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More Winter Thoughts

Published on: 22:57PM Jan 29, 2016

 

Market Watch with Alan Brugler

January 29, 2016

More Winter Thoughts

We cling to our own point of view, as if everything depended on it.  Yet our opinions have no permanence; like Autumn and Winter, they gradually pass away.    Zhuangzi (via BrainyQuote).

"To shorten winter, borrow some money due in spring. "
--W.J. Vogel

With winter now more than a third completed, and another cold and snow front coming into the Midwest at the beginning of the week, I started looking for signs of spring, and the proverbial spring thaw. Many would agree that they would like to thaw out the perma-bears in the commodity markets. Crude oil at least thawed out on the surface, with nearby futures up 26% in seven trading days. The grains also were a little warmer at the end of the week than they were at the beginning. It remains to be seen if this is just a January thaw or an El Niño enhanced early move toward spring.

Corn futures were up 1 3/4 cents for the week on top of a 1.9% gain last week. The weekly USDA export sales total was slower than the previous week, at 855,400 MT (~34 million bushels). Accumulated shipments of 11.259 MMT are still 23% smaller than last year at this point. Total commitments are 26% behind year ago.  Milo sales totaled only 58,600 MT. US ethanol production slowed in the most recent reporting week, with ethanol stocks dropping a sharp 500,000 barrels. The Friday CFTC report showed the spec funds reducing their bearish position by 71,013 contracts in the week ending 1/26. They were still net short 87,197 contracts vs. 158,210 contracts the week before.

Wheat futures were up 0.78% this week in Chicago, while the hard wheat futures were up .26% and .6% in KC and MPLS respectively. USDA reported weekly export sales totaled 347,000 MT for the week ending January 21. The weekly total included 52,800 MT of sales for 2016/17. The market was pulled back and forth by rumors of proposed changes to the Russian export tariff scheme, but no solid conclusion had been reached by the weekend. The Commitment of Traders report showed fund shorts becoming less comfortable, holding a net 50,699 contract position in Chicago SRW on January 26. They bought back 19,759 of them in the reporting week.

Soybeans were up 5 3/4 cents per bushel for the week in nearby March futures, more than erasing the loss from the prior week. All of the gain happened on Friday. USDA reported net soybean export bookings of only 647,800 MT for the week ending 1/21.  A prior sale was cancelled by China under the daily reporting system, and will drag down next week’s results. That said, this week’s number included the MLK holiday weekend and next week will be a full reporting week. Weekly soybean meal sales were respectable at 200,800 MT. Soy oil bookings slowed to 9,100 MT from 19,300 MT the previous week. The Friday afternoon Commitment of Traders report showed the big spec funds adding 4,683 contracts to their net short position. The net short increased to shrank to -30,456 contracts as of Tuesday night.

March cotton futures lost 2.2% for the week. Weekly export sales were stronger than trade ideas, at strong 227,382 RB, including 30,300 RB of Pima. USDA indicated that Pima sales were a marketing year high. Net sales to China totaled 12,070 RBs, up 25% from the week beforeThe USDA increased the AWP for this week, with the LDP/MLG at 5.11 cents through February 4. It had been 4.99 cents.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

01/15/16

01/22/16

01/29/16

Change

% Chg

Mar

Corn

$3.633

$3.703

$3.720

$0.018

0.47%

Mar

CBOT Wheat

$4.738

$4.755

$4.793

$0.038

0.78%

Mar

KCBT Wheat

$4.740

$4.708

$4.720

$0.013

0.26%

Mar

MGEX Wheat

$4.97

$4.97

$5.00

$0.030

0.60%

Mar

Soybeans

$8.790

$8.765

$8.823

$0.057

0.65%

Mar

Soy Meal

$270.70

$268.50

$272.40

$3.90

1.43%

Mar

Soybean Oil

$29.65

$30.50

$30.88

$0.380

1.23%

Feb

Live Cattle

$127.550

$132.075

$135.300

$3.225

2.38%

Mar

Feeder Cattle

$150.28

$157.90

$157.25

($0.65)

-0.41%

Feb

Lean Hogs

$62.025

$63.000

$65.800

$2.800

4.26%

Mar

Cotton

61.41

62.45

61.13

(1.320)

-2.16%

Mar

Oats

$1.988

$2.055

$2.008

($0.048)

-2.37%

 

Live cattle futures rallied 2.4% this week, on top of 3.4% gains last week. Wholesale prices were sharply lower. For the full week, Choice boxes were down 2.7% and and Select boxes were down 1.6%. Cash cattle business was slow to develop, but we were starting to see some sales at $135 in KS and $210-212 in the north as this went to the Web on Friday afternoon. Weekly beef export sales were the largest since May 2015, at 19,600 MT. Estimated weekly slaughter was up 1.8% vs. a year ago and down 0.4% from the previous week. Beef production YTD is down 0.8% vs. last January. The USDA Cattle Inventory report showed larger than expected numbers, up 3.19% from year ago. The report confirmed we are solidly in the expansion phase of the cattle cycle, with beef cow numbers up 3.5% from last year and beef replacement heifers up 3.3%.  Steers were up 4.4% from January 2015.  Keep in mind that the Inventory report includes animals outside the 1000 head lots reported in the Cattle on Feed report.

Lean hog futures were up a strong 4.26% this week, and February is up $3.775 from two weeks ago. The CME Lean Hog Index was $60.23, up $3.03 from the previous Friday. Estimated FI hog slaughter for the week was 2.328 million head, up 0.6% from the previous week and up 3.9% from the same week a year ago. Hog slaughter for the first 22 days of the year is down 0.1% from last year, with pork production down 0.8%. The pork carcass cutout price was up 2.28% on a Friday/Friday basis. All of the primals showed gains for the week except for the pork butts.  With Easter falling in March this year, processor demand for hams is picking up early. Friday’s Commitment of Traders report showed the spec funds adding to their bullish position. It was 5,657 contracts more net long on Tuesday than it had been the previous Tuesday.

Market Watch

Livestock traders will start the week and the month reacting to the Cattle Inventory report issued after the close on Friday.  While historically not a market mover, the numbers were clearly on the high side of trade estimates. USDA will issue the usual weekly Export Inspections report on Monday and Export Sales report on Thursday. They will also issue the monthly industrial reports on Fats & Oils/soybean crush and ethanol production on Monday. Friday will mark the expiration of the February live cattle options. 

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