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Market Analysis: Mar 17, 2006

posted on March 17, 2006


The dry conditions failed to support prices in the wheat pit, and the weather premium also vanished in corn. For the week, nearby wheat futures were down 24 cents. May corn lost 13 cents.

There was also a break in the soy complex as the funds began a major sell-off. For the week, May beans dropped nearly 13 cents. The May meal contract declined by 50 cents per ton.

Cotton prices lost ground, with the May futures contract down by $1.05.

In livestock, the April live cattle contract lost 43 cents. Nearby feeders gained $2.90. And the April lean hog contract advanced 53 cents.

In the financials, Comex gold climbed $14.20 an ounce. Nearby crude oil prices were up $2.81 a barrel. The Euro gained 351 basis points against the dollar. And the CRB Index jumped seven-and-a-half points to close at 328.25.

Here now to lend us her insight on these and other trends is one of our senior market analysts, Sue Martin. Welcome back.

Market Analysis: Mar 17, 2006 Martin: THANK YOU, MARK.

Pearson: WELL, IT WAS A DOWN WEEK AS FAR AS THE GRAINS WERE CONCERNED. WE JUST TALKED ABOUT THE CONDITIONS OUT ON THE SOUTHERN AND CENTRAL PLAINS, AND IT'S EXTREMELY DRY DOWN THERE. WE'VE HEARD A LOT OF COMMENTS ABOUT THE CONDITION OF THE HARD RED WHEAT CROP, AND YET WHEAT PRICES TOOK IT ON THE CHIN PRETTY HARD THIS WEEK.

Martin: WELL, I THINK IT DID AND, OF COURSE -- IN FACT, I KNOW IT DID. BUT, YOU KNOW, BASICALLY ALL THE NEWS MEDIA COVERAGE OVER THE FIRES AND THE CROP CONDITION RATINGS WITH TEXAS AT 87 PERCENT, FLORIDA VERY POOR, AND OKLAHOMA AT 72, YOU KNOW, ANYBODY WHO WANTS TO BE LONG ON WEATHER IS ALREADY THERE. SO NOW THE MARKET NEEDS TO HAVE SOMETHING NEW PUT INTO IT AND A NEW REASON TO GO UP. AND I THINK WE HAVE TO GET INTO APRIL BEFORE WE'RE GOING TO START TO FIND THAT. THE KANSAS CROP, AS WE'VE ALREADY TALKED ABOUT, 35 PERCENT POOR TO VERY POOR, YOU KNOW, IT'S HARD TO GET YOUR HANDS AROUND THAT KANSAS CROP AT THIS TIME. THE FORECAST OF RAIN AND MOISTURE COMING IN, EVEN THOUGH IT MAY NOT END UP BEING AS MUCH AS THEY HOPED FOR, HELPED DRIVE THE MARKET DOWN. AND THEN, OF COURSE, ON FRIDAY WE'VE SEEN SOME SEASONAL SPREADING GOING ON, WHERE THEY BOUGHT WHEAT AND SOLD CORN. BUT ALL IN ALL, I THINK THAT IF WE CAN GET INTO THE MONTH OF APRIL AND THERE'S A TALK OF A COLD SPELL THAT COMES IN, THAT WILL DRIVE YOUR MARKET BACK HIGHER. WITHOUT THAT, I'M NOT SURE THAT THE WHEAT MARKET IS GOING TO REBOUND BACK AS NICELY AS WE'D LIKE. BUT IN YOU JEOPARDIZE THE KANSAS CROP AND YOU GET THE WHEAT TOUR GOING AND THEY START TO TELL US THAT THE CROP ISN'T AS GOOD AS WHAT EVERYBODY THINKS IN KANSAS, THAT WILL SEND YOUR MARKET BACK HIGHER AND YOU'LL PROBABLY GO BACK UP TO 4.96. BUT MUCH MORE THAN 5.10, 5.14, I DOUBT IT.

