Market Watch

Buy The Fact

 

Market Watch with Alan Brugler

July 6, 2018

Buy The Fact

One of the oldest trading rules I know is “sell the rumor, buy the fact”. The markets are in the business of discounting news as it is known or suspected, and in advance of actual facts.  Fundamentally bullish or bearish USDA reports often see the market going the other direction by the close because the data had already been priced into the cash or board values via the rumor mill and social media. We had yet another edition of STRBTF on Friday. The US and China both rolled out their $34 billion tariff packages, which had been announced and fully disclosed back in April and May but not activated. The markets had plenty of time to price in worries about lost market shares, slower GDP growth, loss of export jobs, etc.  US success in increasing export sales to other countries was pretty much being ignored.  On Friday, the tariffs were announced, the world didn’t end, and the short covering (sellers taking profit by buying back positions) began in earnest. One of Alan’s Chart Axioms is that it takes a 38.2% Fibonacci retracement just to get the winners out after the turn. Friday’s moves were just an initial step in that direction. Caution: The bulls have been starving and may or may not be able to walk in a straight line!

 

	Commodity				Weekly	Weekly
Mon		06/22/18	06/29/18	07/06/18	Change	% Chg
Jul	Corn	$3.5725	$3.5025	$3.5175	$0.015	0.43%
Jul	CBOT Wheat	$4.9125	$4.9750	$5.1275	$0.153	3.07%
Jul	KCBT Wheat	$4.89	$4.71	$4.92	$0.215	4.57%
Jul	MGEX Wheat	$5.490	$5.215	$5.458	$0.243	4.65%
Jul	Soybeans	$8.95	$8.59	$8.74	$0.155	1.81%
Jul	Soy Meal	$339.10	$332.80	$339.80	$7.000	2.10%
Jul	Soybean Oil	$29.21	$29.12	$28.90	($0.220)	-0.76%
Aug	Live Cattle	$106.90	$106.73	$106.38	($0.350)	-0.33%
Aug	Feeder Cattle	$149.20	$151.33	$152.20	$0.875	0.58%
Jul	Lean Hogs	$79.83	$82.88	$81.38	($1.500)	-1.81%
Jul	Cotton	$85.43	$85.38	$86.38	$1.000	1.17%
Jul	Oats	$2.4450	$2.5050	$2.5425	$0.038	1.50%

 

Corn futures were up 1 ½ cents for the week, thanks to the 8 ¼ cent rally on Friday. Condition ratings were down 1 point to 389 on the Brugler500 index in Monday’s Crop Progress report, a still lofty rating. Maturity is running ahead, with 17% of the crop silking as of last Sunday. The weekly EIA report indicated that 1.067 million barrels per day of ethanol was produced in the week of June 29, down 5,000 bpd from the previous week. Ethanol stocks rose 301,000 barrels to 21.975 million barrels. Old crop corn export sales slumped in this week’s report to 440,700 MT, with new crop at 232,100 MT.

Wheat futures were the healthiest of the grains from a technical standpoint and had solid gains of 3 to 4.6% for the week. Monday afternoon’s NASS Crop Progress report showed a little bit of a slowdown in the winter wheat harvest in the week that ended last Sunday, at 51% complete. Final condition ratings were steady at 297 on the Brugler500 index. The spring wheat crop was 58% headed, vs. the average at 48%. Conditions were also steady at 77% gd/ex and 384 on the Brugler500. The IGC cut estimated world total supply by 5.5 MMT to 736.8 MMT. USDA reported weekly export sales of 440,100 MT for the week ending June 28, neutral vs. expectations.

Soybean futures posted 9 ½ year lows this week, but thanks to the “sell the rumor, buy the fact” rally on Friday they closed 15 ½ cents higher on the week after a 36 cent decline the previous week. They were up 38 ½ cents on Friday after the Chinese tariffs were implemented. Nearby soy meal was up $7/ton this week, erasing a $6.30/ton loss from the previous week. Monday's Crop Progress report showed condition ratings down 2 points for a Brugler500 index of 380. Weekly export sales of soybeans for 17/18 totaled a strong 561,600 MT, with new crop at 458,700 MT. Several Chinese cancellations or destination switches were noted as they pared back commitments ahead of the 25% tariff implementation on July 6. The weekly CFTC report is delayed until Monday due to the July 4 holiday.

Cotton futures were up 1.17% for the week despite the implementation of Chinese tariffs on imported cotton lint. NASS data shows that 42% of the US cotton crop was squared as of Sunday, with the average at 40%. The report showed 12% setting bolls, leading the normal pace of 9%. Cotton conditions showed an improvement on good/ex ratings to 43%, but higher poor/vp ratings pushed the Brugler500 index 9 points lower to 320. The weekly Export Sales report showed old crop sales of 18,000 RB. New crop sales were shown at 268,200 RB of upland. The weekly AWP was updated to 74.59 cents/lb, down 1.07 from the previous week.

Live cattle futures lost 35 cents on the week in nearby August.  Feeder cattle saw a 0.58% gain in the August contract this week, ignoring the late week rise in feed costs. Cash trade started around $108 earlier this week, but most moved at $113-114 on Friday. That was up handsomely from the $108-110 reported last week. Wholesale beef prices were mixed this week, with the Ch/Se spread narrowing another $4.07 to $9.32. Choice boxes were down $3.93 per cwt (-1.9%), while Select was $0.14 higher for a .1% gain. Weekly beef production was down 12.7% from the previous week due to the holiday, but up 1.5% from year ago. US beef production YTD is up 3.4%.  

Lean hog futures lost 1.8% or $1.50 per cwt on the week in nearby July. The 3-4% expansion rate shown in the USDA Hogs & Pigs report weighed on values. The CME Lean Hog index has slipped a little seasonally. It was down $2.08 on the week to $82.24. Pork production YTD has been 3.6% larger than in 2017. Production this week was down 11.5% from last week, but 6.7% larger than the same holiday week in 2017. Weekly slaughter was up 5.9% vs. year ago. The pork carcass cutout value was down $1.86 this week, a 2.13% drop.  

Market Watch

Per usual, the USDA Export Inspections report will be out on Monday morning, and the Crop Progress report will be out that afternoon. July cotton futures expire on Monday. The weekly EIA ethanol production/stocks report will be out on Wednesday. Thursday will feature the weekly Export Sales report at 7:30 a.m. CDT, but also the USDA July Crop Production and WASDE Supply/Demand reports. The July grain futures contracts expire on Friday.

Brugler Marketing Summer Seminars - Save the Dates

The dates have been set for the Brugler Marketing Summer Seminars.  Our eastern seminar will be in Dayton, Ohio on Monday and Tuesday July 30-31.  The western seminar will be held in Des Moines, IA on Thursday and Friday August 2-3.  These seminars are open to the public, and will give you detailed looks at corn, soybeans, wheat, cattle and hog markets, along with the trade war situation, media relations for ag producers and our macro economic views on the S&P, gold, diesel fuel and interest rates. It’s one stop shopping for valuable market intelligence. See the agendas and registration information at www.bruglermarketing.com/dayton and www.bruglermarketing.com/DM.

Visit our Brugler web site at  or call 402-289-2330 for more information on our consulting and advisory services for farm family enterprises and agribusinesses. Sound analysis and advice makes a difference!

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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