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Timex Cattle

Published on: 21:45PM Oct 09, 2015

 

Market Watch with Alan Brugler

October 9, 2015

Timex Cattle

One of the problems with being a “veteran” industry analyst is that sometimes your younger readers and staffers can’t relate to your analogies. For example, I referred to the Cattle market as a Timex market, drawing blank stares.  From circa 1953 until 2003, Timex watch commercials used the tag line “It takes a licking and keeps on ticking” to advertise durability. That used to be a product differentiator, but now it is a given with digital technology.  I think it is appropriate to cattle, however. Cattle took a major licking (beating, pounding, hammering, pick your own) from October 2014 to October 2015. From high to low they lost $51.95 per hundred pounds in nearby futures. I’m sure some thought the battery (which the old Timexes didn’t have) had died. The market did keep on ticking, and the bulls proved they had a pulse this week by rallying the market $7.70 or 5.9% this week.  Bears of course will dust off the market term “dead cat bounce” to dismiss the rally.

Corn futures lost 1.7% for the week, all of it on Friday following the USDA reports. December was down 6 1/2 for the week, but down 8 1/2 on Friday. There was a little “buy the rumor, sell the fact” action, as both US and world ending stocks estimates declined.  Bears were arguing that the tightness is artificial because USDA should have cut projected exports (current sales commitments more than 4 MMT behind year ago vs. no change in expected full year shipments).  For the record, USDA tightened projected ending stocks to 1.561 billion bushels and raised the midpoint of the cash average price for the year by 5 cents to $3.80.

Wheat futures were cautiously higher this week.  The front month SRW and HRS contracts were up 5 1/2 and 4 1/2 cents respectively, while KC HRW lagged with a 1/4 cent advance. The market rallied this week on smaller US production, with USDA 84 million bushels smaller than expected in the September 30 report. Russia took steps to free up exports by adjusting their tariff scheme, but is also trying to raise domestic intervention prices. There are dry weather concerns for both Russia and Australia. On the bear side, Stats Canada hiked projected production there to 26.1 MMT, 1 MMT larger than pre-report estimates. Total US export commitments are 46% of the full year USDA estimate. They would typically be 53% by this point. Sales last week were miserable at only 77,100 MT.

November soybeans finished the week 11 1/2 cents higher, regaining most of the 15 cents lost the previous week. USDA cut projected harvested acres by 1.1 million on Friday, but raised projected yield to 47.2 bpa. That limited the reduction in overall production to 47 million bushels. Projected 2015/16 exports were cut by 50 million bushels due to slow export sales year to date, but larger crush and smaller old crop carryover allowed the projected ending stocks for 2016 to tighten from 450 million bushels to 425 million. USDA left the cash price estimate UNCH at $9.15. The Commitment of Traders report confirmed that the large spec funds trimmed their  bearish bets from the previous week.  They trimmed 11,341 contracts but were still net short 19, 156 contracts on October 6.   

December cotton futures were up 2.4% for the week. US export commitments are 35% of the full year forecast, lagging the 55% average pace for this date. That usually means WASDE is overstating the full year total. USDA made no change in the export forecast in the Friday WASDE report, however, leaving it at 10.2 million bales. NASS did trim the average yield by 5 pounds, cutting expected US production by 90,000 bales.  Projected ending stocks tightened to 3.1 million from 3.2 million. The average cash price estimate for the year was reduced to 59 cents from 62 cents. Keep in mind that LDP receipts are not captured as part of the cash price. USDA put the AWP for this week at 45.22, and dropped the MLG/LDP to 6.78 from 7.68 cents per pound last week.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

09/25/15

10/02/15

10/09/15

Change

% Chg

Dec

Corn

$3.890

$3.893

$3.828

($0.065)

-1.70%

Dec

CBOT Wheat

$5.078

$5.133

$5.093

($0.040)

-0.79%

Dec

KCBT Wheat

$5.003

$5.005

$5.003

($0.002)

-0.05%

Dec

MGEX Wheat

$5.228

$5.273

$5.30

$0.023

0.42%

Nov

Soybeans

$8.893

$8.743

$8.858

$0.115

1.30%

Oct

Soy Meal

$308.700

$298.500

$306.900

$8.40

2.74%

Oct

Soybean Oil

$27.720

$27.840

$28.170

$0.330

1.17%

Oct

Live Cattle

$133.700

$123.075

$130.775

$7.700

5.89%

Oct

Feeder Cattle

$184.60

$179.50

$188.98

$9.47

5.01%

Oct

Lean Hogs

$71.875

$73.350

$73.825

$0.475

0.64%

Dec

Cotton

60.640

60.140

61.61

1.470

2.39%

Dec

Oats

$2.313

$2.123

$2.273

$0.150

6.60%

 

Live cattle futures jumped nearly 6% this week, rising $7.70 per cwt. October feeders were up 5% thanks to the rise in cattle and the drop in corn. The board rally was big enough to stir up cash deliveries vs. October futures.  Cash prices for cattle rose to $126-127 on Friday, with $195-197 reported in the north. In the Friday WASDE report, USDA increased projected 2015 beef production by 245 million pounds because of higher carcass weights. Weekly beef production was down 2.3%  from last week, but 1.5% larger than the same week in 2014. YTD production has crept within 3.7% of year ago, due to record high average carcass weights estimated at 849 pounds.  Wholesale prices were lower. Choice boxed beef was down 1.3% for the week, with Select product down 1.7%. Rising pork values may be steering some interest back toward beef, but the wide retail/wholesale spread says the consumers aren’t seeing the big drop in prices that would stimulate a big jump in purchases and drive values higher.

Front month lean hog futures were up 0.6% from last Friday. The October contract finished the week at $73.82. The CME Lean Hog Index was $74.75. The two need to converge at futures expiration on October 14.  Weekly pork production was up 1.2% from the previous week, but 5.1% larger than the same week in 2014. Year to date pork production is up 7.4% from last year. Weekly FI slaughter was estimated at 2.290 million head, up 20,000 head from last week.  YTD slaughter is 8.2% larger than a year ago. USDA bumped up projected 2015 US pork production by 55 million pounds in the WASDE report on Friday. Wholesale pork prices were up $3.05/cwt or 3.6% from Friday to Friday.  The pork belly primal was the highest since September 16 to help support the increase.

Market Watch

The government offices and some banks will be closed on Monday for the Columbus Day holiday, but Globex ag markets will trade their regular hours. The holiday will defer the USDA Export Inspections and Crop Progress reports until Tuesday, and bump back weekly Export Sales until Friday morning. October hog futures will expire on Wednesday. NOPA crush is expected to be released on Thursday, assuming its new/old role as an early warning system for the monthly crush report. The USDA now compiles and releases the monthly crush on the first of the month.

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