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Market Analysis: Mar 04, 2005

posted on March 4, 2005

Grain prices continue to push higher as commodity funds have moved from record short to near-record long positions. For the week, nearby wheat futures gained nearly six cents. But March corn lost more than two cents.

As mentioned, weather worries in South America have dominated the soybean pits. For the week, both March and May beans jumped more than 25 cents. The nearby meal contract gained $5.60 a ton.

Cotton prices did well despite another setback for U.S. cotton growers at the World Trade Organization. For the week, the March contract gained $1.65.

In livestock, the February live cattle contract gained $2.92. Nearby feeders advanced $4.27. And the April lean hog contract moved up $1.50.

In the financials, Comex gold fell $1.00 an ounce. The Euro lost just seven basis points against the dollar. And the CRB Index jumped eight-and-a-half points to close at 306.75.

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

Market Analysis: Mar 04, 2005

Sue Martin: Thank you.

Pearson: Let's talk about soybeans, that's what we've been talking about for about a year. The situation in Brazil, prices up again, the big funds were record short as we just mention.Now they're going record long. What's ahead for the soybean market?

Martin: I'm very positive to the bean market as time goes on. I believe that we're into a crop year where we're going to see a lot of volatility. The last time I was on the show, I talked about possibly a lull around February 4 to the 7 and that the dollar was having more than impact than most wanted to believe. The dollar has had the hardest break that it has had. The soybeans adjusted in dollars. Consequently, it was way overdone, underpriced in the world market, and what happened was the public became enamored with the thought that it was going much lower at the time of a February decline. Then in the meantime, everybody was in the belief that the south more than weather was ideal when it was not. Then on top after that, world buyers bought into the same kind of song and dance with hand-to-mouth buy, the dollar was cheaper and then on top of it, it floats with the dollar so they didn't have to worry about that, but the prices were low, and they thought there was a big crop coming. Now they've got to rethink the situation. Now they're coming at the market, they bought 10 cargos of beans, 3 1/2 metric tons out of Brazil, the rest out they have Pacific northwest in the U.S.

Pearson: It's heard a dollar move here in the beans. Producers, should they be making sales?

Martin: It's been a straight up move. So that's a very abnormal price direction in the month of February. Going back 35 years, we've only seen this happen twice. It's not a common thing. Can the markets stop here or can it keep going? I think in the month of March, you'll see a little hesitation, maybe more congestive type markets, but I think a 30 cent or 40 cent break is the most I'd expect out of this market, and I think you'll take beans to the September 1 high which on the May contract is 6.58. If you think about this year's price, the most a farmer could have sold this year's crop for is $8. Everybody keeps think about the $10 we had last year, but $8 is a about the best he could have gone. Halfway back is about $6.50. You get that out, then the market could start looking at the contract high of $7.26. I think there'll be some corrections along the way.

Pearson: So fasten your seat belts. We talked earlier in the show about Asian rust, that's going to be a factor. I wish we had more time to go into the bean market. It's going to be an interesting one.

Martin: And maybe we can talk about it in the Market Plus segment after we get done with the show.

Pearson: Let's talk about the corn market that's been not nearly as responsive as what's happening with the beans.

Martin: The corn market needs good demand. It really isn't getting it. All we hear about is the ethanol, ethanol, ethanol, everybody is building heps on ethanol. In my eyes this ethanol is a good thing, but it's a good thing because it's going to create better basis areas throughout Iowa and places where you're building plants. But it's also going to create competition with D.D.G. and we'll have a lot of meal in the market competing with the other meal. We have to look at crude prices near the all-time high. Minnesota didn't get a chance to get of lot of anhydrous on. If bean prices g higher, the contract high is $6. 50678 if they go through that, you could probably see a switch of acres. I think quorn has its share of issues. In years when you go from a tight carryout supply, market has still shown a tendency to rally into spring. Once that crop is planted and even maybe a little bit before it's fully planted and the trade starts to feel comfortable that the crops in the ground are off to a good start, beware farmers, get your stuff sold.

Pearson: We've seen -- there seems to be plenty of wheat around the world.

Martin: We need good exports and wheat isn't getting it. The past week or so, we had good exports ft. In the meantime, there's soft red wheat. There's fears of winter kill in that crop. We look for less acres this year. Maybe those are pluses. You've got Chicago wheat. If you can get through $3.42, $p.43.

Pearson: Let's talk about fed cat. The courts are involved, the situation with Canada, feeder cattle price has made a big jump on the board. Fed cattle market was strong. What do you tell the cattlemen out there?

Martin: I tell them to use the strength we're getting, to maybe look at some hedging. We're getting some strength. Feeders got up to $102.60. That was your high before you put the high in January. Going back to December. So it's natural to hit some resistance there. On further rallies this next week, I would look at maybe doing some hedging. In the meantime, the price will peak out the second week of March. We know cattle carcasses are weighing more than that a year ago. We haven't had the kills we were expect, but according to the cattle on feed reports, those cattle should still be coming. We think there was more cattle numbers in the lower end of each weight group, which means down the road here, we're probably going to have quite a few numbers coming at us. You put that list, you've got a fair amount of tonnage coming at us.

Pearson: Again, a hedge opportunity in here right now.

Martin: It is. But we should have better cutouts the next week. Packers looking to get back to more profitability.

Pearson: And warm weather in the Midwest won't hurt to get the grills fired up.

Martin: That's one more thing. We haven't been paying attention to the relationship between the dollar and what's going on in Canada. That's going to, if we get a continuing cheap dollar here this year and the price of fat cattle falls, all of a sudden maybe some of that incentive to send stuff south isn't going to be there.

Pearson: Chew on that this week. Let's talk about the hog mark. What's been happening with hogs? They've been benefiting with all this talk and maybe continued excuse of U.S. beef in Japan. There's no -- the hog market could have some potential.

Martin: It seems to be. We had a counterseasonal fall. But this marble has got some power behind it. We took out the 80 cent level. We managed to exceed that. Now the next target for June hogs is 84 cents. We'll probably see some of that too where they'll go into the May and June contracts. I suspect that'll prop up the Junes and maybe soften the Aprils.

Pearson: So at this stage of the game, maybe if you get the opportunities to look into that.

Martin: As you get into the mid 80's, get only hedges on. But the fall contracts still make me wonder if there isn't more on the upside.

Pearson: Sue martin, thank you so much. That wraps up this edition of "Market to Market." But before we go, we'd like to remind you that many Public Television stations across the country soon will be seeking Your investment in quality television programming. If you value the information you receive each week on programs Like "Market to Market," please help with your generous support. We thank you for it. Until next week, then, thanks for watching. I'm Mark Pearson. Have a great week.

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