The Irish Curse

Published on: 22:07PM Sep 28, 2018

Market Watch with Alan Brugler

September 28, 2018

The Irish Curse

While growing up, I was told there was an Irish curse wishing another “"May you live in interesting times".  According to Wikipedia, this is “an English expression purported to be a translation of a traditional Chinese curse. While seemingly a blessing, the expression is normally used ironically, with the clear implication that "uninteresting times" of peace and tranquility are more life-enhancing than interesting ones, which, from a historical perspective, usually include disorder and conflict.” We are certainly in “interesting” times in the ironic sense.  If the Kavanaugh hearing wasn’t sufficiently interesting for you, you had President Trump going to the U.N. and telling countries that going it alone was better than a common forum. If, like me, you tried to focus on business in the commodities market, you had USDA checking all the closets and bin bottoms and finding more corn, soybeans and wheat lying around than previous suspected. That revelation on Friday had an “interesting” effect on prices.

Corn futures saw a loss of just a penny over the course of the week. Gains through Thursday were cut down by Friday losses on a bearish Grain Stocks report. USDA indicated US corn stocks on September 1 were 2.14 bbu, well above the range of trade estimates. That was 6.89% larger than the September WASDE but still down 6.68% from last year. Monday’s Crop Progress report indicated that 72% of the US corn crop was mature as of Sunday, with 16% harvested (vs. 11% average). Condition ratings improved 1% at 69% gd/ex, with the Brugler500 Index up 2 at 375 points. EIA data showed ethanol production in the week of 9/21 down 15,000 barrels per day to 1.036 million bpd. This week’s Export Sales report showed 18/19 sales of 1.713 MMT in the week of 9/20, well above the previous week. CFTC data today indicated spec funds trimming their net short position in corn futures and options by 28,497 contracts in the week ending 9/25/18, leaving them net -112,779 contracts.

Wheat futures endured losses in all three exchanges this week, as nearby Chicago lost 2.44%, with KC 2.28% lower and MPLS down 1.29%. Friday’s USDA reports helped add to those losses. The Small Grains report showed all wheat production up slightly to 1.884 bbu, assisted by increased spring wheat production. That was 9 mbu higher at 623 mbu, as winter wheat production was down slightly to 1.184 mbu. September 1 stocks of all wheat totaled 2.378 bbu, 4.9% larger than Sept 1, 2017. NASS reported that 28% of the winter wheat crop was planted as of last Sunday, 2% above the normal pace. Export sales during the week of 9/20 saw a boost to 657,111 MT, 50.9% larger than this time in 2017. Friday’s Commitment of Traders report showed money managers slicing 260 contracts off their net short position to 1,119 contracts in CBT futures and options for the week of September 25. They also trimmed another 3,054 contracts from their net long position in KC wheat futures and options during that week, to 34,030 contracts.

Soybean futures fell by 1 3/4 cents over the past week. Soybean meal was down 50 cents, as soybean oil led the soy complex, up another 2.10% on the week. A total of 833,934 MT in daily system export sales reported by the USDA this week helped to limit losses, with sell pressure from larger than expected stocks on Friday. The quarterly Grain Stocks report showed that soybean stocks on September 1 were up 45% from last year at 438 mbu. Analysts had been expecting a sub-400 mbu number, as had the September WASDE report. To get to that number, they added 19.12 mbu to 2017 production, bringing the 2017 total to 4.411 bbu. On Monday, NASS reported 71% of US soybeans had leaves dropping as of 9/23, with 14% harvested (8% average). Condition ratings were up 1% to 68% gd/ex, with the Brugler500 Index 2 points higher at 374. The weekly USDA Export Sales report showed 870,738 MT in 18/19 sales for the week ending September 20. A total of 1.006 MMT has been committed to Argentina (via exports or unshipped sales). Spec funds in soybean futures and options were reported at a CFTC net short position of 58,614 contracts on September 25, 11,199 fewer than the previous week.













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Cotton futures were down another sharp 3.44% on the week, bringing the 2-week loss to 7.63%. In their monthly meeting this week, the Federal Reserve decided to raise interest rates by 0.25% as most had been expecting. The dollar firmed. NASS indicated that 58% of the US cotton crop had bolls open on 9/23, with 16% harvested vs. the normal pace of 9%. Cotton ratings were steady vs. the week prior at 39% gd/ex, as the Brugler500 Index was up 5 points to 313 on higher poor/very poor ratings. USDA, in their Export Sales report, showed 70,290 RB of 2018/19 upland cotton sales (-46,800 RB for China) during the week of 9/20, with 58,168 RB for 19/20 (56,400 RB to China). For the week of  9/20, mills trimmed their unfixed call sales position for December by 5,341 contracts to 30,699 contracts. This week’s USDA AWP was down 163 points to 69.94 cents/lb. CFTC showed spec traders trimming their net long position on Tuesday by 1,644 contracts to 59,035 contracts in their weekly Commitment of Traders report.

Live cattle futures ended the week with nearby Oct up 0.33%. Feeder cattle futures were up just 25 cents. The CME feeder cattle index was up 60 cents from the previous week at $156.89. Most cash trades this week were shown at $111, with a few dressed sales at $174 in the North. Wholesale beef prices were lower on the week. Choice boxes were 92 cents lower (-0.4%) while Select dropped $1.27 (-0.7%). Weekly beef production was down 0.9% from the previous week and 0.1% smaller than the same week a year ago. US beef production YTD is up 2.9%. The weekly Commitment of Traders report indicated that spec funds added 4,530 contracts to their net long position through 9/25 to 78,872 contracts in live cattle futures and options. Monday’s Cold Storage report indicated August 31 stocks of beef were 503.449 million pounds. That was up 3.99% from the end of July and 5.64% larger than August 2017.

Lean hog futures posted strong 3.11% gains since last Friday, as October was up 20.61% in the month of September. The CME Lean Hog index was up $7.90 to $65.34 as of September 26. The pork carcass cutout value was up 90 cents or 1.1% this week. Pork production this week was up 9.8% from last week as North Carolina plants got back to normal and up 0.5% from the same week in 2017. Production YTD has been 2.7% larger than in 2017. Friday’s Commitment of Traders report showed the money managers adding another 2,315 contracts to their net long position of 24,140 contracts as of Tuesday. The monthly Cold Storage report from the USDA showed August 31 pork stocks at 582.592 million pounds. That was 5.99% larger than the month prior and 1.2% above August 2017. Belly stocks were reported at 34.969 million pounds, 14% larger than July. Thursday’s quarterly Hogs and Pigs report showed all hogs and pigs on September 1 up 3% to 76.143 million head. Hogs kept for breeding were 3.5% higher at 6.33 million head, with hogs kept for marketing 2.9% larger at 69.156 million head. The market reaction?  “We knew that”.

Market Watch

Autumn is officially here, and the final quarter of 2018 begins on Monday. We start off with the weekly Export Inspections report in the morning and the Crop Progress report in the afternoon. USDA will also release the monthly Grain Crushing, Fats and Oils, and Cotton Systems reports on Monday afternoon. Wednesday morning will show the weekly EIA ethanol production report. The weekly Export Sales report will be released on Thursday morning. October cattle options will expire on Friday.

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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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