Tax Delay & Bear Market Delay

Published on: 21:13PM Apr 15, 2016


Market Watch with Alan Brugler

 April 15, 2016

Tax Delay, Bear Market Delay

This is traditionally Tax Day, the postmark you have to have on your federal and state income tax payments. This year, the filing date has been delayed until Monday, April 18 by something called Emancipation Day.  It is celebrated in Washington DC on April 15, bumping the tax deadline to April 18. While an estimated 47% of the US population pays no federal taxes after refunds, the rest of us wouldn’t mind being emancipated from the tax system. But who would then pay the bureaucrats, the government lawyers and the USDA bean counters? On the markets side, the resumption of the bear market in grains and oilseeds continues to be delayed by a variety of developments around the world.

Corn futures were up 4.3% this week, adding on to the 2.3% gain from the previous week.  May and December futures have totally erased the March 31 sell off, essentially saying that the surprise 3.6 million acres in the Intentions report either no longer exist or have been offset by stronger demand prospects. Weekly export sales were excellent again  in the week ending April 7 at 1.247 MMT. Commitments YTD are now 80% of the full year forecast from USDA, still lagging the 5 year average of  88% for this date. Outstanding commitments (sold but not shipped) are 10% smaller than last year.  USDA cut projected feed use in the Tuesday WASDE report, bumping up ending stocks 25 million bushels and lowering the expected midpoint for cash prices to $3.55 for the marketing year.














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Wheat futures were lower in CHI and KC, but up 0.6% in MPLS. The spring wheat market has outstripped the other two for several weeks, with USDA showing surprisingly small spring wheat acreage intentions and producers suggesting that even some of those will be going to soybeans now that the latter have rallied.  Winter wheat condition ratings dropped, but are expected to rebound if expected heavy rains soak the TX, OK, KS, NE area as predicted for the weekend. USDA trimmed projected feed use as expected on Tuesday, with the stocks number matching the average trade guess. Total US export commitments are 92% of the WASDE figures for the year, which was UNCH on Tuesday. The average commitments by late April would be 101% of the estimate, with the marketing year ending on May 31.

Soybeans shot up 4.1% this week, with big gains on Monday, Tuesday and Wednesday. A weak dollar helped early, but so did indications of smaller Argentine soybean acreage in 2017 and a 2015/16 world stocks/use ratio that is still tighter than the previous year after revisions issued the WASDE on Tuesday. Weekly soybean export sales were improved from the previous week,  and USDA also confirmed additional purchases being made for next week under the daily reporting system. Soy oil was in “buy the rumor, sell the fact” action after palm oil stocks were a little larger than bulls expected. Meal was the buy side of oil/meal spread unwinding, and gained 7.5% for the week.  Soybean commitments are 97% of the full year forecast, close to the 98% average for this date. Unshipped sales are 144,000 MT smaller than year ago.

May cotton futures were down 0.07% for the week. Export commitments are still behind, with 86% of the full year total on the books, The average for this date is 99%, so we will need unusually large weekly export sales between now and July to catch up. The old crop marketing year ends July 31. USDA did tighten projected ending stocks to 3.5 million bales from 3.6 million, but the adjustment was due to lower yield numbers coming back from the gins, not a change to exports. The AWP rose  to 49.45 cents, up from 45.74 last week. The new weekly MLG is 2.55 cents, down significantly from 6.26 cents last week.

Live cattle futures were down 2.2% for the week. Beef production this week was up 2.3% from the previous week and 4% larger than the same week in 2015.  Slaughter was up 2% vs. year ago, with the rest made up by higher average carcass weights. Beef production YTD is now up 2.5% from last year.  Wholesale prices were sharply higher this week, with Choice boxes up 4.8% for the week and Select product gaining 5.1%. Cash cattle trade didn’t show that much vigor, with live sales at $133-135 on Friday and dressed sales anywhere from $208 to $216.

Lean hog futures were down 3.1% this week.  The CME Lean Hog Index was up 15 cents for the week to $66.71 from $66.56 the previous week.  The average pork carcass cutout value rose $2.46,  or 3.2% for the week. Weekly pork production is estimated at 468.2 million pounds. That would be up 2.2% from last week, but 2.3% smaller than the same week in 2015. Pork production YTD is actually down 1.6% from last year, with average live and carcass weights running slightly below year ago. Pork exports for 2016 are also running ahead of year ago by 7.7% at 411,957 MT. The net effect is tighter supplies for US consumers.

Market Watch

The main USDA reports this week will be the Cattle on Feed and Cold Storage, due on April 22. Routine reports of interest will include weekly Crop Progress and Export Inspections on Monday, and the weekly Export Sales report on Thursday morning. May grain options expire on Friday, April 22.

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