Making Money

Published on: 20:52PM Aug 03, 2018


Market Watch with Alan Brugler

August 3, 2018

Making Money

After our column last week about Taught Not to Lose Money, this week was all about making money.  If you are a grain producer/marketer and have lifted most of your hedges, this was good week.  Wheat futures were very “buoyant” including a day where they were briefly 35 cents higher. For the week, corn, beans and wheat all posted nice gains. The rumor mills were working overtime on China, Ukraine, tariff and other news, but the bottom line is that you just have to follow the money. Markets are mean reverting, and this week they were rallying back toward their longer term average prices.  Hogs were a totally different story, but you can pick that up below.

Corn futures gained another 2.14% this week, following last week's 1.9% move higher. NASS reported the corn crop remaining well ahead of normal pace, as 38% of the crop was in the dough stage on July 29 vs. the typical 20%. The crop was rated as 72% gd/ex, with the Brugler500 Index steady at 382. The FAS Export Sales report showed old crop corn sales of 292,000 MT in the week of 7/26, as new crop export sales were at a MY record of 986,125 MT. Wednesday’s Grain Crushings report showed total corn used for ethanol at 470.404 mbu. That was down 1.6% from May 2018, but up 5.97% against June 2017. The EIA report showed ethanol production at 1.064 million bpd in the week of 7/27, with stocks up 314,000 barrels at 21.967 million barrels. Friday’s CFTC report showed the big spec funds shrinking their net short by 77,999 contracts in the week ending July 31. That took the net short down to 52,198 contracts. 













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Wheat futures added another round of sharp gains this week. MPLS saw higher closes each day, up 3.42%, with Sep KC 6.53% higher and CBT 4.85% in the green. USDA NASS reported that 85% of the winter wheat crop has been harvested as of last Sunday, just slightly behind the five year average pace. Spring wheat is 4% harvested on July 29, equal to the five year average. Spring wheat condition ratings were put at 78% good/excellent, down 1 from last week, as the Brugler500 Index dropped 1 point to 387. The weekly FAS export sales report showed new crop net sales of 382,452 MT, down 1% from last week. Shipments of wheat were 386,639 MT, a 5.5% decrease from last week with Japan purchasing 107,843 MT in their weekly MOA tender. The Commitment of Traders report shows the managed money spec funds adding 28,990 contracts to their net long position in CBT futures for the week ending July 31.

Soybean futures managed to pull out a 1.81% gain on the week, despite the continued Trade War rhetoric. Nearby soy meal was down just 0.06%, with nearby soy oil 0.74% lower. News early in the week suggested the US and China were talking in hopes to diffuse the trade war. Wednesday's news that President Trump is considering upping the 10% tariff on $200 billion of Chinese goods to 25%. China responded on Friday by implying they will place tariffs on $60 billion of US goods if the US makes good on that threat. Monday's Crop Progress report showed condition ratings steady on the gd/ex categories, with the Brugler500 down 1 to 377. USDA reported just 93,670 MT of old crop soybeans were sold in the week ending 7/26, as new crop sales totaled 543,284 MT. Wednesday's Fats and Oils report showed June crush at 169.55 mbu, 14.39% larger than last year. Soy oil stocks were seen at 2.305 billion pounds, slightly lower than last year.  CFTC managed money net position showed the funds net short -58,671 contracts of futures and options on July31, which was 2,644 contracts less bearish than the week before. 

Cotton futures were down just 0.25% for the week. NASS reported that 88% of the cotton crop was squaring as of Sunday, just slightly behind the 89% average for this date. They rated 43% of the crop good or excellent, up from 39% last week. The Brugler500 Index was back up 12 points on a 500 point scale to 311. The USDA weekly export sales reported old crop upland cotton sales of 19,649 RB. New crop sales are totaled at 261,170 RB, nearly double last year’s number. Old crop export commitments are 108% of the full year projection vs. the typical 106%. As of July 19, 96% of the full year forecast had been shipped, below the average of 99%. Less than a week is left in the MY. Thursday's Cotton On Call report showed mills unfixed call sales position at 53,904 contracts for December, up 591 from the week prior. The CFTC report on Friday afternoon showed the spec money adding another 7,334 contracts to their net long position last week, taking it to 88,792 as of July 31.

Live cattle futures were up 1.89% for the week, seeing most of those gains on Friday. Feeder cattle were up 0.36%, limited by gains in corn. The CME feeder cattle index was last reported at $148.92 for 8/2, down 65 cents from last week. Cash trade was very slow to develop but hit $114 on Friday afternoon. Wholesale beef prices were lower. Choice boxes were down 39 cents or 0.2% this week while Select was down 0.6% or $1.18. Weekly beef production was down 2.0% from the previous week, and down 1.4% from year ago. US beef production YTD is up 3.3%. The USDA reported net sales of beef are totaled at 16,200, up 36% against the four week average. Exports of 18,800 MT were also reported, a 5% increase against last week.

Lean hog futures dropped 8.09% on the week, with the two week loss around 12%. The Board continues to have a $10 discount to cash, but to sell off every time cash goes lower. The cash seasonal has topped for both the cutout and the CME Index. The CME Lean Hog index dropped to $68.91, down $5.52 for the week. The pork carcass cutout value was down $5.29 or 6.87% after a $3.89 drop the previous week. The pork belly primal dropped 24.09% in seven days after a 14% drop the previous week. Pork production YTD has been 3.2% larger than in 2017. Production this week was up 16.6% from last week as plants came back on line.  It was 3.8% larger than the same week in 2017. Weekly slaughter was up 3.7% vs. year ago.  Net export sales of 35,700 MT were reported for the week ending 7/26, showing a 69% increase against the previous week. Export shipments totaled 21,200 in the same report, a 17% increase compared to the previous week.

Market Watch

Next week will start off somewhat normal, with the Export Inspections and Crop Progress reports released on Monday. US trade data for June will also be released by the USDA on Monday after converting from Census data that was reported on Friday. The weekly EIA ethanol production/stocks report will be out on Wednesday morning. Thursday will present us with the weekly FAS Export Sales report at 7:30 a.m. CDT. Friday is the day the market will be anticipating all week with the release of the WASDE and Crop Production reports by the USDA. This will include the first official NASS yield projections for corn and soybeans in 2018.

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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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