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Alan Brugler

A week ago, the grain and oilseed futures were rolling across the screen at a high rate of speed. The folks at NASS had upped the horsepower by showing smaller than expected corn and soybean acreage for the US, and Brazil was being hit by an early freeze on part of their second crop corn. Then the rains came to the Midwest, in quantity for Iowa and Illinois, and in fits and spurts for the Dakotas. Apparently afraid of sliding into a mud hole and getting stuck, the trade hit the brakes and threw the quote machine into reverse. Corn is back to where it was two weeks ago. Old crop August soybeans lost some traction but are still 73 cents better off than they were two weeks ago. That’s deceptive, as new crop November was down 71 ½ cents from Friday to Friday.

Corn futures were back down 10.56% in September this week. The market giveth and the market taketh away… After a 3-day holiday weekend, the market opened the Tuesday session with weekend rain and precip in the forecast. In the first minute of trade, the 40 cent limit was hit and it took 15 before it was locked there the rest of the day. The Tuesday Crop Progress report did show condition ratings steady at 64% gd/ex, with the Brugler500 index unch to 367. That likely will improve by next Monday’s report. Export sales data showed old crop bookings picking back up slightly with 173,177 MT sold for the week of July 1. New crop sales were just 198,218 MT, though full year forward sales are more than triple what they were last year. A bright spot for the week on use was EIA showing record gasoline demand for the week of 7/2, with ethanol production matching the post-COVID high 1.067 million barrels/day. For Monday, traders look for USDA to tighten old crop ending stocks to 1.07 billion bushels, but to raise new crop to about 1.361 billion because of larger planted acreage and no assumed change to yield this early in the season. Commitment of Traders data release on Friday showed managed money funds trimming their net long in corn futures and options by 26,063 contracts as of 7/6. They were still net long 219,371 contracts on Tuesday. The peak net long for the funds (in April) was 401,993 contracts.

Wheat futures followed suit with the rest of the grain market this week, with Chicago leading the three exchanges, down 5.78%. KC slipped 4.08%, with MPLS holding it together better than the other two, only 2.92% lower. Crop Progress data showed the winter wheat crop was 45% harvested, still 8% behind normal. The spring wheat crop advanced to 69% headed, 7% faster than normal, in part due to the warmer/drier conditions. Condition ratings continue to deteriorate for HRS, down another 4% to 16% gd/ex, or more inclusively 19 points worse to 250 on the Brugler500 index. That is the lowest rating for any week since 1988. Weekly US wheat export sales through July 1 were 290,836 MT, up 28.5% from the previous week, but still 10.82% below that week in 2020. New crop commitments are now 28% of the June WASDE estimate for the marketing year, vs. the 5 year average of 31% for this date. Friday’s CFTC report showed the spec funds in Chicago wheat continuing to flip back and forth between net long and net short. They went back to the short side by a total of 14,391 contracts in the week ending July 6, taking them to a net short 13,617 contracts. In KC HRW, they backed off their net long position by just 1,843 contracts for the week, to net long 20,880 contracts.

Soybeans tagged along for the bearish spin this week, albeit futures came back from Tuesday’s $1.00+ plunge to post a 3.77% loss for the full week. Soy Meal sank 7.2% for the week, with soybean oil 1.8% lower despite also rallying late in the week. Condition ratings as of July 4 were poorer, dropping 4 points for the week on the Brugler500 index. The main reason for the sell off was improving rainfall in the Midwest, expected to stabilize overall crop conditions. USDA’s weekly Export Sales report had 63,308 MT of old crop soybean sales through the week that ended 7/1. For new crop, USDA’s report showed 118,500 MT were booked. Export shipments have reached 94% of the full year USDA forecast. The marketing year ends August 31. Unshipped old crop commitments on the books are down 59% from last year at this time, at 3.41 MMT. The weekly Commitment of Traders report indicated managed money spec funds added 5,923 contracts to their net long position between June 29 and July 6. They were net long 82,180 contracts of futures and options on Tuesday night.

