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Things Warming Up

Published on: 22:03PM Feb 19, 2016

Market Watch with Alan Brugler

February 19, 2016

Things Warming Up

The corn planters were rolling in Texas this week. Baseball players were reporting to spring training, and the Daytona 500 is this weekend. All of these require something to warm up (soil temps, pitchers, engines). While it seems a bit early to kick off planting season rhetoric, the crop intentions surveys are flying fast and thick and many producers are hoping and dreaming about weather rallies yet to come. We see a few tender bull seedlings, enough to be wary about even a “normal” spring last freeze date at this point! Those soil temps? They were in the 50’s in TX and OK, but still 20-21 F in North Dakota.  

Corn futures were up 1.8% this week, taking back most of the nearly 2% decline from the previous week. The USDA Export Sales report showed corn sales of 1.05 MMT for 2015/16 and another 247,200 MT booked for 2016/17. These were stronger than expected by some, with low prices and a weak dollar combining to make US corn competitive with other origins. Total export commitments are 61% of the full year forecast, vs. a 74% average for this date. Milo sales improved to 193,900 MT from 172,300 MT the previous week.  They continue to go mostly to China and Mexico. Ethanol stocks continue to rise, although not quite as aggressively as some had feared. Weekly data from the CFTC showed managed money accounts were 35,132 contracts more short than a week earlier. Commercial shorts (elevators) were down 24,029 contracts, as they shipped out more grain than they took in.

Wheat futures were higher this week in all three markets.  KC HRW had been the most beaten down, and showed the largest improvement this week as unusually high temperatures are being seen and foreseen in the Plains.  Russian and Ukrainian wheat areas are also losing snow cover rapidly. USDA reported weekly export sales totaled 307,800 MT for the week ending February 11. The weekly total included 54,200 MT of sales for 2016/17. USDA indicates that 83% of the newly downsized full year export estimate has been either booked or shipped. It typically would be 89% by this date. Shipments are down 15% YTD since June 1. Egypt bought 60,000 MT of French wheat and 180,000 MT of Russian origin for March 15-25 delivery. They were kind of forced to buy after several aborted tenders.

Soybeans were up 5 1/2 cents for the week, about the same advance as the previous week. Weekly USDA Export Sales are slowing seasonally, with bookings through 2/11 at 595,700 MT. Soy meal sales totaled 111,800 MT. Soy oil sales improved to 12,700 MT from 3,780 MT the previous week. Soybean export shipments are running 10% behind year ago since September 1. It had been a 12% lag. Total commitments are 91% of the full year WASDE number, implying the USDA forecast is makeable. They would typically be 92% by this date. The weekly CFTC Commitment of Traders report on Friday showed positions reported as of the close on Tuesday. Managed money accounts were 43,391 contracts net short as of Tuesday, which was 24,746 contracts less bearish than a week earlier.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

02/05/16

02/12/16

02/19/16

Change

% Chg

Mar

Corn

$3.658

$3.588

$3.655

$0.067

1.85%

Mar

CBOT Wheat

$4.668

$4.575

$4.618

$0.042

0.92%

Mar

KCBT Wheat

$4.540

$4.443

$4.570

$0.128

2.79%

Mar

MGEX Wheat

$4.91

$4.85

$4.93

$0.083

1.67%

Mar

Soybeans

$8.675

$8.728

$8.783

$0.055

0.63%

Mar

Soy Meal

$265.00

$262.00

$264.50

$2.50

0.95%

Mar

Soybean Oil

$31.23

$31.80

$31.39

($0.410)

-1.31%

Feb

Live Cattle

$136.050

$129.950

$135.375

$5.425

4.01%

Mar

Feeder Cattle

$153.83

$150.03

$155.88

$5.85

3.75%

Apr

Lean Hogs

$70.300

$70.375

$68.900

($1.475)

-2.14%

Mar

Cotton

59.97

58.90

60.01

1.110

1.85%

Mar

Oats

$1.970

$1.963

$1.920

($0.043)

-2.21%

 

March cotton futures were up 1.85% this week, cancelling out a 1.8% loss from the previous week. The weekly USDA Export Sales report 330,964 RBs of US cotton sold, including 10,100 RBs of Pima. Net upland sales of 320,864 RBs were the largest one week total since the week ending Oct 1, 2015. Trade estimates called for sales of only 250,000 RBs. China was only in for 9,867 RBs, while Vietnam purchased 137,400 MT. US cotton export sales commitments are 72% vs. the 5 year average of 93%. Upland exports YTD are down 20% from last year at this time. The USDA AWP for this upcoming week is 44.69, with the LDP/MLG up to 7.31 cents for the week.

Live cattle futures were up 4% this week, erasing much of the 4.7% drop from the previous week. Feeder futures couldn’t quite keep up, advancing 3.75% for the week. Wholesale beef prices were lower this week. For the full week, Choice boxes were down 2.0%  and Select boxes were down 2.1%. Cash cattle business on Friday was $210-211 early, with packers apparently backing off to $209 after getting some inventory on the books.  These prices were $5 higher than the previous week. Weekly beef production was down 4.3% from the previous week due to the Presidents Day holiday, and up 1.3% from the same week in 2015. YTD production is now 0.1% above year ago. Average carcass weights are still running about 12# above year ago.  The USDA Cattle on Feed report on Friday night showed slightly larger than expected numbers placed in January, resulting in a February 1 figure that was 99.96% of year ago. There were more cattle placed in all three >600# categories than a year ago, although overall placements were down 1/2% from year ago.

Lean hog futures were down 2.1% in front month April this week. The CME Lean Hog Index was $66.26, up $0.66 for the week. The USDA reported the average carcass cutout was down 1.9% at $74.63 on Friday. Estimated FI hog slaughter for the week was 2.294 million head, up 0.6% from the week before. Production for the week was up 0.3% vs. last week and up 0.9% from the previous year. Pork production year to date is down 1.0%. USDA said there was 19,600 MT of US pork sold to foreign purchasers during the week ending Feb 11. China continues to be an active albeit small scall purchasers of the muscle cuts.

Market Watch

We’re now into the last full week of February. Cattle traders will start the week reacting to the Friday night Cattle on Feed report. Grain traders will be dealing with any surprise positions inherited due to March grain options expiration/exercise. USDA reporting goes back to the normal routine, with weekly Export Inspections on Monday and Export Sales on Thursday.  The monthly USDA Cold Storage report will be out on Tuesday afternoon, with the usual EIA ethanol production numbers on Wednesday. Tuesday is first notice day for March cotton futures deliveries.

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There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.  Copyright 2016 Brugler Marketing & Management, LLC.