Market Watch with Alan Brugler and the Brugler Team
February 10, 2023
The Big Game
The Big Game is set to be played in Arizona this Sunday, as the KC Chiefs take on the Philadelphia Eagles. Approximately 100 million people will dedicate their Sunday evening to the game, either for the sport, commercials, the party, or the food. For perspective, CME has total open interest in futures and options across all ag markets at just 7.5 million contracts. The American Gaming Association estimates over $16 billion dollars will be wagered on the Big Game, compared to over $40 billion wagered in the corn futures market (though, corn trading is legal everywhere). Vegas odds have the Eagles favored by 1.5 points with a 51 point total score over/under. The put/call ratio in March corn suggests 1.089 call buyers for every put buyer, for March beans it’s drastically the other way with 1.55 open puts for each existing call. Both the Super Bowl and the markets have their headline stories, from Kelce v. Kelce, South American weather, Mahomes’ ankle, and the war in Ukraine reaching its 1-yr mark, to Andy Reid playing against his former team, and tight feeder supplies getting tighter. Traders have their bets in place, but remember; there are more possible outcomes than those that can actually happen. Enjoy the game, but note, when the NFL champion is crowned and the season is finished, old crop corn and soy marketing years are only at halftime.
Corn futures continue to trade on either side of $6.80, as March rallied back 3 cents higher this week helped by Friday’s move. Wednesday’s EIA report showed a 28,000 barrel per day cut in daily ethanol production (and corn use) to 1 million bpd. Ethanol stocks backed off by just 25,000 barrels to 24.417 million barrels, with a bulk of the reduction from the Gulf and West Coast, implying the an uptick in exports. Monthly WASDE revisions showed a 25 mbu cut to the US ethanol grind, with the 22/23 carryout up the same total to 1.267 bbu. On the world side, the Brazil production estimate was unch, with Argentina down 5 MMT to 47 MMT. The weekly Export Sales report showed corn bookings backing off to 1.16 MMT during the week of February 2. That was still the second largest total in the last 11 weeks. Old crop corn export commitments (shipped and unshipped sales) are now at 26.792 MMT, which is now down 41% vs. last year but picking up pace. That is also 55% of the USDA forecast, compared to the 70% average pace.
The wheat complex was bolstered this week, helped by a Friday rally. The Kansas City HRW market was up 4.12% on a 36 cent move. Chicago SRW was 29 ¼ cents higher on the week or 3.87%. MPLS was behind, but still rallied 0.95% on the week, an 8 ¾ cent move higher. The Texas state Crop Progress report showed winter wheat ratings backing off 1% to 13% gd/ex, with a Brugler500 index at 235. More states will be out at the end of the month, with the National report out on a weekly basis beginning in April. Wednesday’s monthly WASDE report showed a 1 mbu increase to the US carryout total to 568 mbu, on a shift in in food and seed numbers. Thursday’s Export Sales report tallied wheat bookings at a 4-week low of 131,389 MT. That was also the third lowest weekly total this MY. Total wheat export commitments are now 16.388 MMT as of February 2. That is still 7% below year ago and 78% of the USDA export projection. Normally we would have 87% of the projection sold/shipped by now. Actual shipments are 59% of the projected full-year total, 4% back of the average pace.
Soybeans closed at their highest price on the weekly continuation chart since August at $15.42 ½. For March, that was a 0.69% gain, or 10 ½ cents. The product values shared the sentiment, as Meal was up $2.90, or 0.58%, with bean oil up 2.51% or 148 points. USDA reduced the projected US crush total by 15 mbu to 2.23 bbu. That raised the US ending stocks estimate by the same 15 mbu to 225 mbu. For South America, WAOB trimmed the Argentina production number by 4.5 MMT to 41 MMT, with Brazil unch at a record 153 MMT. Thursday’s Export Sales report tallied old crop soybean export bookings backing at the lowest since September 15 to 459,443 MT in the week of 2/2. Commitments are now 47.731 MMT, or now just 2% larger than last year at this time. They are 88% of USDA’s forecast total, still 8% faster than the average pace. The window for sales and shipments is getting narrower as Brazil’s bean harvest moves on.
Live cattle continued their march higher, as Feb was up another 0.58% on the week. Cash trade was again slow to get moving this week, but some $158-160 trade was being reported in the WCB, with dressed trade at $254. Feeder futures were up just 30 cents on the week. The CME Feeder Cattle Index was $182.53, up $1.08 from last week. Wholesale boxed beef prices were higher this week. Choice boxes on were back up by 1.9% ($4.92/cwt) and Select boxes were 1.1% higher ($2.68/cwt). That widened the Choice/Select spread back to $15.37, up by $2.24. Weekly beef production was down 1.8% from the previous week and a large 7.6% drop from the same week in 2022 as slaughter ready cattle are slowing down. YTD totals are 2.9% lower vs. 2022 on 1% fewer head. That implies lighter weights with this week’s dressed totals down 13 lbs vs. last year. Thursday’s weekly Export Sales report tallied beef export bookings at 16,412 MT, dropping hard from the previous week’s multi-month high. Export shipments also backed off 15,580 MT.
Hogs continue to fight gravity and spec shorts, as soon to be nearby April was down 3.64% on the week. The CME Lean Hog Index has finally found some sort of a bottom with a 95 cent gain this week, to $73.80. The pork carcass cutout was back up this week by 2.5% ($1.96). Bellies were the largest contributor, mainly on Friday, with a 13.6% increase through the week. Weekly pork production was down 4.1% vs. the previous week and 1% lower vs. the same week in 2022. YTD production is up 2.2% vs. the same time in 2022. Export Sales data released on Thursday showed pork bookings at 28,799 MT, down vs. last week. Shipments, also backed off to 30,408 MT. Mexico received a majority of that, with 14,000 MT headed their direction and 4,600 MT shipped to China.
Cotton futures were weaker again this week, as March was down 0.19% on the week. Cotton classing data from USDA released on Friday showed 13.94 million bales of all cotton had been classed as of February 2, a 100,000 bales increase over last week. On Wednesday, USDA lowered their domestic use total by 100,000 bales to 2.1 million, with the ending stocks total up the same to 4.3 million bales. Thursday’s weekly Export Sales report indicated a MY high in cotton bookings to 262,788 RB for old crop during the week that ended on 2/2. New crop sales totaled 4,840 RB. Cotton export shipments YTD have been 14% larger than last year, as unshipped sales commitments are 38% smaller. That is mainly indicative of the smaller crop. It puts total commitments down 20% in total vs. last year. They are still 86% of USDA’s forecast total, 1% behind normal. The FSA lowered the Adjusted World Price for cotton by 83 points on Thursday, to 74.41 cents/lb.
Market Watch
Next week will be sort of quiet on the report side of things. On Monday, we start the week with the Export Inspections report released in the morning. On Tuesday, February Lean Hog futures and options expire. Skip ahead to Wednesday and EIA will release their weekly ethanol production and stocks data. Thursday morning will see the release of weekly Export Sales report.
Visit our Brugler web site at https://www.bruglermarketing.com or call 402-697-3623 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. Similar risks exist for cash commodity producers. Past performance is not necessarily indicative of future results.
Copyright 2023 Brugler Marketing & Management, LLC. All rights reserved.
