Two Different Perspectives |

Two Different Perspectives

Aug 04, 2017


Market Watch with Alan Brugler

August 4, 2017

Two Different Perspectives

If you were hedged up in grains as a producer, or unhedged in livestock, this was a pretty good week for you.  Corn was down 2% and both wheat and soybeans were in the -5% bracket for the week. Grain producers who only use cash market tools or were standing aside took a beating as the weather moderated and the charts broke down. Any first of the month fund money allocations appeared to be on the sell side of grains, or at least allocating away from them. For livestock it was the best of both worlds, with feed costs declining and futures rising to create better hedging opportunities. That said, cash hogs were declining all week and cash cattle were a steady affair at best. The Board had just been a little too pessimistic about both.

Corn futures were down 2.1% this week. USDA crop condition ratings went against most expectations, as the USDA reported corn ratings of 61% good/excellent for the week of July 30, down 1%. The Brugler500 index was down 2 points to 357, which is down 8 points from the initial report and 32 points lower than last year. That didn’t matter, as traders were focused on cooler temps and wetter forecasts for mid-August, as well as weak export sales.  Total export commitments are now 14.94% ahead of last year, but losing their lead. Compared to the USDA projection, they are now 100%, vs. the average of 104% for this date. The average trade guess (Bloomberg) for new crop ending stocks next week is 1.94 billion bushels, down from 2.325 billion in July. The Friday afternoon Commitment of Traders report confirmed that the managed money spec funds were exiting longs. Their net long shrank 22,171 contracts in the week ending August 1, taking it to 84,644.

Wheat futures were down hard this week.  Chicago SRW lost 5.5%, with KC HRW down 4.5% and bull leader losing 3.3%.  Crop condition ratings continued to deteriorate in the MPLS spring wheat to a Brugler500 index of 271 and down another 6 points from the previous week. That is now old news, however, and end users are finding solutions. The Bloomberg survey anticipates All Wheat production of 1.720 billion bushels from USDA on Thursday, down 40 million from last month. Informa estimates that total 2017 wheat production will be 1.69 bbu. This week’s Commitment of Traders report showed the reportable spec traders…

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