Top Ten News Items

Published on: 22:18PM Feb 26, 2016

 

Market Watch with Alan Brugler

February 26, 2016

Top Ten News Stories

While I am a strong believer in the trade axiom “If you trade the news, you lose”, news is clearly a driver in all markets. Changes in supply and demand are all news items at some point. We’re constantly looking for that leading edge ag news item. All news is not created equal, however. A quick look at Top Ten news items across various Web platforms showed headlines as diverse as:

Trump Tower Built with Sweat of Foreign Workers

CDC Confirms 9 Cases of Zika Among US Pregnancies

Cleveland Clinic Performs First US Uterus Transplant

Republicans Clash in Feisty Debate

Indonesian Volcano Erupts Twice in One Day

Elephants Chase US Senator (Jeff Flake) in Africa

Consumer Spending, Inflation Data Keep Fed Rate Hikes on Table

While the above headlines raise some interesting questions (Who donated their uterus for that operation? What did the Republican senator do to peeve the elephants?) you will notice that none of them were directly ag related. Food and energy costs are WAY down, but excluded from the standard inflation measures. The volcano could be an issue only if it reaches Pinatubo dimensions and dirties up the atmosphere. The big problem in the ag markets right now is that there ISN’T a problem. Grain supplies are comfortable, and US pork and beef inventories were at record levels for January. To get the bears fleeing, it will take a news event threatening that supply serenity.

Corn futures were down a sharp 3.1% this week. While widely anticipated to be bearish, the release of the first USDA S&D estimates for 2016/17 still pressured the market with their 168 bpa yield assumption and $3.45 annual average cash price. That would be 15 cents lower than this year. There are still many factors which could impact those initial estimates.  In fact, the first official WASDE estimates aren’t released until May, when they have a better handle on US acreage and South American production. US weekly export sales were 1.066 MMT of US corn was sold on the global market during the week ending last Thursday, an 18% decline from the week before, but still 17% above the previous four week average. Weekly EIA ethanol production averaged 994,000 barrels per day, an increase of 19,000 bpd from the week before. Ethanol stocks dropped by 100,000 barrels to 23.1 million barrels, despite the larger daily production. The CFTC Commitment of Traders report on Friday afternoon little change from Tuesday to Tuesday, with the large spec funds still net short 134,334 contracts. We suspect there was some additional selling pressure on Wed-Friday, which will be in next week’s report.

Wheat futures were lower in all three markets, with Chicago the weakest. World ending stocks are still burdensome, and crop threats to growing crops in the Northern Hemisphere have been minimal thus far. Weekly export sales were 486,229 MT sold for the week ending 2/18, beating trade expectations that maxed at 450,000 MT. This was the largest weekly total since the week ending November 12! Total commitments are still not running at the pace needed to meet the USDA full year forecast. Commitments are 84% of the full year estimate, and would typically be 91% by now. Egypt did buy 300,000 MT for late March delivery, but none of it was US origin.  On the bullish side of the equation, USDA is projecting only 51 million planted acres for the US in 2016, with the highest average yield since 2013.  We can accept that higher average yield based on ample spring moisture conditions and a higher % of SRW acres. A hard freeze on wheat that is being pushed ahead of normal maturity by warm temps would be the wild card here in the US.

Soybeans were down 2.7% this week.  USDA reported net soybean export bookings of only 328,668 MT of soybeans were sold to foreign purchasers during the week ending Feb 18, a drop of 45% week over week. Soy meal sales of 172,621 were reported, nearly identical to the previous four week average. There were also 3,204 MT of soy oil. Soybean export commitments have reached 91% of the full year forecast. They would typically be 93% as of this date. The meal exports are within 1% of the average pace. The initial USDA balance sheet for 2016/17 calls for 440 million bushel ending stocks (tighter than some in the trade had feared) but a cash average price of $8.50 for the year. That would be 30 cents per bushel below this year. The Friday afternoon Commitment of Traders report showed the big spec funds cutting their bearish position in soybeans by half. The net short declined to -22,059 contracts as of Tuesday night.

March cotton futures sank 3/6% for the week. Larger US acreage and production forecasts weighed on the market. The USDA Export Sales report Thursday morning showed cotton bookings totaling 140,079 RBs during the week ending Feb 18, including 10,800 RBs of Pima. China was in for 21,216 RBs, the third largest weekly total for the country since Aug 1. Outstanding (unshipped) US cotton export commitments are 32% smaller than last year at this time. Cotton acreage in 2016, as reported at the USDA Forum on Thursday, is expected to reach 9.4 million acres, versus only 8.58 million acres in 2015. The USDA AWP for the upcoming week is 44.66, with the LDP/MLG up to 7.34 cents for the week.

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

02/12/16

02/19/16

02/26/16

Change

% Chg

Mar

Corn

$3.588

$3.655

$3.545

($0.110)

-3.10%

Mar

CBOT Wheat

$4.575

$4.618

$4.433

($0.185)

-4.17%

Mar

KCBT Wheat

$4.443

$4.570

$4.425

($0.145)

-3.28%

Mar

MGEX Wheat

$4.85

$4.93

$4.89

($0.040)

-0.82%

Mar

Soybeans

$8.728

$8.783

$8.550

($0.233)

-2.72%

Mar

Soy Meal

$262.00

$264.50

$257.20

($7.30)

-2.84%

Mar

Soybean Oil

$31.80

$31.39

$31.03

($0.360)

-1.16%

Feb

Live Cattle

$129.950

$135.375

$137.550

$2.175

1.58%

Mar

Feeder Cattle

$150.03

$155.88

$158.65

$2.78

1.75%

Apr

Lean Hogs

$70.375

$68.900

$70.850

$1.950

2.75%

Mar

Cotton

58.90

60.01

57.92

(2.090)

-3.61%

Mar

Oats

$1.963

$1.920

$1.710

($0.210)

-12.28%

 

Live cattle futures rallied 1/6% this week, with a firmer tone to product value and a technical breakout on some of the price charts. Wholesale prices were sharply higher, with Choice boxes up 2.8% and Select boxes up 1.8% for the week. Cash cattle business was slow to develop, but we were starting to see some sales at $135 in KS and $210-212 in the north as this went to the Web on Friday afternoon. Estimated weekly slaughter was up 2.5% vs. last week and up 1.5% from the same week in 2015.  Beef production YTD is up 0.5% vs. 2015. The monthly Cold Storage report confirmed record frozen beef stocks for the month of January. Frozen stocks as of January 31 totaled 518.463 million pounds, up 1.2% from December 31, and 5.4% bigger than January 2015.

Lean hog futures were up 2.7% this week. The CME Lean Hog Index was $66.52, up 60 cents on Friday. Estimated FI hog slaughter for the week was 2.211 million head, down 3.6% from the previous week and down 2.1% from the same week a year ago. Hog slaughter for the year to date is down 0.5% from last year. with pork production down 1.3%. The pork carcass cutout price was down 0.68% on a Friday/Friday basis. Most of the primals showed losses, except for hams and pork butts. Friday’s Commitment of Traders report showed the spec funds adding to their bullish position last week. It was 1,858 contracts more net long on Tuesday than it had been the previous Tuesday.

Market Watch

Grain traders start the week with delivery notices against March futures, while Monday also marks expiration of the February live cattle contracts.  USDA will be back on the ‘normal’ schedule for weekly reports, with Export Inspections on Monday and Export Sales on Thursday.  Not to be overlooked, we’ll get the monthly CAIR reports on Tuesday, including Grain Crushings, Fats & Oils and Cotton Consumption.  Friday will mark the expiration of March serial options for live cattle.\

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