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Alan Brugler

A CNBC commentator suggested this week that the sell off in the Chinese stock market (before this week’s bounce) was as big in dollar terms as the 1987 stock market collapse in the US. The latter rang alarm bells about the US economy.  However, traders brushed the Chinese slide off with a “been there, done that” or “it’ll never last” type of mentality. They appeared to be getting used to big swings in prices. We’re seeing something similar in the ag markets, with 3-5% weekly swings the exception back in 2015-2019, but now happening with some frequency. We don’t see the panic or the euphoria that we were seeing on big move days.  Please consider, however, that being used to the swings is not the same as being immune to the swings. There are significant gross income effects on farm operations with these swings. It is also not a big stretch from “used to” to “complacent”. Complacency often leads to inaction during the initial phases of a market pull back from a high, missed opportunity. We’re not calling tops here, but as you watch these price swings be sure to have some mental triggers in place for action.  Check your Price & Probability Forecasts ©  and Techno-Fundamental © tools.

May Corn futures sank 2.7% this week, shedding some of the inverse based on rising Brazilian corn production estimates. Agroconsult is projecting second crop Brazilian production of a record 92.2 MMT, vs. the 86 MMT being used by CONAB. The weekly Export Sales report showed another round of  excellent corn bookings in the week ending March 10. They were not as good as the MY high previous, but were the third largest so far this year at 1.836 million metric tonnes. New crop sales totaled just 204,000 MT. US old crop corn export commitments (shipped plus outstanding sales) are now at 52.039 MMT, now just 14% below last year at this time. They are 82% of the full year WASDE forecast, still ahead of the average pace of 81%. Accumulated exports are 45% of the updated WASDE full year projection. Matching the average pace. The weekly Commitment of Traders report showed managed money spec funds were net long 372,909 contracts as of 3/15. That was up 4,125 contracts week/week.

Wheat futures sold off again this week in CHI and KC futures but settled 0.8% higher in Minneapolis. Chicago was down 8.5% the previous week but slowed to -3.9% this week.   KC HRW was down 10.3% two weeks ago and 1.7% this week. Weekly Export Sales data indicated just 145,900 MT in sales during the week of 3/10. That was down 53% from the previous week. New crop sales were better, at 325,600 MT. Old crop export commitments are now 18.993 MMT, or 87% of USDA’s full year forecast, still lagging the average pace by 10%. Shipments to date are still 21% smaller than a year ago, at 14.969 MMT. That is 68% of the USDA projection vs the average of 74% by now. There are less than 3 months until the end of the MY! Friday’s CFTC Commitment of Traders report showed spec funds in CBT wheat futures and options net long 22,945 contracts as of March 15, adding 2,737 contracts to their net long during the week despite extreme duress. In KC wheat, they cut 470 contracts from their net long position in the week ending Tuesday, taking it to 44,236 contracts. 

Soybeans lost 8 cents per bushel this week, or 0.5%.  Soybean meal was close to UNCH, losing only 10 cents per ton, but soy oil dropped 4.9% under pressure from palm oil. SDA’s weekly Export Sales report showed another strong set of data for this late in the MT at 1.253 MMT of old crop soybeans booked during the week of 3/10. There was also 477,000 MT for new crop sales. US soybean exporters have either sold or shipped 53.624 MMT of the 21/22 crop, now only 11% smaller than last year’s record buying pace. However, total export commitments are 94% of the USDA full year estimate, outpacing the 90% average for this date. Shipments are 74% of that projection, even with the average, suggesting the shipments may be for later in the MY. CFTC’s weekly Commitment of Traders report indicated spec traders in soybean futures and options trimming 1,204 contracts from their net long in a week. That took the net position to long 170,690 contracts.

Live cattle futures were up 2.3% this week, with April futures going back to a premium vs. the cash market. Cash cattle was mostly $138, steady with week ago. Northern dressed trade was quoted $1-2 higher at $221-222. Feeder cattle futures were up 2.4%, lifted by both the higher cattle market and the drop in old crop corn. The CME Feeder Cattle Index was $154.85, up $2.29 from the prior week. Wholesale beef prices were higher this week. Choice boxes were up $3.45 (+1.41%) per 100 pounds, with Select $1.54/cwt higher (+0.6%). The Choice/Select spread hasn’t been above $10 since January but did widen to $7.51 this week. Weekly beef production was UNCH for the week but 3.5% larger vs. the same week last year. YTD beef production is now up 0.2% vs. a year ago. Weekly Export Sales for beef slowed 28% to 19,700 MT for the week ending 3/10. Friday’s Commitment of Traders data indicated managed money spec funds were re-entering long cattle positions. They added 1,593 contract to their net long position in the week that ended on March 15. That took the net long to 40,144 contracts by Tuesday. 

Lean hogs gave back 3.2% from Friday to Friday and are now below where they were two week ago. The CME Lean Hog index was up another $0.86 this week to $100.77. The pork carcass cutout value was up $2.40 (2.3%) this week to $104.95. Only the rib and ham primals were down on the week. Weekly pork production was down 1.8% from last week but 3.4% below the same week in 2021. YTD that number is down 7.2% vs last year on 7.1% fewer hogs slaughtered. Weekly Export Sales data showed 38,300 MT of pork sold for the week ending 3/10, a 51% bounce. Friday’s Commitment of Traders report showed spec funds in lean hogs trimming back their net long position by 2,674 contracts during the week that ended on March 15. That took their net long down to 63,345 contracts by Tuesday.

Cotton futures were sharply higher again this week, up 5.8 cents per pound after a 4.6 cents per pound gain the previous week. USDA tallied export sales of cotton in the week ending 3/10 at 371,400 RB for old crop and 49,000 RB for new crop. Outstanding cotton sales are 45% larger than year ago at 7.806 million bales. Adding shipments takes commitments to just 4% under 2020/21 at 13.656 million RB. That is 98% of the USDA export projection, 4% above the average pace for this week. USDA’s FSA raised the AWP for cotton by 155 points to 113.26 cents. That is in effect through next Thursday. The Commitment of Traders report shows managed money spec funds in cotton net long 67,127 contracts as of March 15. They trimmed 3,079 contracts from the net long vs. the previous week.

Market Watch

Next week has a typical start with the weekly Export Inspections report released on Monday morning. Skip ahead to Wednesday EIA will publish their weekly ethanol production and stocks report. We will also get the Cold Storage report on Wednesday afternoon. The USDA weekly Export Sales data will be released on Thursday morning. On Friday, Cattle traders will be blessed with the monthly Cattle on Feed report from NASS. It is also the last day for April serial options in the grains.

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: December Corn

December corn futures posted a life of contract high on Monday, at $6.58, but ended the day with a harami candlestick formation. That was followed by a doji/hanging man on Tuesday, and a nasty sell off on Wednesday because of the first two. However, prices simply dropped from the upper Bollinger Band to the mid-line 18-day moving average, finding buyers there to end the week. The BB midline support will be $6.295 to start the week. Stochastics have a sell signal, but per typical trending market behavior haven’t been able to reach oversold status since last September! Overhead resistance is the contract high at $6.58, followed by the upper Bollinger Band at $6.70.  MACD (not shown) has turned bearish on this chart, but has a duck formation. Our mnemonic there is “Don’t trust the duck”.

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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