300 MT through March 24.  Traders are anticipating that the Friday Hogs & Pigs report will show an overall herd increase of 0.3%, with the breending herd at 100.6% of year ago and market hogs also at 100.3% of year ago.

 

Market Watch

Hog traders will begin the week reacting to the Hogs & Pigs report issued on Friday while the markets were closed. The expiration of April grain options is a smaller consideration, due to limited volume. USDA will issue the usual Export Inspections on Monday and weekly Export Sales on Thursday. The premier events of the week occur on Thursday, when NASS issues the Prospective Plantings and quarterly Grain Stocks reports at 11 am CDT.  We’ll see the usual month end asset allocation adjustments, as well as the first of the index funds rolling out of May grain positions. On Friday, USDA will release the monthly Fats & Oils report along with the Grain Crushings (ethanol and sweeteners) report. April cattle options are also scheduled to expire on April Fool’s Day.

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