Winter Grind

Published on: 23:27PM Feb 15, 2019

Market Watch with Alan Brugler

February 15, 2019

Winter Grind

The commodity markets had a bit of SAD this week, the seasonal affective disorder tied to lack of daylight and melatonin. The stock markets were full of sunshiny optimism, even ignoring a lousy retail sales report because they assumed (as we did) that there is some faulty data in there. Not so the grains. Corn ground out a ½ cent per bushel gain for the week. Soybeans were fearful the Trade War winter would last forever, which is about what February seems like sometimes! Our friends at Brainy Quote did provide some sources of optimism, however.  From Hal Borland “No winter lasts forever, no spring skips it’s turn”.  Many a farmer could agree with Henry Rollins, quoted with “In Winter, I plot and plan, in spring I move.”

Corn futures managed to get back ½ cent per bushel out of the 4 cents they lost the previous week. The weekly EIA report showed ethanol production rebounding by 62,000 barrels per day in the week of Feb 8 at 1.029 million bpd. Ethanol stocks @23.466 million barrels were down 481,000 barrels from the week prior. Corn export sales data was released for the New Years holiday week and was nothing to write home about (459,822 MTs). That was still 5% above the same week in 2018. Per the CFTC reports, the large spec funds added 16,899 contracts to their net long in the week ending January 22. That gave them a modest net long of 44,358 contracts for futures and options combined.













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CBOT Wheat







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Soy Meal







Soybean Oil







Live Cattle







Feeder Cattle







Lean Hogs




















Arctic cold temps didn’t faze the bears, and neither did previous chart support.  Nearby Chicago March was down 2.5% for the week and KC dropped 3.6%. Prices broke to new lows in the winter wheat contracts amid concerns about getting enough export demand soon enough to meet the USDA projections for the year.  The MATIF futures in Paris also broke hard this week despite getting some sales made to Algeria and Tunisia.  Minneapolis spring wheat, which has yet to be planted, fared better.  It was up 4 1/2 cents per bushel for the week.  Cold and wet forecasts for the remainder of February are raising questions about planting dates and eventual acreage.  USDA’s weekly export sales data is still badly behind schedule, with this week covering the New Years holiday week and of course showing little activity. We should be back to the usual one week lag by Friday.

Soybean futures were down 7 cents per bushel for the week, after losing 3 ¼ cents the previous week. Soybean meal was up 0.13% from Friday to Friday, but soy oil dropped nearly 3%. Friday’s NOPA crush report showed strong soybean use at 171.63 million bushels, but soy oil stocks were larger than expected at 1.549 billion pounds. That was still down 10.3% from year ago.  The weekly Export Sales report for the week ending January 3 was finally released, causing consternation because it showed Chinese cancellations of 807,000 MT. These appear to have been previous purchases by private crushers who can’t afford to pay the 25% tariff (still in effect). The close to 10 MMT purchased in December and January were all by government affiliated firms that are exempt from the tariffs, and those ships are leaving port. The PNW soybean basis firmed this week. Brazilian production forecasts are solidifying in the 112-115 MMT range, with SAFRAS at 115.44 MMT on Friday. The Commitment of Traders report for the week ending Jan 22 showed the spec funds rebuilding their net short to -22,914 contracts. They had been short only 1,220 contracts in the Jan 8 report.

Cotton futures were down 3.2% this week. The delayed Export Sales report on Thursday did show some increased buying interest over the New Years holiday week. Old crop upland sales of 299,767 RB for the week that ended on 1/3 were the second largest total this MY, and 9.19% above the same New Year’s week last year! The NCC planting intentions survey was released at the San Antonio meeting and was seen as bearish with it’s 2.9% increase from last year at 14.5 million acres. The CFTC reports are still not up to current date, but the one released on Friday showed data through January 22 and indicated that the large spec funds were net short 10,038 contracts vs. 10,536 contracts two weeks ago.

Live cattle futures were down 75 cents this week in nearby Feb futures. They continue to hold out hope for further gains in cash cattle prices, but Friday activity was mostly $125 and thus UNCH from the previous week. Feeder cattle futures were down $1.50 or 1.04% after being up 1.1% for the previous week. The CME feeder cattle index was $141.31, down 38 cents for the week. Wholesale beef prices were mixed this week, with choice boxes up $1.50 or 0.7% while Select 600-900# carcass values were down $.18 or 0.1%. The weekly beef production was down 4.5% from the previous week and 0.4% smaller than the same week in 2018. Beef production YTD is down 1.2% on 0.8% smaller slaughter.  That indicates carcass weights are still running on the light side.

Lean hog futures stabilized as February headed into expiration, and April was up $1.10 for the week as it became the lead month. The CME Lean Hog index was $55.24 on Friday (Wednesday average), down $1.65 from the previous week. The pork carcass cutout value lost another $1.79 per cwt this week, or 2.8%. It is already cheaper than any year since the PED outbreak, but seems to be following the seasonal lower. The hams took a turn as the weak link, although bellies and loins were also under pressure. Pork production this week was up 0.2% from the previous week and 5.7% larger than the same week in 2018. Pork production for the year to date is up 2.3% from last year on 2.1% more slaughter.

Market Watch

We start off the week with the President’s Day holiday.  Trading will resume electronically on Monday evening. with the Export Inspections report delayed until Tuesday. Thursday will show the weekly EIA ethanol report. The Export Sales report will be released on Friday, and will include a cumulative catch up for all reports through February 14.  Other delayed reports to be released on Friday include the January Cattle on Feed report, the Feb 1 Fats & Oils, Grain Crushing and Cotton System reports. The Cattle on Feed report originally scheduled for Feb 22 will be issued on March 8. Friday will also mark the expiration of March grain futures options.

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There is a risk of loss in futures and options trading. Similar risks exist for cash commodity producers. Past performance is not necessarily indicative of future results.

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