Market Watch

Fireworks

 

Market Watch with Alan Brugler and Austin Schroeder

June 30, 2017

Firecracker

Just ahead of next week’s 4^th of July Holiday, it seems that somebody has lit the fuse for the spring wheat contracts. Watching the markets this week was almost as enjoyable as watching a barrage of fireworks during the most American celebration of them all! Corn, soybeans, and hogs were the show, with KC and CBT wheat the lead up to the finale, and of course, MPLS wheat the Grand Finale. Cattle seemed to be the dud that everyone is disappointed by, and just so happens to be made in China (not to be taken literally, we love that they are back in the market!). Going into next week, it will be interesting to see if this week was the prelude to an even bigger finale, or if spring wheat has lit its last fuse.

Corn futures gained 3.56% for the week, to get back some of the losses from a week ago. Rain showers moved across most of the Corn Belt this week, ahead of warmer weather expected next week. The corn condition rating was 369 for the Brugler500 index as of June 25, with 4% of the crop silking as of last Sunday. Most of the ECB conditions were better over last week, with the Northern Plains seemingly worse. On Friday, the Planting Acreage showed 90.886 million acres of corn for 2017 US production. That is 0.99% larger than the March intentions report but 3.32% below last year’s final acreage number. The Quarterly Grain Stocks report estimated June 1 corn stocks at 5.225 billion bushels, above expectations and 10.91% larger than last June. Third quarter disappearance was record large. Total corn export commitments (to June 22) were 18.3% above last year at this point. That lead has been shrinking. They are 98% of the USDA projected export total lagging the average of 100%. They have been at 98% for the last 3 weeks. The Commitment of Traders report had managed money adding another 52,294 to their net short in corn futures and options, for a net position of -106,119 contracts on June 27.

Spring Wheat futures led the way this week, as the July contract was 16.11% higher than last week. KC and CBT were 10.12% and 11.15% higher respectively, as the KC-MPLS September spread jumped to $2.42 ¼. Spring wheat conditions continued to deteriorate over last week and were reported at 40% good/excellent, with at Brugler500 rating of 309 points. The Brugler500 index for winter wheat crop conditions gained just 2 points to 338, as g/e ratings were unchanged.  HRW was even, with SRW down by 1. Nationally, the winter wheat crop was 41% harvested as of last Sunday, as it is going full swing. The average pace is 39%. The NASS division of the USDA reported 45.657 million acres for all wheat acreage on Friday, below expectations and 0.87% smaller than the intentions report. Winter wheat acreage was up slightly compared to March at 32.747 million acres. Closely watched spring wheat was 10.899 million acres, 3.62% lower than March intentions. June 1 stocks of 1.184 bbu were announced, 21.31% larger than last year and higher than expectations. This will be the ending stocks number in the July WASDE report. US wheat export sales commitments are running 5% above last year. The weekly CFTC report showed spec funds backing off their net short position by 10,813 contracts, to -10,158 contracts for Chicago wheat futures and options on June 27. That group was likely net long by Friday night. KC wheat futures and options showed managed money at their largest net long position since April 2014 at 44,240 contracts. For the fourth week in a row, Minneapolis had no reported spec fund shorts.

Soybean futures took back last week’s losses, and finished with weekly gains of 4.17%. Meal saw most of the weekly gain on Friday, with July up 3.68% for the week. The USDA Crop Progress report showed 94% of the soybeans were emerged, running ahead of the 91% average for the week. Condition ratings dropped 1% over last week to 66% g/e. The Brugler500 index was 2 points lower at 366. The USDA projected 2017 US soybean acreage was lower than some expectations at 89.513 million acres, a slight increase from March intentions and 7.29% above last year. NASS showed June 1 soybean stocks at 963 million bushels, lower than analysts’ expectations but up 10.44% from June 2016. Export commitments for 2016/17 soybeans are 106% of the USDA full year export estimate, well above the average of 101% for this date and last year’s 100%. Spec traders in soybean futures and options reported a record net short CFTC position on June 27 of 118,683 contracts, after adding 31,543 shorts to that position during that week. The tender young bears were feeling the heat on Friday!

