About The Author

Alan Brugler

Decades ago, we had related rates algebra story problems.  You know the type.  Bus A is leaving Omaha and traveling east at 75 mph and Bus B is leaving downtown Chicago at the same time, traveling west at 65 mph. Where will they meet? I hated these problems because I could always think of other variables that should be included.  How long were the rest stops?  Was there road construction (always the case in the summertime!)? If somebody tested positive for COVID would Bus B have to return to Chicago?

Our grain markets are involved in solving a similar problem right now. Where is the harvest low?  Yield estimates are moving constantly.  Export sales are under performing, but South America has to run out sometime soon. Basis is taking a hit because of Gulf elevator closures caused by Hurricane Ida. Southern producers are likely to still be loading barges well after they would normally be off the river and making room for the Upper Miss. These busses keep changing speeds!

Corn futures posted a nice little bounce from last week’s losses, with December up 9 ¾ cents or 1.88%. On Monday, USDA tallied the US corn crop at 37% mature (31% average) and 4% harvested (5% average), as of 8/29. Crop condition ratings slipped 1% to 58% gd/ex, which took the Brugler500 index to 352 vs. the previous week to 355. Weekly EIA data shows ethanol production increased to a 4 week high of 937,000 barrels per day. That’s about 94 million bushels of weekly corn use at current US average yield. Weekly corn export sales were poor at only 246,600 MT.  Most of the New Orleans export elevators are either down for repair or awaiting power. A few have resumed barge handling. Outstanding sales are still 20% larger than year ago, due primarily to China’s 3 week buying spree back in the spring. Commitment of Traders data indicated that the managed money spec funds had trimmed just 2,943 contracts from their net long in corn futures and options during the week ending September 14. That took them to a net long 212,229 contracts by Tuesday.

Wheat futures led the charge for the grains on the week, all up double digits. Chicago SRW wheat futures were up 20 ¼ cents, with MGE HRS 21 ¾ cents higher and KC HRW up 30 ½ cents. The winter wheat crop was 12 planted as of 9/12 according to Crop Progress data, 4% faster than the 5-year average. USDA’s Export Sales report showed the largest bookings for the marketing year, at 617,100 MT. Total commitments for wheat exports are now 10.547 MMT. That is 44% of the USDA forecast vs. the 50% average pace for this date. Friday’s CFTC Commitment of Traders report showed money managers in CBT wheat flipped their net position from long to short by 11,172 contracts for the week ending 9/14. That took them to net short 6,005 contracts. In KC HRW, they trimmed 3,589 contracts from their net long for the week, to 37,646 contracts.

Soybean closed the week in the red by just 2 ½ cents thanks to Friday weakness. Soy oil was up 0.91%, with soy meal 0.29% lower. NASS Crop Progress data showed 38% of the crop dropping leaves, 9% above the average pace. Condition ratings as of September 12 were unch at 57% gd/ex, but up 1 point on the Brugler500 index to 351. Weekly soybean export sales through September 9 totaled 1.264 MMT. China took more than 945,000 MT of that total. Total export commitments are down 31% vs. year ago. Outstanding sales lag by 8.05 MMT (296 million bushels!). CFTC Commitment of Traders data showed spec traders slicing another 2,136 contracts from their soybean net long positions for the week ending 9/14. They took that position down to 55,380 contracts as of Tuesday, the lowest point since last August.

Live cattle futures saw a weekly drop of 62.5 cents since last Friday. Cash cattle trade this week was steady, with the North trade at $126 and the South in the $122-124 range. Feeder futures posted a 62.5 cent bounce on the week. The CME feeder cattle index is $154.60, down $3.14 from the previous week. Wholesale beef prices continued to decline. Choice boxes were down $12.75 (-3.9%), with Select down $13.62/cwt (-4.6%). Choice is down 10% from the August 23rd peak. Weekly beef production was up 14.6% vs. the Labor Day week, and 0.2% lower than last year. YTD beef production is now 3.4% above year ago on 3.7% increased slaughter. The fire at JBS in Grand Island (NE) cost 1 day of capacity but is expected to be made up. Estimated weekly slaughter including Saturday is 660,000 head vs. 648,000 a year ago. Weekly beef export sales improved 23% from the previous week at 15,300 MT.  The big buyers were Japan, South Korea and China. The Commitment of Traders report indicated managed money spec funds cut a huge 21,550 contracts from their net long during the week ending 9/14. That took them to a net 46,043 futures and options contracts as of Tuesday night.

