volume 4 number 34 - blimling and...

September 3, 2012 Volume 4 Number 34

September 3, 2012 - 2 - KEY INDICATORS 2

• …are coming into a shortened week that will feature several widely-watched data releases. • Struggling: An Associated Press dispatch reports on slow progress in the labor market… The

U.S. economic recovery hasn't felt much like one even for people who managed to find new jobs after being laid off. Most of them have had to settle for less pay. Only 56% of Americans laid off from January 2009 through December 2011 had found jobs by the start of this year, the Labor Department said Friday. More than half of them took jobs with lower pay. One-third took pay cuts of 20% or more. http://tinyurl.com/AP-Wages

• Food Inflation: The Wall Street Journal looks at how restaurants are planning to cope with higher costs… Restaurant chains are in a pickle, caught between soaring ingredient costs and fears that raising prices will turn off their budget-conscious customers, who generally remain pessimistic about the economy… Some are trying to pass on rising costs to customers to avoid squeezing their profit margins. Others are holding the line on prices or emphasizing their existing low-cost menu items to keep consumers coming through the door. http://tinyurl.com/WSJ-Restaurant-Costs

• A Different Kind of Building Boom: Lego reported soaring sales during the first half, but concern about futures growth, as The Wall Street Journal reports… The company, known around the globe for its colorful plastic bricks, posted an increase in net profit of 36% during the first six months of 2012 and a revenue increase of 24%. The global toy market, meanwhile, fell 4% during the period, the company said. It cited better-than-expected sales to girls, demand for movie-themed play sets and solid growth in Asia.

• Reports this week: ISM, Construction Spending, Auto Sales (Tue); Employment (Fri).

THE MARKETS WE GREET THIS WEEK…

http://tinyurl.com/AP-Wages



http://tinyurl.com/WSJ-Restaurant-Costs






US EQUITIES FINANCIAL

• US equity prices were slightly lower, with the S&P500 closing at 1,406.6, down 0.3%, the Dow Industrials finishing at 13,090.8, down 0.5%, and the NASDAQ going out at 3,067.0, down 0.1%.

• For the month: S&P500 up 2.4%, Dow Industrials up 0.5%, NASDAQ100 up 4.7%.

• Year-to-date through August: S&P500 up 12.1%, Dow Industrials up 7.0%, NASDAQ100 up 21.6%.

• Best performing global market so far this year: Mexico +14.2%.

• The US Dollar chopped along most of the week and then stumbled on Friday amid talk about Fed intervention. USDX slipped all the way to the 81 level before closing at 81.21 – down 0.5% to the lowest Friday close since early May.

• The Euro closed at 1.2579 versus the USD, up 0.5%, after trading between 1.2487 and 1.2638.

• Year-to-date through August: Euro down 3.1%. • Brazil cuts interest rates again looking to boost

its sluggish economy.

FINANCIAL

US DOLLAR


CHINA EQUITIES FINANCIAL FINANCIAL

VOLATILITY

• Equity prices in China continued to slide, with the Shanghai Composite closing at 2,047.5, down 2.1% to the lowest level since 2009.

• WSJ: Cotton output in China's biggest producing region is expected to be 4% higher in the current marketing year, putting downward pressure on global prices and squeezing textile exporters.

• AP: Chinese manufacturing contracted in August as new orders fell, but the slowdown shows signs of bottoming out, an industry group said.

• Volatility was on the rise for much of the week, with the benchmark CBOE VIX closing at 17.47, up 15.1%, after moving between 15.75 and 1805.

• Schaeffer’s Investment Research: Caution among investors is evident in: the steepening slope of the VIX futures curve; a VIX reading that is almost triple that of SPX realized volatility; a large short position on SPX component stocks and a hedge-fund community that is underweight U.S. equities.


• Gold prices shot higher on Friday as Fed Chairman Bernanke asserted that his toolbox was not empty.

• Market was up 2.0% on the day…enough to make for a 1.1% gain on the week. Settlement: $1,692.30 per ounce.

• Nearby silver futures closed at $31.72 per ounce, up 3.7%.

• Copper was at $3.45, down 1.0%.

• For the week ending August 25, the US Department of Labor showed initial jobless claims at 474,000, unchanged on the week and down 38,000 year-over-year.

• Gallup: employed full time 66.5% (down 0.5), unemployed 8.2% (down 0.2), underemployed 17.2% (up 0.1).

• The Financial Times reports: [In Europe], the overall number of people without a job in July compared with a year ago increased by 2 million.

