Market Watch with Alan Brugler
June 7, 2024
Markets Do Strange Things
“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it” attributed to Warren Buffet on BrainyQuote.com
“Only when the tide goes out do you discover who’s been swimming naked.” Also Buffett
The common theme here is that not all market moves are rational, prices do go to extremes due to human psychology, and that maintaining your own discipline is important to your marketing success. This is particularly true for agriculture during the growing season. Meteorology is an inexact science, and the world is a big place. Shifts in yield potential are best seen after the fact. Things aren’t always what they seem. Politics also tends to interfere with efficient markets. We have seen all of those influences in the past few weeks.
Corn clawed back early week losses on Thursday, then held on for a small weekly gain of 2 ½ cents in the July and less than that in December. Monday’s Crop Progress data showed 91% of the US corn crop planted by June 2, 2% ahead of the five-year average pace. Emergence hit 74%, a 1% point lead on that average development pace. The initial NASS crop rating was 75% gd/ex vs. 64% from the same week last year. That is a 385 on the Brugler500 index, the best start to the year since the 391 in 2018. Export sales commitments are at 94% of the full year USDA forecast and would typically be 99% of that figure by now. Commitments are running 34% ahead of year ago, but a finishing kick is needed here in June before the Brazilian second crop starts to hit the world market. Friday afternoon’s Commitment of Traders report showed the managed money spec funds increased their net short in corn by 79,230 contracts during the week ending June 4, increasing it to 212,706 contracts for combined futures and options.
The wheat market was hammered this week, having completed what is typically a full year range to the upside and hitting 10 month highs in May. Chicago was 51 cents lower in the July contract (-7.52%) to lead the bear charge. Kansas City futures were close behind with a 6.07% loss. MPLS tried at times to stay out of the fight but lost 45 cents and 6.12% for the week. Concerns over Russia’s crop and lower private estimates (80-83 MMT) were treated as old news, with the frost having occurred in May and Russian officials indicating that 800,000 HA had already been replanted. Monday’s Crop Progress report showed 83% of the US winter wheat crop headed, 5% above normal, with harvest 6% complete, faster than the 3% average. Condition ratings were up 1% to 49% gd/ex, taking the Brugler500 index back up 2 points to 333. Spring wheat was 94% planted, 4% above the average pace, with 78% of the crop emerging, 9% faster than normal. Conditions were 74% gd/ex, with the Brugler500 index at 377. Commitment of Traders Friday afternoon’s Commitment of Traders report showed the spec funds were increasing their net short position in CBT wheat futures and options during the week ending June 4. They added a net 6,253 contracts and were still net short 31,684 on that date.
Soybeans had an impressive 20 cent plus rally on Thursday, then gave it all back on Friday. For the week, beans were down 2.1% or 25 ¾ cents per bushel. New crop November soybeans were up 16 ¼ cents (1.35%). Meal lost an even $4/ton this week. Bean oil on the other hand slid 1.89 cents per pound or more than 4.1%. The NASS Crop Progress report showed 78% of the bean crop planted, 5% ahead of the average pace for this week. Emergence was 55% complete, 3% faster than normal. Oilseed processing association NOPA announced corrections for April NOPA crush, revising it upward on Friday to 169.436 million bushels from 166.034 million. NOPA member oil stocks were increased to 1.832 billion lbs from 1.755 billion.
Soybean export commitments are 94% of the full year WASDE number, and outstanding sales on the books are up 23% from year ago. The bad news is that they would typically be 100% of the USDA forecast by now (and need to be in order to cover late season shipping delays and rollovers). China Customs reported that May soybean imports totaled 10.22 MMT, down 15% vs. May 2023. Most of those came from Brazil, which was hampered by flooding Rio Grande do Sul. Calendar YTD imports total 37.37 MMT, down 5.4% year/year. CFTC Commitment of Traders data for the week ending June 4 showed the managed money spec funds increasing their soybean net short by 45,524 contracts, taking it 59,741 contracts (futures + options).
Live cattle futures eked out a 62-cent gain for the week, only 0.34% at this price level. Cash trade was lower this week, with the South trading $185-190 and the north at $298-301 in the meat. Feeders were helped by the higher fats but were nicked by the late week corn rally. August FC was down 0.6% for the week. The CME Feeder Cattle Index was up $1.06 week/week to $251.20 and is still discounted vs. the board. Wholesale boxed beef quotes were mixed this week. Choice boxes were up $3.55 or 1.1% for the week but Select 600-900# carcasses were down 57 cents or 0.2%. The Chc/Sel spread is out to $15.61. Weekly beef production was up 13.7% from the holiday week and up 4.9% vs. the same week last year. That took the YTD beef production to down now just 1.7% from the same time a year ago, with cattle slaughter down 4.4%. Yes, they are being fed heavier. Friday’s Commitment of Traders disaggregated report showed the managed money spec funds net long 52,741 contracts of futures and options on June 4, a reduction of 5,815 contracts for the reporting week.
Hogs continued their grind lower this week as June was down $1.82 (-1.93%). The CME Lean Hog Index was up 15 cents for the week at $91.92. USDA’s Pork Carcass Cutout was down $2.34 this week (2.3%) to $100.91. The loins and picnics were the only primals reported higher this week. Weekly pork production was up 12.3% vs. Memorial Day week and up 4.0% vs. last year. The YTD production is now 0.6% larger than last year at this time. YTD hog slaughter has been 0.8% above last year. USDA estimated federally inspected hog slaughter at 466,000 head on Friday, with the WTD total at 2.422 million head including a Saturday estimate for 40,000 head. That compares to 2.354 million head a year ago. Managed money spec funds cut their net long in hogs by 13,138 futures and options contracts in the week ending June 4. The Commitment of Traders report put their net position on that evening at 16,254 contracts.
Cotton entertained bullish hopes, with old crop July up 3 days in a row. Those hopes were not shared by new crop December and were pretty much dashed after a late week sell off. July was down 231 points (3%) from Friday to Friday. New crop December was 228 points lower for the week. The weekly Crop Progress report showed 70% of the US cotton crop planted, on par with the average pace. Condition ratings were up 1% to 61% gd/ex, with the Brugler500 down 5 points to 357 due to an increase in the poor/very poor ratings. US cotton export sales commitments are 107% of the full year WASDE figures, but would typically be 113$ by now (5 year average). They trail year ago by about 8%. The USDA Average World Price (AWP) is 58.13 through next Thursday, dropping 6.24 cents/lb from the previous week. The large managed money speculators in cotton futures and options were 23,908 contracts net short in cotton futures and options on June 4, adding 11,143 contracts to the position during the reporting week.
Market Watch
Cotton and Live Cattle traders will begin Monday adjusting to any surprise futures positions inherited at Friday’s July options expirations. Monday morning will start the weekly data parade with the USDA weekly Export Inspections report, followed by the weekly USDA Crop Progress report that afternoon. We will get updated EIA ethanol stocks and production data on Wednesday. USDA’s monthly Crop Production and WASDE reports are also scheduled for Wednesday morning. The weekly Export Sales report will be released on Thursday morning. June hog futures and options expire on Friday.
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.
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