Lean hog futures held some nice gains on the week with October up $3.27 since last Friday’s close. The CME Lean Hog index was down $6.87 for the week @$94.45. The pork carcass cutout value was up 31 cents for the week, a 0.3% gain. The belly and ham primals were down hard the previous week, but up this week. Weekly pork production was up 13.1% from the Labor Day  week, and 3.3% lower vs. the same but COVID distorted week in 2020. Pork production is now 1.8% smaller YTD vs. last year, with 1.8% fewer hogs harvested. Weekly pork export sales for the week ending 9/9 were down 25% from the previous week at 25,300 MT. Shipments to China continue to slow, with 3,700 MT leaving during that week. Commitment of Traders data showed managed money removing a big chunk of long positions from their portfolios.  They cut 20,478 contracts from their net long during the week ending 9/14. They were net long 63,921 contracts on that date. The position peaked on August 3 at 89,131 net long.

Cotton futures felt weakness this week, with December down 1.25%. Weekly NASS Crop Progress data has cotton a little behind pace at 36% of the crop with bolls open vs the 43% average and 5% harvested compared to the average pace of 8%. After a sharp drop in the previous week, condition ratings were back up 7 points to 371 on the Brugler500 index or 3% to 64% gd/ex. The weekly Export Sales report indicated upland cotton sales of 284,800 RB in the week ending 9/9, with another 9,600 RB of pima varieties also sold. The weekly Commitment of Traders report indicated the large managed money spec funds were net long 91,917 contracts on September 14, adding 810 contracts on the week. That is their most bullish aggregate position since May 2018.

Market Watch

The final full week of September starts as usual with the weekly Export Inspections report on Monday morning and the Crop Progress report in the afternoon. The FOMC will meet next Tuesday and Wednesday. On Wednesday morning, EIA will issue the weekly update on ethanol production and stocks, with NASS releasing the monthly Cold Storage report that afternoon. Weekly Export Sales data will be released per usual on Thursday morning. Friday will be a busy day for livestock with NASS putting out the monthly Cattle on Feed report and quarterly Hogs and Pigs report that afternoon. First notice day for October Cotton futures is also on Friday.

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 posted a very “neat” bottom on September 10, with a key reversal amid oversold short term oscillators and a “sell the rumor, buy the fact” reaction to the USDA reports. The market was also resting on the 200-day moving average, not shown at $12.61 (now $12.67 ¼). The buy signals got us to the Bollinger midline resistance at $12.95 ¼, and briefly above $13. The round number sellers pushed back and were joined by pre-weekend profit takers on Friday. The US dollar index was up sharply on Thursday and Friday, which also encouraged commodity selling.

So where does that leave us?  The seasonal tendency is down into October. Uptrend support from the July low is $12.64, next door tot hat 200-day moving average. A 38.2% Fib retracement is usually needed to get the winners out after a big move. The retracement for the entire 2020-2021 rally is thus support at $12.30 ¼ and a logical place for a fall low IF we have to head lower. Upside targets would include the 40-day average (red) at $13.21 ¼, and the downtrend line from the contract high at $13.33. The tipping point might well be $13.11. We omitted the declining regression channel for visual clarity, originating it at the key reversal peak on July 19. The upper channel boundary will be $13.11 at the beginning of next week. Any bullish thoughts have to first break out of the channel. Channel support would be $12.40-12.42 if the down trend from that July high continues.

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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