FINANCIAL

GOLD MACRO

JOBLESS CLAIMS

325,000

350,000

375,000

400,000

425,000

450,000

3-Sep 8-Oct 12-Nov 17-Dec 21-Jan 25-Feb 31-Mar 5-May 9-Jun 14-Jul 18-Aug

WEEKLY UNEMPLOYMENT INITIAL CLAIMS

Source: US Department of Labor


• Individual investor sentiment remained bullish, but less so, in the latest AAII survey for the week ending August 29.

• Respondents: 35% bullish (down from 42%), 33% neutral (up from 32%) and 33% bearish (up from 26%).

• Net bullish for four consecutive weeks, something not seen since April.

• Investor’s Intelligence: 49% bullish, up from a week ago.

• Intrade has President Obama at 57% for re-election, unchanged on the week and month. Mitt Romney’s odds went up to 44% at one point before drifting back to 43%, up from 42% a week ago and 40% a month ago.

• Real Clear Politics composite of national polling shows President Obama’s lead slipping to just 0.5 points, with no more than a 2.0 point lead in any poll. Romney up 1.0 in Rasmussen, ABC News/Washington Post, Fox News.

MACRO

BULL/BEAR 2012 ELECTION MACRO

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

Jun Jul Aug

AAII INVESTOR SENTIMENT SURVEY

Bullish Bearish

Source: American Association of Individual Investors

30%

35%

40%

45%

50%

55%

60%

65%

26-Jun 3-Jul 10-Jul 17-Jul 24-Jul 31-Jul 7-Aug 14-Aug 21-Aug 28-Aug

INTRADE ODDS: 2012 US PRESIDENTIAL ELECTION

Obama Romney


• Consumer spending remained on the high side of average during the week ending August 26, with Gallup tracking putting outlays at $75 daily. That was down 18% on the week but up 14% on a year-over-year basis.

• Economic sentiment reading unchanged at -28. • Poll respondents: 13% say economy

“excellent/good” with 43% at “poor” – both unchanged; 35% say “getting better” (unchanged), 59% “getting worse” (down 1).

• The ICSC/Goldman Sachs chain store report showed continued vigor, with sales up 3.5% on a year-over-year basis during the week ending August 25. Johnson/Redbook survey showed 1.5% growth versus 2011.

• Reuters: Nearly all retailers posted better-than-expected sales gains in August at stores open at least a year as parents and students wrapped up back-to-school purchases, setting the stage for a strong third quarter.

MACRO

THE CONSUMER CHAIN STORE SALES MACRO

$45

$50

$55

$60

$65

$70

$75

$80

$85

$90

$95

Mar Apr Apr May Jun Jul Aug

GALLUP CONSUMER SPENDING

Weekly Average of Daily TrackingSource: Gallup

0%

1%

2%

3%

4%

2-Jun 9-Jun 16-Jun 23-Jun 30-Jun 7-Jul 14-Jul 21-Jul 28-Jul 4-Aug 11-Aug 18-Aug 25-Aug

CHAIN STORE RETAIL SALES

ICSC-Goldman Sachs Johnson Redbook

Year-over-Year ChangeSource: RetailSails, ICSC, Redbook


CASE-SHILLER MACRO

• In June, for the first time in nearly two years, the S&P/Case-Shiller Home Price Index turned positive on a year-over-year basis: +0.6%. Prices were up 2.3% versus May.

• All 20 markets gained month-over-month, with Detroit leading the way (+7.7%) and San Diego showing the least growth (+1.1%).

• Thirteen of 20 were positive year-over-year, with Phoenix out front at +13.9%. Atlanta lost the most ground at -12.1%.

• Americans’ inclination to bank their cash was basically steady in July, with Federal Reserve data showing the savings rate at 4.2%, down from 4.3% in June and unchanged versus year-ago levels.

• Personal spending was up 0.4% from June to July compared to flat performance from May to June.

• Personal income was up 0.3% month-over-month, same as in the prior period.

MACRO

SAVINGS RATE


NEW ZEALAND WEATHER COMMODITIES

GASOLINE

$1.500

$2.000

$2.500

$3.000

$3.500

$4.000

$4.500

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

US UNLEADED GASOLINE

2012 2011 2010

US Dollars Per GallonSource: DOE/EIA

• Rainfall in New Zealand over the past 15 days has been adequate in spots, a little below average in spots and absent in spots.

• Soil moisture anomaly map continues to show good conditions over much of both the North and South Islands.

• Forecast for Taupo (North Island) calls for greater than 60% chance for rain on four of the next ten days, with 40% chance or better on two other days.

• Gasoline prices are within 15-20 cents of their year-to-date high (made in April), with the latest DOE/EIA report showing all grades of unleaded averaging $3.837 per gallon during the week ending August 27, up three cents.