Live cattle futures came out of the week with a 2.3% loss in nearby August. Cash trade had a distinct North/South divide this week. Sales reported by USDA were $118-120 in the South and $125-127 in the North. Feeder futures were up 1.4% on the week, thanks to the drop in corn. The CME feeder cattle index is $152.77, up $6.81 from the previous week. Wholesale beef prices were again down sharply this week. Choice boxes dropped $6.85 (-2.4%), with Select down $7.00 per 100 pounds (-2.6%). Weekly beef production was down 7.3% from last week, due to the holiday. YTD beef production is now 5.3% above year ago on 4.9% larger slaughter. Weekly Beef export sales were a six week high of 23,705 MT, with shipments holding strong at 17,808 MT. Commitment of Traders data showed spec funds trimming their net long in cattle by 2,844 contracts, taking it to 62,881 contracts as of Tuesday.

Lean hog futures were up 1.4% on the week. The CME Lean Hog index was down another $2.00 this week @ $109.77. The pork carcass cutout value was up $0.98 for the week, a 0.9% gain. Hams were the largest contributor, up 16.5% for the week. Weekly pork production was down 16.2% from the previous week. Pork production is now only 0.5% higher YTD vs. last year, with 0.1% more hogs slaughtered. Weekly pork export sales were a six week high at 43,794 MT. China returned as an active buyer, but shipments to that destination were still slow Managed money spec funds exited another 462 contracts (net) out of their CFTC hog net long in the week ending 7/6. They were still net long 67,207 contracts on that date.
Cotton futures closed out the week with a gain of 0.9%. Crop Progress data from Monday showed the US cotton crop at 42% squared, 4% behind normal, with 11% setting bolls vs. the 13% average. Ratings were lower in OK, dropping the overall Brugler500 Index 4 points to 349. Cotton export sales commitments are 106% of the full year WASDE forecast. They would be 112% on average, due to rollovers and deferrals. Export shipments are 8% larger than year ago at this point, but outstanding commitments are 47% smaller. The marketing year ends July 31. Commitment of Traders data released on Friday indicated large managed money spec funds were net long 52,717 contracts on July 6, down 777 for the week.
Market Watch
We begin next week with a slew of information out of the USDA on Monday. As per usual, Export Inspections data will be released in the morning and the Crop Progress report in the afternoon. In addition to both of those, USDA will give the market a look a fresh supply and demand tables at 11:00 am CDT via the WASDE, as well as the Crop Production report. July futures expire for corn, the soybean complex, and wheat on Wednesday, with lean hog July futures and options expiring on Thursday. Outside of that, we will have a somewhat normal schedule with the EIA report back on the schedule for Wednesday. We also have the Export Sales report scheduled for Thursday, as well as a NOPA update.

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

There is a lot going on in this November soybean chart as the smart and not so smart people try to figure out what the stuff should be worth while it is still two months away from harvest. The daily range on June 30 was $1.17, with an 83 cent net gain for the day. After consolidating for two days, we took a 3 day July 4th holiday. It rained a few places. Prices gapped lower on Tuesday, closing 91 ¾ lower. The rest of the week we had inside days and a bearish harami as of Thursday night. So what’s next?

The chart gap is a news gap, and thus overhead resistance at $13.825. It shouldn’t be closed until we have more news. That could be enough increased consumption or decreased yield prospects to offset what the market “added” on Tuesday. The upper Bollinger Band and downtrend line off the high are secondary resistance around $14.05. The 100-day moving average has been good support, it is $13.09 ¾, but likely won’t survive a truly bearish set of USDA numbers on Monday. Stochastics are neutral. You will note that we broke the 2/3 speedline several times in both directions. At this point it is merely a reference but getting decisively below out would bring out long term risk of revisiting the March low at $11.84. Not shown on the chart is $12.30 ¼. That is a 38.2% retracement of the entire rally from May 2020.

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.

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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