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Alan Brugler

Monday is Flag Day in the US, an officially recognized holiday since President Woodrow Wilson made it one in 1916, but not a federal or market holiday. That makes it a minor holiday to some, but triggered thinking about other flags and what they signal.  Flags are visual symbols identifying affiliations from afar, whether a regiment on a Civil War battlefield or a government office. Pirates allegedly had the Jolly Rodger or skull and crossbones flag, signaling that they were bad dudes. High schools often have flag corps for formation drills and half time entertainment. The navy historically had signal flags to message other ships in the vicinity. Market technicians have bull flag and bear flag chart formations, occasionally useful in identifying the size of an upcoming price move. I would argue that our ag markets have been flying the scarcity flags, signaling for more production to be thrown into the gaping mouth of demand. We’re still too far away to identify it, but somewhere out there is the “got enough to get by” flag.

Corn futures gained 1 ¾ cents for the week (July) despite a double digit decline on Friday. December corn was up 19 1/2 cents per bushel for the week. Crop condition ratings dropped for the week, with the Brugler500 Index down to 380 vs. 385 the previous week.  The 10 year average rating for that week is 375. Cumulative export shipments have reached 2.082 billion bushels.  Unshipped old crop sales commitments are both an opportunity and a liability, with more than 16.386 MMT still on the books. Chinese is making excellent progress in reducing their unshipped old crop commitments. On Thursday, USDA increased projected old crop exports by 75 million bushels, and also hiked expected corn use for ethanol by the same, dropping expected ending stocks to 1.107 billion bushels. Expected 2022 ending stocks were also tightened by 150 mbu.  But USDA left production changes alone until after the June 30 reports. Friday’s Commitment of Traders report showed spec funds getting less bullish on corn, trimming 14,337 contracts from their net long in corn futures and options in the week ending 6/8. That put them net long 275,599 contracts, well below the peak position of 401,993 net long held on April 13.

Wheat futures were mixed.  KC HRW eked out a 0.24% gain.  Minneapolis was 11.7% the previous week but lost 5.9% this week as rain of varying intensity swept across the major growing areas. Chicago was down 1%. USDA hiked projected HRW wheat production by 42 million bushels on Thursday and bumped up SRW by 5 million. White wheat was down, with no implied change to spring/durum numbers. They also reversed course on old crop exports, raising them 20 million after cutting the estimate the previous month. New crop ending stocks are seen tightening again in 2022, to 770 million bushels. Spec traders in CBT wheat futures and options cut 4,601 contracts from their CFTC net long position in the week ending 6/8, returning to a net bearish 1,374 contracts. In KC wheat, they added 627 contracts to their net long during the week to bring it to 19,713 contracts.

Soybean futures sank 4.8% this week, more than 75 cents per bushel for the nearby July futures. November futures were up 5 ¼ cents for the week. Index funds were rolling out of July all week. Soy Meal was down 3.3% for the week, with bean oil down 6.1%.  That was THE main reason for the soybean weakness. Palm oil was also down. Soybean planting across the US has moved right along with 90% of the crop in the ground as of last Sunday, vs. 79% average. USDA cut projected old crop soybean crush by 15 mbu on Thursday, increasing projected ending stocks to a slightly more comfortable 135 million.  New crop stocks were raised due to the old crop carryover revision, to 155 million bushels. Weekly Commitment of Traders data showed managed money spec funds in soybean futures and options added 2,695 contracts to their net long position in the week ending June 8. They were still net long 141,483 contracts at that time. Spec funds in soy oil had held their biggest net long position since April 27 on June 1, at 86,084 contracts.  They reduced it by 4,764 contracts in this latest reporting week. 

Live cattle futures managed a gain of $1.875 on the week, with most of it coming on Friday. Cash trade was steady to a dollar firmer this week, with mostly $119-121 reported as well as some $122s in the north on Friday. Feeder futures were up $1.25 for the week, all coming on Friday with its weaker corn and higher cattle. The CME feeder cattle index is $140.23, up $2.73 from the previous week. Wholesale beef prices were down this week. Choice boxes dropped $1.42 (-0.4%), with Select down $6.52 (-2.1%). Weekly beef production was 2% larger than the same week in 2020. YTD beef production is now 6.6% above year ago on 5.7% larger slaughter. Estimated weekly FI slaughter was 665,000 head vs. 538,000 last week (JBS computer outage) and 645,000 a year ago. Census confirmed record US beef exports for the month of April, though down from the all time high in March. Friday’s CFTC Commitment of Traders report showed managed money spec funds adding 2,740 contracts to their net long position in the week ending June 8, boosting it to 52,940 contracts.

Lean hog futures added another $3.17/cwt in the June contract this week (+2.7%) to post a new contract high. The CME Lean Hog index was up $5.86 this week @ $119.91 The pork carcass cutout value dropped 9 cents for the week, a 0.1% loss. Lower prices for the ham and rib primals dragged down the carcass value. Weekly pork production was up 23.3% from the previous week with its JBS hacking disruptions. Pork production is now 2.2% higher YTD vs. last year, with 1.7% more hogs slaughtered.  Weekly pork export shipments were slower. China is taking less as they get their hog herd rebuilt. Census confirmed record US pork export shipments for the month of April, but those were also down from the record set in March. Managed money spec funds in lean hog futures and options increased their net long position by another 1,989 contracts last week, boosting it to 84,621 contracts as of Tuesday. Despite the extended 2020-21 bull market, that is still below the record large spec fund net long of 97,952 contracts held in September 2013.

Cotton futures rose 1.4% this week amid concerns about yield potential and tightening ending stocks projections.   Planting of the US cotton crop has been lagging a little so far in 2021, with USDA reporting 71% of the crop in the ground on June 6 vs. the 78% average for that date. USDA indicated 46% of the crop was in good or excellent condition, similar to the 43% from a year ago. On Thursday, the folks at WASDE increased projected old crop exports and trimmed carryover from 3.3 million bales to 3.15 million. The weekly CFTC Commitment of Traders data showed spec traders in cotton futures and options pared added 2,933 contracts to their net long position during the week ending June 8. They took the net position to 37.945 contracts.

Market Watch

Monday is Flag Day. Cotton traders will begin the week reacting to any surprise positions inherited at options expiration on Friday. The weekly Export Inspections and Crop Progress reports will be in their normal Monday release slots. Monday also marks the expiration of the June hog futures and options. The monthly NOPA crush report is expected on Tuesday. The Fed (FOMC) is meeting Tuesday and Wednesday. EIA ethanol data will be out on Wednesday, with USDA weekly Export Sales data out on Thursday.  Summer officially begins on Saturday the 19th, and Sunday the 20th is Father’s Day.

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.

See Tech Talk on Page 4!

Tech Talk: November Soybeans

November soybeans spike to new life of contract highs on Monday, picking off stops while also attracting new sellers above the upper Bollinger Band resistance. They spent the rest of the week closing the Monday chart gap and consolidating.  Upper Bollinger Band resistance is $14.76, with the 18-day moving average support a fraction below $14. The market has also had only 2 closes below the 40-day average since last August. That is $13.78 ¼. Stochastics lean bearish, wanting to clean up some overbought sentiment. MACD is still bull friendly, with a rising ADX in support until Friday’s sell off.

If bulls can find some more bullets (drought, recovery of soy oil or meal prices, surprise export demand), the Fibonacci expansion count is up there at $15.44 ½. With a more bearish, profit taking tack ahead of the June 30 Grain Stocks and Planted Acreage reports, the lower BB at $13.235 would be a consideration. It will take a break below $13.25 to confirm a double top.

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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