• The Wall Street Journal repots: The Obama administration released final fuel-economy standards that are set to nearly double the average mileage of cars and light trucks to 54.5 miles per gallon by 2025…


• US rail traffic was mixed (again), with the AAR report showing 297,042 “cars loaded” during the week ending August 25 – down 1% year-over-year.

• However, intermodal loadings totaled 248,264 cars, up 5% year-over-year.

• Ten of the 20 carload commodity groups posted increases compared with the same week in 2011, with petroleum products, up 56% and farm products excluding grain, up 26%.

• The “rally” in the Baltic Dry Index was brief, with values headed down anew. Settlement Friday was at 703, down 1.9% from the week prior.

• Reuters reports: “Slow and difficult trading conditions prevail with little improvement in the volume of trans-Atlantic cargoes…” Braemar Seascope said. “Mineral prices continue to fall, eating away at profit margins for mining companies and encouraging buyers to test the resolve of counterparties regarding obligations.”

MACRO

US RAIL TRAFFIC BALTIC DRY INDEX MACRO

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Mar Apr May Jun Jul Aug

RAILROAD CARS LOADED: YEAR-OVER-YEAR CHANGE

Intermodal Total

Source: Association of American Railroads


SLAUGHTER DAIRY

• Slaughter activity again topped the 60,000 mark during the week ending August 18, with USDA reporting culling at 60,968 head – well above the August 2011 average of 54,000 per week.

• Liquidation in the Southwest continues apace, with a 50% year-over-year increase in activity there. Culling in the West was up 15%, while the Midwest was flat.

• Live cattle futures: 126.025, up from 124.450 week prior.

• Data published by USDA/AMS Dairy Market News implied cream multiples at 133, steady on the week but up from 126 a year ago.

• Dairy Market News reports: Cream supplies are steady to somewhat more available as a few ice cream plants reduce production seasonally. Cream multiples stepped lower. Milk handlers and manufacturers note farm milk intakes are variable. Some plant operators indicate pickups are increased in volume…

DAIRY

CREAM PRICES

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35

IMPLIED CLASS II CREAM MULTIPLE

2012 2011 2010

FOB Upper MidwestSource: USDA/AMS Dairy Market NewsBlimling and Associates estimates

week -->30

35

40

45

50

55

60

65

70

Jan Feb Mar Apr May Jun Aug Sep Oct Nov Dec

DAIRY COW SLAUGHTER

2012 2011

Thousand HeadSource: USDA


CRUDE OIL COMMODITIES

1,000,000

1,020,000

1,040,000

1,060,000

1,080,000

1,100,000

1,120,000

1,140,000

1,160,000


CRUDE OIL AND PETROLEUM PRODUCT STOCKS

2012 2011 2010

Source: DOE/EIAThousand BarrelsExcludes SPR

• Crude oil prices continue to hover near their 200-day moving average… On Friday, nearby futures closed at $96.47 per barrel, up 0.3%.

• Range for the week: $93.95 to $97.72 per barrel. • Bill Gary of CIS has November crude on a sell

signal, portending a pullback to the $91.79-$94.39 area with potential to $86.38 to $91.05.

• Petroleum product stocks were up 0.4% on the week and 0.8% year-over-year; weekly increase was the first in five weeks.

$88

$90

$92

$94

$96

$98

$100

Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13

CRUDE OIL FUTURES CURVE

Aug 31 Aug 24


NATURAL GAS COMMODITIES

• Natural gas prices bounced back some, but the market remains trapped between its 50- and 200-day moving averages.

• Nearby futures closed at $2.799 per mmbtu on Friday, up 3.6% to the highest level in four weeks.

• Baker-Hughes reported 13 fewer rigs drilling for natural gas, bringing the total down to 473 (last year at this time: 895).

• Inventories were up 2.0% compared to 2.2% on average over the previous five years.

1000

1500

2000

2500

3000

3500

4000


NATURAL GAS WORKING STORAGE

2012 2011 2010

Billion Cubic FeedSource: US DOE/EIA

$2.50

$2.75

$3.00

$3.25

$3.50

$3.75

Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13

NATURAL GAS FUTURES CURVE

Aug 31 Aug 24


• Soybean oil prices moved higher as concerns about soybean crop conditions and prospective market tightening.

• Nearby contract flirted with 57.00 cents per pound for the first time since April before closing at 56.42, up 0.3% on the week.

• Export shipments totaled 11,829 metric tons. Net sales were reported at 37,453 metric tons, the most since the week ending March 15.

• Crop Progress report shows “good/excellent” category down one percent.

