General Comments:
The data this week was ugly and the volatility continues. Applications for home purchase mortgages fell to a new 13year low. Jobless claims just climbed back above 400,000 and consumer confidence is down to levels not seen since the end of Jimmy Carter’s administration. It is reasonable to expect the next round of reports coming this week to be less than rosy. In the next five days we’ll see the New Home Sales report and the FHFA Housing Price Index, initial and continuing jobless claims and durable goods orders.
Europe’s leaders continue resisting the debt disaster tooth and nail. Pressure is mounting on Germany and France to take radical action on the euro zone debt crisis. Bad news from Europe could slam our stock market at any moment.
Producers and users need to stay covered with hedges.
I remember in 1987 when the stock market broke that it affected every other market. Large losses in the world’s various stock markets and margin calls can make even the most bullish commodity position get liquidated.
Corn :
Futures closed 9 ¼ cents higher for the week. Managed funds added 25,137 contracts to their net long positions. Japan bought 140,000 metric tonnes according to private exporters. Cash markets remained steady.
Cattle:
Cattle and calves on feed totaled 10.6 million head on August 1, 2011 up 8% over a year ago. Placements in feedlots during July totaled 2.15 million head, up 22% over 2010. Marketing of fed cattle during July totaled 1.91 million head, slightly higher than a year ago.
At first glance a very negative report. The large increase in placements came because of the severe drought in the southern plains with the largest percentage of those placements weighing less than 600 lbs. The second largest weight category of placements between 600 -700 lbs. Most of the cattle from those two weight categories won’t finish out until April next year. Combine that with marketing being a little higher than a year ago, red meat exports on track to set a record this year, a large liquidation of beef cows in the southern plains and I think the cattle market remains bullish on the front end.
Still havenâ’t entertained a short play on the bonds. Yield curve remains flat. The economy continues to look so bad that any more bad data will probably cause more flight to “safety”. I will continue to stand aside in this market.
US Dollar:
The dollar finished the week lower by .63%. As I mentioned above in the General Comments the economic data kept the equity markets roiling. Everyone is awaiting the coming reports and comments from Ben Bernanke at the Economic Policy Symposium in Jackson Hole. If the summit results in no new policy actions to help investor confidence then the dollar should strengthen with more deleveraging by traders anticipating recession. Will 73.50 in the ICE dollar index hold?
Questions? Ask Tim Hughes today at 602-859-4100
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