Alan Brugler Market Commentary

February 02, 2013

Market Commentary

Corn

Commodity markets
Commodity markets

Corn futures finished the day lower in the nearby contracts and up a penny on new crop. Corn futures hit their highs of the day shortly after the pit open in Chicago in what seemed to be another positive day for the grain complex, but selling pressure soon surfaced that never allowed the nearby contracts back into positive territory in the afternoon session. For the week March corn added 15 cents with the help of managed money, who added to their long positions in the amount of 64.64 million bushels. Brazil is expected to receive moisture over the weekend, while Argentina will turn cooler as a cold front moves through the area. Informa pegged Brazils corn crop at 70.3 MMT, while putting the Argentinean corn crop at 25 MMT. The USDA has current estimates higher for both with Brazil at 75 and Argentina at 28. The EPA released the 2013 ethanol mandates this week and increased the requirement for corn ethanol from 13.2 billion gallons to 13.8 bill/gal (see Brugler SRR titled Ethanol EPA’s 2013 Ethanol Mandate or call 402-289-2330 for more info).

Mar 13 Corn closed at $7.36, down 4 1/2 cents,

May 13 Corn closed at $7.37 3/4, down 4 1/4 cents,

Jul 13 Corn closed at $7.28 3/4, down 4 1/2 cents

Sep 13 Corn closed at $6.16 1/4, up 1 cent

Soybeans

Soybean futures managed to stay in positive territory despite a weaker wheat and corn trade. March soybeans finished the week up 33 cents, while meal added on $11.80. Futures traded off their highs midday as rain is expected over parts of Brazils growing regions while Argentina is expected to have a cold front move through this weekend. Informa pegged Brazils crop at 84 MMT, which is higher than the USDA estimate of 82.5 MMT. Informas estimate for Argentina was put at 54.5 MMT, higher than the USDA estimate of 54 MMT. The US national average soybean basis remains historically strong despite light commercial selling taking place this week (see Brugler SRR titled Soybean Basis, Demand and Supply Checkup for more info or call 402-289-2330). The EPA raised their advanced renewable fuels mandate this week, which includes diesel made from soybeans. The new mandate, if not modified after the comment period, would require 2.75 billion gallons be produced vs. 2 bill/gal in 2012. Roughly 1.28 must be derived from plant based diesel fuels. Soybean oil finished the week up 1.71%.

Mar 13 Soybeans closed at $14.74 1/4, up 5 3/4 cents,

May 13 Soybeans closed at $14.65 1/2, up 5 3/4 cents,

Jul 13 Soybeans closed at $14.55 1/4, up 5 3/4 cents,

Aug 13 Soybeans closed at $14.26, up 6 3/4 cents,

Mar 13 Soybean Meal closed at $428.20, up $1.80,

Mar 13 Soybean Oil closed at $52.99, up $0.13

Wheat

Wheat futures started the trading day with double digit gains on all three exchanges, but profit taking quickly reversed those gains and left March wheat down 1.48% on the week. Managed money cut their net short position by 16.16 million bushels, although they are still hanging onto a sizable net short position. A USDA attaché in Argentina estimated the wheat crop at 10.3 MMT, which is below the 11.0 MMT that the USDA estimated in their January report. Informa today estimated Argetinas wheat crop at 9.5 MMT this morning, providing further evidence that the wheat crop is producing smaller than expected yields. Argentine wheat exports were pegged at 5 MMT for the 2012/13 marketing year in the USDA Jan report, down from 12.9 MMT in 2011/12. Egypt issued a tender to purchase wheat this weekend for shipment between March 1-10th, despite making previous statements that they had enough supply to last until mid-June. India has stepped up their export program as they picked up tenders from the UK, Ethiopia, and Yemen this week. Beginning Jan 1, India reserves totaled an estimated 34.4 MMT.

Mar 13 CBOT Wheat closed at $7.65, down 14 1/2 cents,

Mar 13 KCBT Wheat closed at $8.22, down 15 3/4 cents,

Mar 13 MGEX Wheat closed at $8.51 3/4, down 13 1/4 cents

Cattle

Cattle future finished the day lower ahead of the Cattle Inventory Report. Feb futures closed the gap up that was left on Monday after the Cattle-on-Feed report, while June futures left this gap open. Significantly weaker beef prices this week held back any potential rally, with Choice losing 2.6% and Select down 1.8% Fri to Fri. Choice was $2.76 lower today, and finished the week at lows not seen since August. Select was down $1.63 on 238 loads. The Cattle Inventory report put total cattle as of Jan 1st  at 1.62% below 2012 levels. This wasn’t as big of a drop as the trade expected, with their estimates between 1.8-2.04% lower than 2012 levels. The beef replacement heifers were up 1.9% year over year, indicating some of the cows are getting replaced. The week to date slaughter with Saturday included is 621,000 head. This is 4,000 head below last weeks projected slaughter. The YTD slaughter is running 3.3% behind the pace set last year. The CME feeder cattle index was reported 13 cents higher at $146.27.

Feb 13 Cattle closed at $127.200, down $0.425,

Apr 13 Cattle closed at $132.200, down $0.600,

Jun 13 Cattle closed at $127.900, down $0.400,

Mar 13 Feeder Cattle closed at $149.300, down $0.250

Apr 13 Feeder Cattle closed at $152.200, down $0.375

May 13 Feeder Cattle closed at $154.825, down $0.200

Lean Hogs

Hog futures started the day higher with the Feb contract hitting a November high before backing off and finishing the day near unchanged. Cash hogs finished the day mixed with IA/MN 23 cents higher, the WCB 52 cents lower, and the ECB $1.78 higher. The pork carcass cutout finished Friday $1.77 higher, with large gains in loins and hams supporting the price move. The week to date slaughter was estimated at 2,083,000 head with another 93,000 head expected on Saturday. Slaughter has been below trade expectations all week due to the cold winter weather slowing marketings in the Midwest, but with Saturdays projected number the WTD will come in 23,000 ahead of the previous week. The CME lean hog index was reported 5 cents lower at $88.25, a 67 ½ cent premium to the front futures contract.

Feb 13 Hogs closed at $87.575, down $0.025,

Apr 13 Hogs closed at $88.775, down $0.575

May 13 Hogs closed at $96.075, down $0.300

Cotton

Cotton futures finished the day in positive territory, with a similar trade pattern to Thursday. Cotton futures are witnessing the longest winning streak since early 2011 as investors continue to support the rally. Open Interest on Thursday was its highest since February 2011, when cotton was trading near 200. Cotton is in an acreage battle with corn and soybeans. Soybeans, which are expected to replace some cotton acreage in 2013, have been rallying over concerns on weather conditions in South America. Higher soybean prices will encourage more producers to switch from cotton to soybean production. For the week, March cotton advanced 3.2% while March soybeans were up 2.31%. The Cotton Certified Stock Report showed current deliverable stocks here in the US at 137,381 bales, 7,189 new certs, and 39,811 awaiting review. The Cotlook “A” index was unch at 90.35.

Mar 13 Cotton closed at 82.98, up 3 points,

May 13 Cotton closed at 83.55, up 40 points

Jul 13 Cotton closed at 83.88, up 44 points

Market Commentary Provided By:
Brugler Marketing & Management LLC
1908 N. 203rd St.
Omaha, NE 68022
Phone: 402-697-3623
Fax: 402-289-2353
E-mail: alanb@bruglermktg.com
Web: www.bruglermktg.com

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