Sorry, you need to enable JavaScript to visit this website.

Who Wants It

Published on: 21:06PM Oct 16, 2015

 

Market Watch with Alan Brugler

October 16, 2015

Who Wants It?

The US is experiencing an excellent fall harvest period, with the exception of the Southeast areas afflicted by drought and/or too much tropical moisture. Frost and freeze damage will be minimal, with late planted beans in better than expected shape. The above is already built into the USDA numbers, in our opinion. The numbers we are most concerned about are the ending stocks, with USDA projecting corn stocks over 1.5 billion bushels, wheat at 861 million and soybeans at 425 million. If realized next summer, these would all imply lower prices than those we are seeing. Of course, the market’s job is to find a home for those excess bushels, and wheat in particular keeps trying to go down and get competitive with bargain priced Black Sea offers. The bottom line is who wants it, and at what price will they take more?

Corn futures lost 1.6% this week to go with the 1.7% drop from the previous week.  Concerns about exports are front and center, with US commitments YTD down 5.589 MMT from last year at this time. For perspective, the US sold .658 MMT this past week, so it will take a string of some pretty big sales weeks to catch up.  USDA could have reduced the projection for the year but chose not to do so. We note that available corn supplies ex-China and ex-US are expected to drop sharply in 2015/16, so the assumption would be higher volumes at a later date. At the moment, Brazilian corn is still discounted from US offers all the way into 2016. That could change once they get more on the books.  Consultant Informa said its early surveys show US producers increasing corn plantings in 2016 by 2.4 million acres.

Wheat futures were down more than 3% in all three markets, and were a drag on corn prices as well.US exports were up 57% this week at 406,400 MT but commitments lag year ago by 2.54 MMT. Russian and Ukrainian production and export estimates keep rising.  Ukranian producers are being squeezed by low selling prices and high prices for imported inputs. Weakness in the local currency is a factor in both.

November soybeans finished the week 12 1/2 cents higher on stronger than expected exports. Weekly export sales were solid at 1.48 MMT (54.26 million bushels). Total export commitments lag year ago by nearly 7.2 MMT, with unshipped sales down 7.3 MMT. To the surprise of some (given the slow sales) export shipments to date actually exceed year ago by 213,000 MT. This is causing a scramble for cash bushels to ship in some areas. Brazilian planting still lags LY. The rainy season is arriving late due to El Nino but we are now starting to see better rainfall coverage in the 7 to 14 day forecasts.  The Commitment of Traders report confirmed that the large spec funds have flipped back to net long. They trimmed 21,263 contracts from the previous net short in the week ending October 13

 

 

Commodity

 

 

 

Weekly

Weekly

Mon

10/02/15

10/09/15

10/16/15

Change

% Chg

Dec

Corn

$3.893

$3.828

$3.768

($0.060)

-1.59%

Dec

CBOT Wheat

$5.133

$5.093

$4.923

($0.170)

-3.45%

Dec

KCBT Wheat

$5.005

$5.003

$4.835

($0.168)

-3.46%

Dec

MGEX Wheat

$5.273

$5.295

$5.12

($0.173)

-3.37%

Nov

Soybeans

$8.743

$8.858

$8.983

$0.125

1.39%

Dec

Soy Meal

$301.20

$307.80

$312.00

$4.20

1.35%

Dec

Soybean Oil

$28.06

$28.34

$28.60

$0.260

0.91%

Oct

Live Cattle

$123.075

$130.775

$135.950

$5.175

3.81%

Oct

Feeder Cattle

$179.50

$188.98

$193.80

$4.83

2.49%

Dec

Lean Hogs

$65.375

$66.125

$65.575

($0.550)

-0.84%

Dec

Cotton

60.140

61.610

63.85

2.240

3.51%

Dec

Oats

$2.123

$2.273

$2.308

$0.035

1.52%

 

December cotton futures were up 3.5% for the week, building on gains from the prior week. US export commitments are 36% of the full year forecast, lagging the 56% average pace for this date. That usually means WASDE is overstating the full year total. Outstanding sales (on the books, not shipped) are down 50% from last year at this time. USDA put the AWP for this week at 46.70, and dropped the MLG/LDP to 5.30 cents from 6.78 cents per pound last week. The Cotlook A Index climbed back above 70.00. The Commitment of Traders report on Friday afternoon showed the managed money spec funds net long 38,601 futures contracts, up 11,685 for the reporting week.

Live cattle futures rose 3.8% this week, on top of a 6% advance the previous week. October feeders were up 2.5% 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 since cash cattle didn’t keep up and basis weakened. Cash cattle did trade at $130 in the north on Friday afternoon. Weekly beef production was up 3.5%%  from last week, and jumped 5.2%  vs. the same week in 2014. YTD production has crept within 3.5% of year ago, due to record high average carcass weights estimated at 860 pounds.  Wholesale prices were higher this week, up 4.3% in both the Choice and Select boxes.

Front month lean hog futures were down 0.8% from last Friday. December was at a big discount to the October when the latter went off the board. Thus far, there has been no attempt to fill the daily chart gap, but rather patience in waiting for the cash hogs to come down to board level. The CME Lean Hog Index was $74.98, up 23 cents for the week. Weekly pork production was up 1.3% from the previous week, but 4.2% larger than the same week in 2014. Year to date pork production is up 7.3% from last year. Weekly FI slaughter was estimated at 2.318 million head, up 28,000 head from last week.  YTD slaughter is 8.1% larger than a year ago. Wholesale pork prices were up 0.82% from Friday to Friday, and are up $5.67/cwt in 30 days.  

Market Watch

We go back to normal trading schedules this week, with USDA reporting Export Inspections and Crop Progress on Monday, with weekly Export Sales on Thursday. There are two key monthly reports for livestock, with Cold Storage due on Thursday and Cattle on Feed coming out after the close of trading on Friday afternoon. Friday will also mark the expiration of November grain options.

Visit our Brugler web site at http://www.bruglermarketing.com, find our iPad app "AgMarket" in the Apple app store, or call 402-289-2330 for more information on our consulting and advisory services for farm family enterprises and agribusinesses.

There is a risk of loss in futures and options trading. Past performance is not necessarily indicative of future results.

 

Copyright 2015 Brugler Marketing & Management, LLC