Pearson: ALL RIGHT. AND YOU WOULD MAKE SALES RIGHT THERE?

Martin: OH, I WOULD DEFINITELY BE MAKING SOME SALES. I THINK THAT THE 4.50 AREA IS NOT A BAD PRICE. BUT SUPPORT ON THE DOWN SIDE, IN THE KANSAS CITY WHEAT, WE SHOULD PROBABLY HAVE SUPPORTAROUND THE 4.02, 4.04 LEVEL.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE CORN MARKET, ALSO UNDER SOME PRESSURE THIS WEEK. AND, OF COURSE, WE'RE A WAYS ALMOST FROM THE KEY PARTS OF THE CORN BELT THAT'S STARTING TO PLANT CORN. I KNOW THERE'S A LOT OF INTEREST OUT THERE JUST WHAT IS GOING TO HAPPEN WITH ACREAGE. BUT, AGAIN, NOT A WHOLE LOT OF NEWS REALLY TO BOLSTER THIS MARKET AT THIS STAGE, IS THERE?

Martin: WELL, I THINK CORN FELT SYMPATHETIC PAINS TOWARDS THE WHEAT CROP -- OR THE WHEAT MARKET, AND SO IT FELL BACK. YOU ALSO HAD THE JULY CONTRACT, ABOUT A 50-PERCENT RETRACEMENT OF LAST YEAR'S RANGE, SO TECHNICALLY IT WAS ABOUT TIME TO HAVE A CORRECTION. BUT I DON'T THINK THE CORN MARKET IS DONE. I SEE THIS MARKET AS PULLING BACK. YOU CAME AGAINST THE TREND LINES FROM THE HARVEST LOWS HERE THIS PAST WEEK ON FRIDAY, MUCH LOWER. YOU'LL FIND SUPPORT, I BELIEVE, AND THE MARKET SHOULD TRY TO TURN HIGHER. AS FAR AS ACRES GOING, THE FIRST PLANTING INTENTIONS REPORT IS GOING TO TELL US A BIG, YOU KNOW, STORY AS TO WHAT THE FARMER IS INTENDING. YOU KNOW, THE FIRST TWO WEEKS OF MARCH, THEY BASICALLY RESEARCH OR TAKE DATA FROM ABOUT 83,000 FARMS, AND THEN THEY FORM THEIR NUMBERS OFF OF THAT. WELL, WE'LL HAVE TO SEE HOW THAT REPORT COMES OUT. I THINK YOU'RE GOING TO PROBABLY LOSE A LITTLE OVER A MILLION ACRES, MAYBE 1.1, 1.2 MILLION ACRES IN THIS REPORT. BUT ALL IN ALL, YOU KNOW, IF YOU LOOK AT THE STATES LIKE IOWA THAT HAVE PRODUCTION ABOVE THE NATIONAL AVERAGE -- LIKE LAST YEAR IOWA HAD 173-BUSHEL-PER-ACRE AVERAGE YIELD; WHEREAS, OPPOSED TO ARKANSAS, THEY HAD 131. YOU KNOW, IT'S GOING TO BE THOSE STATES THAT DON'T DO VERY WELL AGAINST THE NATIONAL AVERAGE THAT'S GOING TO THINK TWICE ABOUT PLANTING CORN. BUT, YOU KNOW, YOU LOOK AT ILLINOIS, THE NORTHERN HALF OF ILLINOIS STILL EXTREMELY DRY, SUBSOIL DEPLETED. I DON'T THINK THE JURY IS DONE YET. I THINK THAT IOWA MAY PLANT MORE CORN THAN YOU THINK. BUT OTHER AREAS WHERE IT'S, YOU KNOW, THEY'RE VULNERABLE, MARGINAL, THEY'LL THINK TWICE AND PLANT SOMETHING ELSE.

Pearson: OKAY. SO AT THIS STAGE OF THE GAME, WHAT WOULD YOU TELL A PRODUCER WHO'S A LITTLE BIT NERVOUS ABOUT WHAT'S BEEN HAPPENING IN THE MARKET?

