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Talking Turkey

Published on: 21:35PM Nov 20, 2015

 

Market Watch with Alan Brugler

November 20, 2015

Talking Turkey

Our thoughts turn to the Thanksgiving holiday on Thursday.  It is an official celebration of many blessings, including an abundant harvest.  and we certainly have had that in 2015 overall. Global stocks of wheat are record high, and those of soybeans and corn are comfortable. US meat inventories were up in the October Cold Storage report. All of this abundance comes at a price, with market values declining to move the inventory. Grain prices are down, and so are beef and pork. Actually, the turkey guys (and egg producers) have it pretty good this year, if they were outside the HPAI outbreak zone. Turkey and egg prices are up due to the restricted supply, and feed prices are down.  Nearby corn futures are down 14% from the Friday before Thanksgiving last year, and soybean meal prices are down 21%.  The feed prices are good news for cattle and hog producers as well, except that the selling prices they are experiencing for their output are also under pressure due to oversupply.

Corn futures eked out a modest gain of 5 cents per bushel this week, a 1.38% gain. The weekly USDA Export Sales report showed bookings of 779,800 MT during the week ending Nov 12. This was the largest weekly total since the start of the marketing year, and an increase of 26% week over week. Milo sales topped 400,000 MT for the first time since December 18, 2014. The EIA report on Wednesday morning showed that ethanol production fell by 7,000 barrels per day during the week ending November 13, to a level of 975,000 barrels per day. Global ethanol prices are fairly strong, but domestic prices are above gasoline, limiting consumption growth. The weekly CFTC report showed another 26,259 contracts added to the speculative net short position through November 17.

Wheat futures were down 1.5% in Chicago on the week, with losses of 1.9% in HRW but a 1% gain in Minneapolis spring wheat futures as the spreads reversed. The weekly Export Sales report showed sales of 721,900 MT during the week ending 11/12, greatly exceeding the expectations for less than 400,000 MT. This was the largest weekly sales total since the week ending July 30. Low prices cure low prices. Taking the medicine is the first step in being cured! The Friday afternoon Commitment of Traders report showed the spec funds slightly less short than the week before, with a net addition of 1,416 contracts. They were still net short 50,885 contracts as of November 17.

January soybeans were 1 1/2 cents lower this week. The USDA weekly Export Sales report jumped to 1.798 MMT for the week ending Nov 12, and was a 38.5% increase from the previous week. Traders expected something less than 1.1 MMT. China was in for 1.644 MMT worth of bookings, the largest in a month. Most of it was new business rather than the switches from unknown destinations purchases we had been seeing. Nearly 77% of weekly shipments were bound for China last week. Argentina is now thought to be 31% planted. Their run off presidential election is this Sunday, November 22. Both candidates have proposed changes to the export tariff scheme that could affect exports, but there are also issues with the value of the peso that will come into play.

December cotton futures were down 2.7% in the December contract as longs exited ahead of the start of delivery notices on Monday. March futures were up 91 points (1.5%). The USDA weekly export sales report showed solid export sales of 215,600 RB during the week ending November 12. Net sales to China (17,341 RB) were the largest of the marketing year. Year to date export commitments are only 39.4% of the full year forecast, however. USDA put the AWP for this week at 46.88 and dropped the LDP/MLG to 5.12 from 5.41 cents last week.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

11/06/15

11/13/15

11/20/15

Change

% Chg

Dec

Corn

$3.730

$3.583

$3.633

$0.050

1.38%

Dec

CBOT Wheat

$5.233

$4.958

$4.885

($0.072)

-1.48%

Dec

KCBT Wheat

$4.903

$4.655

$4.570

($0.085)

-1.86%

Dec

MGEX Wheat

$5.19

$5.04

$5.10

$0.052

1.03%

Jan

Soybeans

$8.673

$8.590

$8.575

($0.015)

-0.17%

Dec

Soy Meal

$295.70

$288.80

$283.00

($5.80)

-2.05%

Dec

Soybean Oil

$28.04

$27.04

$27.90

$0.860

3.08%

Dec

Live Cattle

$134.925

$130.675

$129.700

($0.975)

-0.75%

Jan

Feeder Cattle

$172.05

$164.55

$163.65

($0.90)

-0.55%

Dec

Lean Hogs

$55.000

$54.800

$57.450

$2.650

4.61%

Dec

Cotton

61.66

61.68

60.04

(1.640)

-2.73%

Dec

Oats

$2.238

$2.315

$2.510

$0.195

7.77%

 

Cattle futures continue to be quite volatile. This week they were down 0.75% or 97 cents per cwt. From Friday to Friday.  Feeders mimicked the decline, with lead month January down 0.55%. Estimated weekly beef production was up 2.3%% from the previous week, and up 2.7% vs. the same week in 2014. Year to date production is still down 3.0% but gaining ground. Wholesale prices were sharply lower again this week, with choice boxes down 2.9% and Select product down 4.1% from Friday to Friday. It is critical to collapse the beef/pork spread at both the wholesale and retail levels in order to stimulate beef disappearance. Cash cattle trade was on hold until after the COF report, with a few cattle trading in Nebraska at $125 ($193 dressed). Southern lots were still trying to get $130-131. The USDA Cattle on Feed report showed Nov 1 inventory was 102.1% of year ago.  October placements were 96.3% of last year.  October marketings were expected to be lower due to one less slaughter day than  last year and they were down 3.3% at 96.74% of October 2014.

Lean hogs rallied a sharp 4.6% this week, ending a sharp slide. Weekly pork production was up 0.7% from the previous week according to USDA, and 6.0% larger than the same week in 2014. Year to date pork production is up 7.1% on 7.9% larger slaughter. Obviously average weights have been below year ago. Estimated weekly slaughter was 2.40 million head this week. Pork carcass cutouts were down 22 cents (0.3%). Pork loins lost nearly 10% the previous week, but regained 4.2% this week. The Commitment of Traders report showed continued erosion of the speculative long position in hogs. The net long had dwindled to 15,776 contracts as of November 17.

Market Watch

The grain markets will start the week adjusting to any surprise positions resulting from December options expiration on Friday. Cattle traders will be reacting to the COF report outlined above. USDA will issue the usual export inspections and crop progress reports on Monday, along with the monthly Cold Storage report.  Monday will also be first notice day for December cotton futures deliveries. EIA energy stocks and ethanol production will be out on Wednesday. Thursday is a market holiday (Thanksgiving) but the markets are open on Friday. USDA weekly Export Sales will be delayed until Friday due to the holiday.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-289-2330 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

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