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Memorial Day Marker

Published on: 20:31PM May 27, 2016

 

Market Watch with Alan Brugler

 May 27, 2016

Memorial Day Marker

“Patriotism is supporting your country all the time, and your government when it deserves it.”  Mark Twain

The US takes time this weekend for an observance dating back to the Grand Army of the Republic, the veterans of the Civil War. The General Order #11 called for remembrance of those who died in the conflict, and charged the survivors with taking care of those left behind (families) and the wounded and maimed. While some in the US treat it as a retail day, a chance to go shopping or hold a picnic, it is also a demarcation between worrying about planting and worrying about a growing crop in which you have invested time and money. No matter what the crop is, it has vulnerabilities from either too much or too little of something. Take a moment to thank those who died in a hailstorm of lead, or disease in some inhospitable location, or at the bottom of the ocean, so that you could be free to make those planting, spraying and marketing decisions and freely associate with friends and family. Complaining about politicians and government is a sport here, but in a lot of other countries it can get you arrested and jailed without trial.

Corn futures were up 18 1/4 for the week, a 4.4% pop.  Strong corn export sales have been the feature, with unshipped sales on the books 17% larger than last year at this time. Total commitments are 95% of the full year USDA estimate. The 5 year average would be 96%. US ethanol stocks continued to decline, with the summer driving season picking up and exports active. There were at the lowest level since December 2015. DDG prices hit the highest reading of the year, chasing soybean meal and improving margins for ethanol plants. About 99 million bushels of corn per week are going into ethanol and DDG (or wet mill byproduct) production.

China sold a reported 889,094 MT of the 2 MMT of government controlled corn offered in the tender this week.  You will recall that under the old support program they bought corn at above market prices from fall until April, and then sold it back over the summer. If imports are severely limited, the local market needs to buy this corn or there is little available to feed.  On a different note, COFCO reportedly is opening an ethanol trading desk in CT.  There is some question whether the main focus is originating shipments to China, or moving sugar based ethanol from the old Noble plants in Brazil (now owned by COFCO) to the US .

Soybeans were up 1.13% this week, aided by a 2.5% advance in nearby soybean meal. Soy oil was up 0.7% on solid USDA export sales numbers and some spread unwinding.   USDA Weekly Export Sales for soybeans were 606,800 MT, down a little from 648,500 MT the previous week. Old crop soybean commitments are now 100% of the WASDE full year forecast, with June, July and August yet to go.  They would typically be 101% at this point. Soy oil bookings have been excellent at 94% of the full year figure when the average commitment would be 85% by now.  What about meal? Commitments are 90% of the full year forecast vs. the 5 year average of 91%. There isn’t much evidence of unusual global demand there! Unshipped sales commitments are actually 3% below last year. 

 

Commodity

 

 

 

Weekly

Weekly

Mon

05/13/16

05/20/16

05/27/16

Change

% Chg

Jul

Corn

$3.908

$3.945

$4.128

$0.183

4.42%

Jul

CBOT Wheat

$4.748

$4.678

$4.815

$0.138

2.86%

Jul

KCBT Wheat

$4.560

$4.490

$4.598

$0.108

2.34%

Jul

MGEX Wheat

$5.355

$5.278

$5.280

$0.003

0.05%

Jul

Soybeans

$10.650

$10.743

$10.865

$0.123

1.13%

Jul

Soy Meal

$363.00

$392.70

$402.60

$9.90

2.46%

Jul

Soybean Oil

$32.50

$31.27

$31.48

$0.210

0.67%

Jun

Live Cattle

$123.425

$121.050

$119.700

($1.350)

-1.13%

Aug

Feeder Cattle

$146.25

$147.93

$146.70

($1.22)

-0.84%

Jun

Lean Hogs

$81.950

$79.850

$80.525

$0.675

0.84%

Jul

Cotton

60.62

61.67

64.28

2.610

4.06%

Jul

Oats

$1.953

$1.895

$1.930

$0.035

1.81%

 

 Wheat futures were higher in all three markets this week, with Minneapolis the weakest. USDA showed net negative old crop wheat sales for last week, not usual as we head into year end and contracts are adjusted. They did report 354,000 MT sold for 2016/17 delivery in the week ending May 19. USDA shows commitments for 98% of the full year export forecast, but we would typically be 105% by now. Unshipped sales on the books are 39% larger than last year, hinting at strong shipment levels in May and/or large carryover business to start off the new marketing year in June.  

July cotton futures were up a huge 4.1% this week. US planting delays are a supportive factor, and the pull back in the US dollar at midweek helped firm prices. USDA weekly Export Sales for US upland cotton were fairly solid at 128,500 RB for old crop and 119,200 RB for new crop. This was for the week ending May 19. Pima sales for 15/16 were especially strong at 16,700 RB. US Export commitments are still behind, with 99% of the full year total on the books, The average for this date is 104%. The old crop marketing year ends July 31.  The USDA AWP for the new week is 51.50, up from 50.42 last week. That cuts the LDP/MLG to 0.50 from 1.58 cents.

Live cattle futures were down 1.1% this week after a 2% loss the prior week. Beef production this week was down 0.3% from the previous week but up 11.7% vs. the same week in 2015 due to holidaty timing.  Slaughter was up 11.6% vs. year ago. Beef production YTD is up 3.4% from last year on 2.2% larger slaughter.  Wholesale prices were down this week despite a smaller Cold Storage beef inventory number on Monday. The week before the holiday is tough on wholesale prices, as retailers have already bought what they need, and go to minimum purchases until they see what the holiday clearances have been. Choice boxes were down 1.7% for the week. Select boxes were down 3.3% from the previous Friday.  Cash cattle traded at $125-126, with dressed trade at $200-205. The latter was about $5 lower than last week.

Lean hog prices were up 0.8% for the week at the Merc. The CME Lean Hog Index at $78.60 was up 17 cents for the week despite a retreat ahead of the weekend. The average pork carcass cutout value was up 16 cents per cwt for the week, or 0.19%. Rib and belly primal were the firmest. Weekly hog slaughter is estimated at 2.181 million head, up 3.2% from the previous week. The seasonal decline in slaughter runs now appears to be underway. Pork production YTD is down 0.1% from last year at this time on a 0.4% larger slaughter. Average carcass weights have been lower. The CFTC Commitment of Traders report showed the spec funds net long 48,637, a drop of 9,474 contracts from the previous week.

Market Watch

We’ll begin the week late, with US markets closed for the 3-day Memorial Day holiday weekend. Monday is also a spring bank holiday in the UK.  The weekly USDA Export Inspections and Crop Progress reports will be delayed until Tuesday. Tuesday will also be the last trading day of the month, with the usual unusual cash flows due to profit taking and asset allocation.  We also begin the index fund roll period for exiting long July futures and moving them to August, September or December depending on the fund and the commodity.  USDA will release the monthly crush reports for corn and soybeans on Wednesday, with key interest in soybean crush and soybean meal production for April. The weekly USDA Export Sales report will be delayed until Friday morning. Friday will also mark the expiration of the June cattle options.  

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