Martin: WELL, YOU KNOW, A 2.35 CARRYOUT, THAT WILL PROBABLY BUFFER ANY LITTLE MINOR PROBLEMS WE HAVE AT THIS TIME. BUT, YOU KNOW, IF YOU LOOK AT THE GOVERNMENT REPORTS, THEY'VE BEEN INCREASING EXPORTS ON EVERY REPORT. USAGE HAS BEEN GOING UP. I THINK THAT WE HAVE A GOVERNMENT THAT HAD -- THE USDA THAT HAS UNDERESTIMATED INDUSTRIAL USAGE. AND, OF COURSE, FEED USAGE IS GOING TO BE PRETTY GOOD. THE ONLY THING THAT MIGHT JEOPARDIZE THAT OR CHANGE THAT IS IF AVIAN BIRD FLU WAS FOUND IN THE U.S. I THINK THAT WHEN I LOOK AT THE MARKET, I THINK YOU'VE HAD A 13-CENT DECLINE IN THE JULY CONTRACT. DEC. HAS HAD 109.75-, 9.5-CENT DECLINE. YOU'VE GOT A MARKET THAT CAN STILL SET BACK A LITTLE MORE. BUT ALL IN ALL, I DON'T THINK I'D WANT TO GET TOO NEGATIVE. YOU KNOW, A THIRTY-MONTH CYCLE LOW DUE HERE WITHIN THE END OF THIS NEXT WEEK, AND I THINK THE MARKETS WILL TURN HIGHER FROM THERE. I THINK YOU'VE GOT BETTER HIGHS COMING.

Pearson: OKAY. LET'S MOVE OVER TO THE SOYBEAN MARKET. AND YOU'VE MENTIONED AVIAN BIRD FLU. AND, OF COURSE, WE'RE GOING TO TALK ABOUT THAT IN THE MEATS. BUT THERE'S A LOT OF POULTRY OUT THERE AND, OF COURSE, A LOT OF CONCERN ABOUT WHAT THE DEMAND IS GOING TO BE FOR SOYBEAN MEAL GOING FORWARD, SOYBEAN OIL, WITH SOYBEAN DIESEL. A LOT OF FACTORS OUT HERE IN THIS SOYBEAN MARKET TOO, AND ALSO THE FACT THAT SOUTH AMERICA HAS A BIG CROP COMING.