 

	Commodity				Weekly	Weekly
Mon		06/16/17	06/23/17	06/30/17	Change	% Chg
Jul	Corn	3.84	3.5775	3.705	$0.128	3.56%
Jul	CBOT Wheat	4.6525	4.5975	5.11	$0.513	11.15%
Jul	KCBT Wheat	4.735	4.6425	5.1125	$0.470	10.12%
Jul	MGEX Wheat	6.4275	6.6125	7.6775	$1.065	16.11%
Jul	Soybeans	9.39	9.045	9.4225	$0.378	4.17%
Jul	Soy Meal	300.9	293.6	304.4	$10.800	3.68%
Jul	Soybean Oil	33.11	31.61	32.93	$1.320	4.18%
Jun	Live Cattle	121.7	119.2	119.1	($0.100)	-0.08%
Aug	Feeder Cattle	147.88	144.95	147.93	$2.975	2.05%
Jul	Lean Hogs	82.325	85.3	90.625	$5.325	6.24%
Jul	Cotton	71.88	72.65	75.31	$2.660	3.66%
Jul	Oats	2.6925	2.545	2.9	$0.355	13.95%

 

Cotton futures posted gains of 3.66% over the course of the week.  US crop condition ratings declined for the second week in a row, this time by 7 points on the Brugler500 index. Ratings for g/e are now at 57%, down 4% from last week. The 2017 cotton acreage was projected at 12.055 million acres in this morning’s Planting Acreage report, 19.653% larger than last year. That is down 1.455% from the March intentions report and lower than expectations. Export sales exploded for the week of June 22, with total commitments 65.9% larger than last year. USDA has of course increased projected shipments, so commitments reflect 107% of the full year forecast vs. the 5 year average of 105% for this date.  The Commitment of Traders report indicated that the spec funds trimmed their net long position for the sixth week in a row to 31,410 contracts in cotton futures and options.

Live cattle futures were the only ag commodity to lose ground since last week, as the June contract expired at $119.10. Feeder cattle futures avenged last week’s losses and were up 2.05% for the week. Wholesale beef prices were sharply lower again this week. Choice boxed beef dropped $15.02 for the week (6.3%), with Select down $8.30/cwt from the previous Friday. Friday’s Ch/Se spread was down to $16.39 vs. $23.03 the previous week. Cash cattle trade was around $119 for a majority of the week as cash and June futures converged on Friday. Weekly beef production was up 1.5% from last week, and up 3.5% from the same week in 2016. Year to date production is up 3.9% on 5.8% more slaughter. Friday’s Commitments of Traders report showed managed money at their lowest reported net long position since April 11 at 125,185 contracts in live cattle futures and options. That was down 6,528 contracts from the previous week.

Lean hog futures saw sharp gains of 6.24% on the week, as they work toward their seasonal peak. The CME Lean Hog index rose to $91.66 on Friday, a jump of $2.36/cwt for the week. Weekly pork production was up 2.0% from last week, and 2.8% larger than the same week in 2016. Pork production YTD is 2.3% larger than last year. Weekly slaughter @ 2.192 million head was 2.2% larger than the same week in 2016. The USDA pork carcass value was up $1.77 or 1.75% this week, going home at $102.92 per hundredweight. Bellies were the driver again, as the rib was holding all other cuts back, down 8.06%. The Hogs & Pigs report, released on Thursday, showed June 1 inventory at 71.65 million head, slightly ahead of expectations. Hogs kept for breeding were at 6.069 million head, with kept for marketing hogs at 65.581 million head. Both were close to expectations and August was limit up the day after the report. CFTC showed the spec fund longs adding 870 contracts to their net long position of 67,305 contracts in lean hogs futures and options as of June 27.

Market Watch

The Schedule for next week will be off from the norm. Futures will trade on Sunday night and Monday (July 3) but will close at 12:05 CST and stay dark for the July 4^th holiday. Some will likely make it a 4 or even 5 day holiday.  The USDA Export Inspections report will be out on Monday, per normal, but that’s about it. Due to the Fourth of July holiday, the Crop Progress report will be out Wednesday, as will the USDA Grain Crushing and Fats and Oilseed reports. The weekly EIA report will be delayed until Thursday. The US trade data for May will also be released on Thursday. The USDA Export Sales report will be postponed until Friday.  The 7^th will mark expiration for the July cotton contract.

Visit our Brugler web site at http://www.bruglermarketing.com 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. Past performance is not necessarily indicative of future results. 

Copyright 2017 Brugler Marketing & Management, LLC