SOYBEAN OIL COMMODITIES

50

51

52

53

54

55

56

57

58

Aug2012

Sep2012

Oct2012

Dec2012

Jan2013

Mar2013

May2013

Jul2013

Aug2013

Sep2013

Oct2013

Dec2013

SOYBEAN OIL FUTURES CURVE

Aug 31 Aug 24


• Corn prices continued to flip back and forth around the $8.00 per bushel mark. Nearby futures closed at $8.0275 per bushel…over the past four weeks, Friday settlements have been within a $0.0425 range.

• December closed at $7.9975 per bushel, down 1.1% to the lowest Friday level in five weeks.

• The CFTC COT report showed the “managed money” net long position down 4% during the week ending August 28, the first net liquidation in three weeks.

CORN COMMODITIES

$5.50

$5.75

$6.00

$6.25

$6.50

$6.75

$7.00

$7.25

$7.50

$7.75

$8.00

$8.25

$8.50

Sep 12 Dec 12 Mar 13 May 13 Jul 13 Sep 13 Dec 13 Mar 14 May 14 Jul 14 Sep 14 Dec 14

CORN FUTURES CURVE

Aug 31 Aug 24

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12

CORN: NET "MANAGED MONEY" POSITION

Source: CFTC Disaggregated COTPositive Number Indicates Long


• Class III milk futures were lower up front, steady on the back of the board as spot cheese prices continued to languish.

• September 2012 through August 2013 contracts closed at an average of $19.23 per hundredweight, basically unchanged; October through December was at $19.85, down 13 cents, while January through June closed at $19.16, up nine cents.

• The CFTC COT report showed reportable, “non-commercials” holding a small net long position.

COMMODITIES

CLASS III MILK

$17.00

$17.50

$18.00

$18.50

$19.00

$19.50

$20.00

$20.50

$21.00

Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug

CLASS III MILK FUTURES CURVE

Aug 31 Aug 24

-6,000

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

Sep-11 Nov-11 Jan-12 Feb-12 Apr-12 Jun-12 Aug-12

CLASS III MILK: NET SPECULATIVE POSITION

Source: CFTC+ is net long; - is net short


• Nearby cocoa futures continued to rally – gaining 9% to close at $2,668 per metric ton.

• The cocoa market hit new nine-month highs every day, with buying driven by speculators touting concerns that cloudy, cool conditions in the Ivory Coast would limit crop progress there. Reuters notes that industry participants are “skeptical” of those claims.

• Coffee prices were higher, with nearby futures closing at $1.6455 per pound, up 1%.

• Sugar: unchanged at 19.78 cents per pound.

COMMODITIES

SOFTS


Firm established to help clients find over-

the-counter risk management

solutions.

Facilitates transactions with Wells Fargo Bank.

Works with clients at each stage in the marketing chain, offering access to liquidity in several product lines and

combinations.

Detailed understanding of client needs and

dedication to finding structures satisfying those imperatives.

Licensed commodity broker introducing

business to ADM Investor Services.

Trading desk staffed with experienced

professionals.

Expert order handling in thinly traded

markets.

Premier order execution on Globex via industry-leading

OAK Desktop trading platform or using

dedicated resources on the CME Group trading

floor.

Competitive rates.

Research, consulting and risk management

strategy firm.

Subscription service includes numerous,

popular reports covering all aspects of

the dairy markets – globally.

Price forecasts and analysis across

multiple markets.

Staff with relevant, applicable experience.

Strategic, long-term engagements with

clients.

Highly-detailed, highly-specialized projects.

MADISON, WISCONSIN 608-249-5030

Phil Plourd [email protected] Mark Morningstar [email protected] Dallas Sipes Chapman [email protected] Lori Strong [email protected] Theresa Rutz [email protected] Katelyn Morningstar [email protected] John Sandstrom [email protected]

MOUNTAIN TOP, PENNSYLVANIA 608-249-6727

Bill Curley [email protected]

OMAHA, NEBRASKA 608-249-7873

Duane Banderob [email protected]

JAMESTOWN, CALIFORNIA 608-249-7897

Tiffany LaMendola [email protected]

©2012 BLIMLING AND ASSOCIATES, INC.

5201 East Terrace Drive • Suite 280 • Madison, WI 53718 This information is carefully compiled but not guaranteed to be complete or free from error, nor does it constitute a solicitation to buy or sell futures/options contracts. Past performance is not

indicative of future results This has been prepared for the exclusive use of clients. Redistribution and reproduction in part

or in whole without written permission is strictly prohibited.

volume 4 number 34 - blimling and...

Documents