The Race is On

Published on: 19:47PM Mar 20, 2015

 Brugler

Market Watch with Alan Brugler

March 20, 2015

The Race is On

Big price moves last Friday, on Tuesday and this Friday are trying to tell us a couple things. One might be that liquidity is lacking, resulting in big ripples when an elephant steps in the water. This is a common complaint with the Wall Street crowd as it chafes under tighter regulation and some firms have closed down their trading desks. However, it can also be seasonal if you look at open interest patterns. We know that open interest tends to pick up in grains once the growing season begins and creates more tradable speculative moments. The big moves in wheat tell us that weather is beginning to be a factor. We’re not just trading exports and the dollar (although the break in the dollar following the Fed meeting clearly helped commodities priced in dollars). The heat early in the week, variable rainfall forecasts and results, and shifting 10 day forecasts all attracted market responses. The race is on!

May corn futures were up 1.1% for the week, a 4 1/4 cent gain which occurred entirely on Friday. There were some modestly bullish influences during the week, including increased weekly ethanol production (and reduced stocks), decent weekly export sales, and planting delays in southern areas which will restrict new crop corn supplies in July and August. None of those really expressed themselves in the market until the US dollar index broke sharply on Friday.

 

Commodity

 

 

 

Weekly

Weekly

Month

03/06/15

03/13/15

03/20/15

Change

% Chg

May

Corn

$3.86

$3.81

$3.85

$0.043

1.10%

May

CBOT Wheat

$4.83

$5.02

$5.31

$0.285

5.37%

May

KCBT Wheat

$5.22

$5.39

$5.69

$0.300

5.27%

May

MGEX Wheat

$5.57

$5.68

$5.895

$0.22

3.73%

May

Soybeans

$9.85

$9.74

$9.71

($0.030)

-0.31%

May

Soy Meal

$327.70

$327.00

$323.00

($4.000)

-1.24%

May

Soybean Oil

$31.28

$30.49

$30.61

$0.120

0.39%

Apr

Live Cattle

$154.65

$154.28

$158.35

$4.075

2.57%

Mar

Feeder Cattle

$209.73

$212.68

$214.88

$2.200

1.02%

Apr

Lean Hogs

$66.13

$62.10

$58.45

($3.650)

-6.24%

May

Cotton

62.97

60.50

62.82

$2.320

3.69%

May

Oats

$2.83

$2.78

$2.73

($0.047)

-1.74%

May soybeans posted a loss of 3 cents for the week, following an 11 cent drop the week before. Net soybean export sales reported this week were 347,000 MT, well above the previous week. Meal export bookings also totaled 216,600 MT vs. 101,800 MT the previous week. Soybean export commitments as a % of the total projected by USDA for the year are at 99% vs. the 5-yr average of 95% for this week of the year. The monthly NOPA crush report for February was in line with the previous month on a use per day basis, with February only having 28 days. That was initially seen as bearish. Informa on Friday estimated US plantings at 87.5 million acres for 2015, in line with an 87.25 million estimate from Farm Futures.

Chicago wheat ended the week with a 5.4% gain to add to the 3.9% rise the week before.  Wheat export sales reported this week by USDA totaled 534,800 MT including 142,900 MT for 2015/16 delivery. Consultant Informa projected US all wheat plantings at 56 million acres on Friday. An earlier estimate from Farm Futures called for 55.6 million. The EU continues to be an aggressive exporter, approving licenses for another 780,130 MT in the week ending March 17.

May cotton futures gained 3.7% this week, getting back a good part of the previous week’s 4% loss. lost more than 4% for the week.  USDA weekly export sales improved to 289,900 RB for last week. That included 1,100 RB of Pima and 50,200 RB of 2015/16 business.  Cert stocks slipped to 7,515 bales, with 616 more bales de-certified.  The new USDA AWP for March 20-26 is 46.35 with the LDP rising to 5.65 cents per pound.  It was 4.95 last week.

April cattle futures gained 2.6% this week. That weakened what had been a very strong basis. March feeders added another $2.20 this week, up 1.02% as the front month futures caught up with the CME index.  Beef production in the week ended March 21 is estimated down 1.1% from a week earlier and down 7.7% from the same week in 2014. Estimated weekly slaughter was down 10.5%. Year to date, beef production is now down 4.9% from last year. Weekly beef export sales slowed to 11,600 MT, off 33% from the excellent sales of the previous week.  The Friday afternoon USDA Cattle on Feed report showed a drop of 0.5% vs. March 1, 2015 in major feeder numbers. Placements during February only totaled 91.9% of those one year earlier.

Hog futures lost another 6.2% this week after being down 6.5% the previous week. The perception of excess production continues to lean on the market.  USDA weekly pork production was up a substantial 10.0% from the same week in 2014, with slaughter also up 9.8%. On the positive side, it was up only 0.4% from the previous week.  Pork production YTD has now been 4.4% larger than last year to this point. When coupled with slow export sales, you have a mess. Some small progress was made on the export shipping side, wth 19,800 MT exported. Net new sales for the week were 21,100 MT.

Market Watch

Livestock traders will begin the week reacting to the Friday night Cattle on Feed report. They will also want to take a look at the Cold Storage report on Monday night to see if the inventory buildup in February was as bad as advertised. The USDA report lineup is pretty standard, with export inspections on Monday and weekly export sales on Thursday. March feeder cattle futures and options will expire on Thursday. The main quarterly report will be the Hogs & Pigs report scheduled for release on Friday afternoon. Friday will also market the expiration for April grain futures options.

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