Market Watch

Fourth and Four

Market Watch with Alan Brugler

Nov 23, 2018

Fourth and Four

Perhaps I’m under the influence of too many Thanksgiving football games (not to mention a couple big college contests this weekend), but I see some analogies to the commodity markets and football games. You have Bulls vs. Bears every day. There are rules, and there are referees from the CFTC. Your star quarterbacks are the trading advisors and some spec fund heavy weights. The commercials are the offensive and defensive lineman.  Without them you can’t get the market to move much. You spend a lot of time studying film (technical analysis) and scouting (fundamental analysis, satellite weather, etc).  You get some bad calls (fake news) and some Hail Mary plays thrown in desperation.  Unlike equity markets with their infinite periods, commodities contracts are on the clock and time runs out. Options expire and producers need cash flow. You get some foreign stars from Argentina and Brazil to do the kicking.  I’ll let your imagination fill in the rest!  That fourth and four?  It’s usually a bad bet to convert, but it depends on the quality of your kicking game, how many points behind you are, and field position.  And just like in football, somebody like your spouse or banker is going to chastise you if that marketing play fails to convert.  If you sell at the high of the month or the quarter, that fourth down turns into a game winning TD and you get a celebratory shower.   Stay in the game!

Corn futures dropped 1.58% (5 3/4 cents) in front month Dec on the week. The Friday Export Sales report tallied 18/19 corn sales near the top end of expectations at 877,424 MT for the week ending 11/15. Export commitments for 18/19 are now 39% of the USDA projection, compared to the normal 43% pace. Monday’s Crop Progress report indicated that 90% of the US corn harvest was complete as of Sunday, still lagging the 93% average. The weekly EIA report on Wednesday showed production in the week ending 11/16 at 1.042 million barrels per day, down 25,000 bdp from last week. Stocks were drawn down 723,000 barrels to 22.791 million. A couple different Brazilian consultants estimated 18/19 Brazil corn production at 94.9 and 95.3 MMT, vs. the USDA projection of 94.5 MMT.

Wheat futures posted a sharp 4.45% loss in nearby KC this week, with CBT down 1.38%, widening the spread. MPLS, on the other hand, was up 0.53% since last Friday. The weekly Crop Progress report showed winter wheat planting progress at 93% complete vs. the 5-year average of 97%, with 81% listed as emerged. This week’s delayed Export Sales report from USDA showed all wheat sales for the week that ended 11/15 at 330,394 MT. Shipments were reported at a MY high 503,848 MT in that week. Export commitments are now 52% of the USDA full year projection vs. the normal pace of 72%. Egypt’s GASC purchased 240,000 MT of wheat in a tender this week, with 120,000 MT of that from the US and the balance split between Russia and Romania.

Soybean futures fell 1.26% in nearby Jan this week. Soybean meal gave back most of last week’s gains, down 1.64%, with soy oil up 1.02% on the week. Friday’s weekly Export Sales report showed soybean sales at a 7-week high 680,528 MT for the week that ended on 11/15. That was 14.9% below last year, as export commitments are now just 44% of the USDA projection, vs. the normal 68% pace. The US soybean harvest was reported at just 91% complete as of last Sunday, vs. the 96% average. AgRural estimates Brazil’s soybeans are now 89% planted, with the normal pace running 78%. Brazil’s 18/19 soybean crop is estimated at 122.2 MMT by SAFRAS & Mercado, with Agroconsult showing a wide range of 123-129 MMT.

	Commodity				Weekly	Weekly
Mon		11/09/18	11/16/18	11/23/18	Change	% Chg
Dec	Corn	$3.6975	$3.6475	$3.5900	($0.058)	-1.58%
Dec	CBOT Wheat	$5.0200	$5.0675	$4.9975	($0.070)	-1.38%
Dec	KCBT Wheat	$4.88	$4.83	$4.61	($0.215)	-4.45%
Dec	MGEX Wheat	$5.733	$5.713	$5.743	$0.030	0.53%
Jan	Soybeans	$8.87	$8.92	$8.81	($0.112)	-1.26%
Dec	Soy Meal	$305.60	$310.90	$305.80	($5.100)	-1.64%
Dec	Soybean Oil	$27.62	$27.37	$27.65	$0.280	1.02%
Dec	Live Cattle	$114.58	$115.35	$117.10	$1.750	1.52%
Jan	Feeder Cattle	$143.80	$146.53	$149.38	$2.850	1.95%
Dec	Lean Hogs	$55.80	$60.08	$59.08	($1.000)	-1.66%
Dec	Cotton	$78.09	$76.12	$74.92	($1.200)	-1.58%
Dec	Oats	$2.8500	$2.9825	$2.8650	($0.118)	-3.94%

Cotton futures dropped were up 1.58% this week in nearby Dec. Another week of a stronger dollar and lower crude oil played roles. The continuous front month chart found the lowest price since December 2017. Monday’s Crop Progress report indicated the US cotton crop was 59% complete as of last Sunday, lagging the 69% average. The weekly Export Sales report showed 18/19 upland sales at a MY high 210,464 RB for the week that ended on Nov 15. Upland cotton export commitments are now just 1.6% above a year ago, slipping a bit on the slower sales compared to 2017. They are 63% of the USDA export projection vs. the 56% average pace. Friday’s Cotton on Call report showed the mills unfixed call sales position at 7,174 contracts for December, down 6,951 from last week. Unfixed on call purchases for Dec were at 9,801 on 11/16.

Live cattle futures ended the week with Dec 1.52% higher than last Friday. Cash trade was mostly reported around $116-117 for this week on Wednesday. Feeder cattle futures were up another 1.95% on the week. The CME feeder cattle index was reported at $147.83 on 11/22, up $1.44 for the week.  Wholesale beef prices were higher this week, with the Ch/Se spread UNCH at $15.34. Choice boxes were 94 cents (0.4%) higher, with Select up the same for a 0.5% gain. Weekly beef production was down 10.8% from the previous week due to the Holiday and 2.5% lower than the same week a year ago. US beef production YTD is up 2.6% over last year on 2.4% more slaughter. The monthly Cold Storage report showed October 31 frozen beef stocks at 515.369 million pounds, up 1.62% from September and 1.64% larger than last year. Wednesday’s Cattle on Feed report showed 11.692 million head on feed as of Nov 1, up 3.18% from 2017. October placements were seen at 2.248 million head, down 6.06% from last year, with marketings up 4.78% at 1.887 million head.

Lean hog futures saw a 1.66% loss this week, following sharp gains last week. The CME Lean Hog index was at $58.02 on Friday, down $1.84 for the week. The pork carcass cutout value was down $1.25 or 1.8% during the past week. The belly took the largest hit, down 9.7% or $11.25. Pork production this week was down 13% from last week with the day off on Thursday but 5.0% larger than the same week a year ago. Production YTD has been 2.8% larger than in 2017. NASS indicated that 570.554 million pounds of pork was in cold storage at the end of October. That was down 3.2% from September and 4.65% lower than last year. Belly stocks were reported at 26.682 million pounds, down 17.31% from a year ago.

Market Watch

The final week of November will get back to a pretty normal weekly schedule. We will see the delayed CFTC commitment of Traders report on Monday, showing nearly week-old data. The Export Inspections report will be released on Monday morning, with the final Crop Progress report of the year out that afternoon. Wednesday will show the weekly EIA ethanol production and stocks report. The weekly Export Sales will be out on Thursday morning per normal. Monday is FND for Dec cotton future deliveries, with Friday FND for Dec corn, and the three wheat complexes.  

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