Martin: WELL, SOUTH AMERICA DOES HAVE A BIG CROP. IT'S A RECORD CROP IF YOU COMPARE IT TO THE LAST YEAR OR TWO. BUT WHEN YOU LOOK AT THE YIELDS, YOU KNOW, THE USDA STARTED AT 60 MILLION METRIC TONS FOR BRAZIL, LOWERED IT DOWN TO 58.5. THEY'VE KEPT IT THERE. ARGENTINA AROUND 39.50, 40. BUT WHEN YOU HEAR THE YIELDS THAT ARE COMING OUT, THEY'RE A DISAPPOINTMENT. SO THEY'LL STILL HAVE A RECORD PRODUCTION, BUT THE YIELDS ARE GOING TO BE DOWN FROM WHAT THEY EXPECTED. IN THE MEANTIME, YES, PRICES ARE FALLING BACK, BUT IT'S ALL ABOUT CURRENCY AND WHAT THE DOLLAR DOES. IF THE DOLLAR FALLS BACK, THAT'S GOING TO BE HARMFUL TO THE SOUTH AMERICAN FARMER AGAIN. AND HE HAS SLOWED UP HIS SALES BECAUSE HE'S NOT MAKING ANY MONEY. IN THE MEANTIME THE BEAN MARKET IS GOING TO GO DOWN, I BELIEVE, INTO THE TURN OF THE MONTH, INTO THE FIRST OF APRIL. WITH THE EXPECTATION OF INCREASED ACRES, I CAN'T UNDERSTAND WHY ANYBODY WOULD PROBABLY WANT TO BE HANGING LONG INTO THAT REPORT, SO I EXPECT WEAKNESS. BUT BEYOND THAT, I CAN NO LONGER BE BEARISH. I HAVE TO BE BUYING THIS MARKET. I THINK YOU'VE PRICED IN YOUR CARRYOUTS. THAT'S ALL YOU HEAR THE BEARS TALK ABOUT IS CARRYOUT, CARRYOUT, CARRYOUT. I THINK THERE'S MORE TO IT. YOU HAVE GROWING ECONOMIES AROUND THE WORLD AS OPPOSED TO DECLINING ECONOMIES IN THE PAST WHEN YOU HAD THESE KIND OF CARRYOUTS. YOU ALSO HAVE A LARGER NUMBER OF POULTRY AND, EVEN CONVERSELY, EVEN THOUGH YOU HAVE THE AVIAN BIRD FLU PROBLEM, YOU STILL HAVE A LARGER NUMBER OF BIRDS IN THE WORLD GLOBALLY AND YOU HAVE A LARGER NUMBER OF HOGS IN THE WORLD GLOBALLY. SO I THINK THAT WE'RE LOOKING AT USAGE, BUT NOT TO MENTION THE ETHENOL USAGE, THE INDUSTRIAL USAGE IS INCREASING. I THINK IT'S UNDERESTIMATED AND I SEE IT GROWING. I ALSO SEE THE BIODIESEL BEING STRONGER. SO I THINK THAT WHEN WE LOOK AT THE NEED FOR BEANS, WE HAVE TO GROW A CROP, WE NEED TO BE COMPETITIVE, BUT I THINK THERE'S REASONS FOR THIS MARKET TO BE STRONGER.

Pearson: OKAY. SO AT THIS STAGE OF THE GAME, IF YOU'RE A LITTLE NERVOUS AND CONCERNED ABOUT WHAT SOYBEAN PRICES ARE GOING TO DO AND YOU'RE LOOKING DOWN THE ROAD GOING, WELL, IF I CAN GET $6 ON BEANS, HISTORICALLY THAT'S PRETTY GOOD, WOULD YOU MAKE ANY SALES?

Martin: WELL, I THINK I WOULD. YOU KNOW, WHEN WE HAD OUR CHANCE AT NOVEMBER BEANS AT $6 ON THE CASH MARKET, WE HAD ONE CHANCE AT IT, WE WERE TELLING PEOPLE TO GO AHEAD AND DO SOME HEDGING THERE OR FORWARD CONTRACTING. BUT IF YOU MISSED THAT AND YOU WANT TO STILL SELL BECAUSE FUTURES ARE AROUND 606, FINE, GO AHEAD, BUT GET YOURSELF SOME JULY CALLS BOUGHT OR SOMETHING LIKE THAT.

Pearson: AND GET SOME UPSIDE.

Martin: YEAH.

Pearson: REAL QUICK, COTTON MARKET AGAIN TOOK IT ON THE CHIN THIS WEEK. THAT'S ALMOST ALL -- ALMOST ALL OF CHINA DEAL, ISN'T IT?

Martin: WELL, IT IS. AND, OF COURSE, COTTON HAS HAD -- YOU KNOW, IT'S BEEN MORE VIBRANT. IT'S ONE OF OUR MARKETS THAT TURNED AROUND AND LED US BACK UP. YOU KNOW, IT WAS FIRST BREAK LAST YEAR, TURNED AROUND AND WAS ONE OF THE FIRST ONES TO COME BACK OUT OF HERE ON THE UPSIDE. BUT I THINK THAT ALL IN ALL, YOU HAVE A MARKET HERE THAT IS TRYING TO SET BACK A LITTLE BIT. BUT THIS 60-CENT -- 58-, 60-CENT AREA I THINK IS A HEDGING OPPORTUNITY. I WOULD PROBABLY DO SOME MARKETING.

Pearson: ALL RIGHT. LET'S TALK LIVESTOCK, SUE. THE FED-CATTLE MARKET, A SETBACK THIS WEEK, ANOTHER BSE OUTBREAK, ALTHOUGH IT DIDN'T SEEM TO IMPACT THE MARKET ALL THAT MUCH DIRECTLY. I MEAN, IT HAD KIND OF A HO-HUM RESPONSE. BUT WE HAVE BEEN ON A TRACK FOR THE 60 DAYS OF LOWER FED-CATTLE PRICES. YOU TURNED NEGATIVE LAST FALL WHEN YOU FACED SOME REALLY STRONG MARKETS. AND, BOY, NOW WE ARE SEEING THE PRESSURE CONTINUE TO BUILD. WHAT'S YOUR OUTLOOK NOW THE NEXT 60 TO 90 DAYS ON FED CATTLE?

Martin: IT'S NOT PRETTY. MY OUTLOOK IS STILL AS NEGATIVE AS IT WAS THE LAST TIME I WAS ON THE SHOW. I BELIEVE THAT YOU ARE MIRRORING A YEAR VERY SIMILAR TO 1974. I THINK THAT -- AND THAT WAS NOT A FUN YEAR.

Pearson: THAT WAS UGLY.

Martin: YOU KNOW, YOU HAVE ARGENTINA, BECAUSE OF THEIR INFLATION AND LACK OF CATTLE NUMBERS, THEY'VE PUT A BAN ON EXPORTS. WELL, YOU KNOW, THIS IS OUR OPPORTUNITY TO TRY TO GARNER SOME OF THAT BUSINESS AWAY. AND, OF COURSE, GERMANY IS A MAJOR BUYER FROM ARGENTINA, AS WELL AS OTHER PARTS OF EUROPE. AND I WOULD SO HOPE WE COULD GAIN OUR FOOT BACK IN THE DOOR AND GET THOSE EXPORTS BACK. HOWEVER, THE LAST BSE ISSUE PROBABLY MIGHT NOT HAVE HELPED US, BUT WE STILL NEED TO TRY. IN THE MEANTIME, THE NUMBERS OF BEEF PRODUCTION IS STILL GOING TO GO UP. AND WE'RE NOT LOOKING AT THE MAJOR INREASE IN BEEF PRODUCTION AS YOU GET TOWARD THE LATTER PART OF APRIL, FIRST OF MAY. YOU'VE GOT POULTRY -- YOU KNOW, THE COLD STORAGE REPORT COMING OUT HERE IN A WEEK OR SO IS GOING TO SHOW -- IT'S JUST GOING TO CONFIRM HUGE STOCKS OF POULTRY IN THE COOLERS. AND THEN ON TOP OF -- AND YOU'VE GOT TYSON PUTTING MORE CHICKEN INTO PET FOODS, WHICH IS PROBABLY A GOOD PLACE FOR IT. AND THEN ON TOP OF IT, YOU'VE GOT THE HOG MARKET. YOU KNOW, WE'RE KILLING 200,000 HEAD OF HOGS A DAY -- OR 400,000, EXCUSE ME, HEAD OF HOGS A DAY VERSUS, WHAT, 378- A YEAR AGO THIS PAST WEEK. AND THEN ON TOP OF IT, YOU END THE WEEK UP OVER TWO MILLION HEAD. WE CAN'T USE ALL THIS MEAT. WE HAVE WAY TOO MUCH MEAT COMING AT US IN A TIME WHEN THE DOLLAR IS BEING STRETCHED BY THE CONSUMER. LAST YEAR THE USAGE PER CAPITA OF PORK WAS, LIKE, DOWN 1.2 OR 1.9 PERCENT. YOU KNOW, WE CAN'T HAVE INCREASING PRODUCTION IN A TIME WHEN USAGE IS DROPPING. I SEE THE CATTLE MARKET FALLING. I THINK THE JUNE MARKET IS GOING TO GO DOWN TO 72.20. I THINK THE OCTOBER MARKET IS GETTING READY TO TAKE A SPILL, AND I THINK OCTOBER CATTLE PROBABLY BY THE END OF MAY WILL HAVE FALLEN MAYBE DOWN TO 78-, 75 CENT -- PROBABLY 75 CENTS.

Pearson: ALL RIGHT. LET'S -- AGAIN, HUGE POULTRY STOCKPILES; YOU'RE RIGHT. THAT'S WEIGHING THIS MARKET, HITTING BOTH BEEF AND PORK. ARE YOU AS DARK ON THE OUTLOOK FOR HOGS?

Martin: WELL, I THINK THE HOG MARKET STILL HAS A BLACK CLOUD OVER IT. IT'S A MATTER OF JUST COMPETITION EVERYWHERE. SO I STILL SEE THE HOG MARKET DECLINING. I DON'T SEE APRIL AS A GOOD MONTH IN ANY OF THE MEATS. MAY MIGHT NOT BE EITHER. AND THEN LET'S HOPE THAT WE HAVE AN EARLY SUMMER LOW IN ALL MEATS AND WE TURN HIGHER FROM THERE.

Pearson: OKAY. IF YOU'RE A PORK PRODUCER, WOULD YOU UTILIZE ANY STRATEGIES RIGHT NOW? IS THERE ANYTHING OUT THERE THAT YOU FIND ATTRACTIVE FROM A MARKETING STANDPOINT?

Martin: WELL, I WOULD USE RALLIES AND PROBABLY BE TRYING TO MARKET THE OCTOBER HOGS, GET SOME HEDGES ON. I WOULD START DOING SOME OF THOSE FALL- OR FOURTH-QUARTER MARKETS IF YOU CAN GET A RALLY.

Pearson: REAL QUICK, SUE, WOULD YOU COVER ANY FEED NEEDS IN HERE WITH THIS BREAK?

Martin: YES, I WOULD. I WOULD BE USING THE FIRST OF APRIL -- FIRST WEEK OF APRIL TO BE MAYBE BOOKING SOME SOYMEAL FOR SUMMER NEEDS. AND I WOULD ALSO BE MARKETING -- OR PRICING IN SOME CORN NEEDS TOO.

Pearson: OKAY. AND YOU'LL BE DOING THAT EITHER TOWARD LOCAL CASH, OR WOULD YOU USE A FUTURES CONTRACT?

Martin: WELL, I'D CERTAINLY USE FUTURES CONTRACTS IF YOU'RE NOT COMFORTABLE WITH THE LOCAL MARKET, BUT I'D USE THE LOCAL MARKET TOO.

Pearson: ABSOLUTELY. SUE MARTIN, AS USUAL, SOME GREAT INSIGHTS. THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT BEFORE WE GO, WE'D LIKE TO REMIND YOU THAT MANY PUBLIC TELEVISION STATIONS CURRENTLY ARE ASKING FOR YOUR FINANCIAL SUPPORT. SO IF YOU VALUE THE KINDS OF INFORMATION YOU GET FROM PROGRAMS LIKE "MARKET TO MARKET," PLEASE LET YOUR LOCAL PUBLIC TELEVISION STATION KNOW BY MAKING A GENEROUS PLEDGE OF SUPPORT. UNTIL NEXT WEEK, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT ONE.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

"MARKET TO MARKET" IS A PRODUCTION OF IOWA PUBLIC TELEVISION, WHICH IS SOLELY RESPONSIBLE FOR ITS CONTENT. FUNDING FOR "MARKET TO MARKET" IS PROVIDED BY PIONEER HI-BRED, BECAUSE SOUND INFORMATION, PLUS CONSISTENT YIELDS, CAN HELP FARMERS STAY ON TRACK. THE PEOPLE WHO BRING YOU PIONEER-BRAND CORN HYBRIDS PROUDLY SUPPORT "MARKET TO MARKET."

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