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Market Analysis: Oct 29, 2004

posted on October 29, 2004


The corn market remains choppy on harvest sales but, as mentioned earlier, wheat strengthened on export sales. For the week, nearby wheat futures were up eight cents. December corn gained less than a penny.

Long-term opportunities for better soybean prices are iffy, thanks to expected competition out of South America. For the week, November beans were down more than two cents. The nearby meal contract lost $2.50 per ton.

The cotton market continues to trade sideways, and for the week dropped 69 cents.

In livestock, the October live cattle contract went off the board Friday up 10 cents for the week. November feeders lost $2.22. And the December lean hog contract advanced by $1.25.

In the financials, Comex gold advanced $4.80 an ounce. The Euro jumped another 142 basis points against the dollar. And the CRB Index fell more than two points to close at 284.75.

Here now to lend us his insight on these and other trends is one of our regular market analysts, Tomm Pfitzenmaier. Welcome back.

Market Analysis: Oct 29, 2004

Pfitzenmaier: THANKS MARK.

Pearson: WELL, WE WERE TALKING ABOUT THERE WAS SOME RAIN ACROSS THE CORN BELT THIS WEEK. IT SLOWED THINGS DOWN SOME. BUT ALL THE HARVEST NEWS THAT WE'RE GETTING IN THE USDA'S LAST REPORT SHOWED A PHENOMENALLY LARGE CROP. WHAT'S A PRODUCER TO DO?

Pfitzenmaier: YEAH, IT'S HUGE. THERE'S NO QUESTION ABOUT IT. THERE'S NOT GOING TO BE A WHOLE LOT TO DO. WE'RE WELL INTO THE -- UNDER THE LOAN RATE. WE TRIED TO RALLY THE MARKET ALL WEEK LONG AND ENDED UP CLOSING NEAR THE BOTTOM END OF THE RANGE WE'VE BEEN IN FOR QUITE A WHILE. THERE'S JUST A LOT OF FARMER GRAINS SITTING OUT THERE THAT ULTIMATELY THE MARKET KNOWS IS GOING TO HAVE TO MOVE. WE ALL KNOW IT'S GOING TO HAVE TO MOVE. THE MARKET IS GOING TO SIT HERE AND SEE HOW MUCH OF IT GETS LOCKED UP AFTER HARVEST AND HOW MUCH, YOU KNOW, THINGS DRY UP A LITTLE BIT IN THAT PERIOD THERE BETWEEN HARVEST AND THE FIRST OF THE YEAR WHEN PEOPLE START MOVING GRAIN AGAIN. WAITING TO SEE HOW DEMAND SHAPES UP IF THIS -- THE DOLLAR, LIKE YOU ALLUDED TO EARLIER IN THE SHOW, WEAKER DOLLAR, LOWER PRICES STIMULATE SOME KIND OF DEMAND. A LOT OF PEOPLE ARE HANGING THEIR HATS ON ETHANOL, THAT HIGH OIL PRICES AND LOW CORN PRICES ARE GOING TO CONTINUE TO STIMULATE THAT INDUSTRY AND SOAK UP SOME OF THE CORN. BUT THERE'S A LOT OF IT AROUND, AND IT'S A PROBLEM.

Pearson: ALL RIGHT. SO IF YOU HAVEN'T SOLD ANYTHING YET, WHAT ARE YOU TELLING SOMEBODY TO DO?

Pfitzenmaier: WELL, IF YOU NEED MONEY, I GUESS YOU PUT IT UNDER LOAN OR YOU SELL IT. I MEAN AS LONG AS YOU'RE UNDER LOAN, UNLESS YOU CAN SPECULATE AND TRY TO WIGGLE YOUR WAY INTO AN LDP AND THEN CATCH A RALLY AND SELL IT AND GO THROUGH THAT RIGAMAROLE, THERE'S NOT A WHOLE LOT TO DO. AND THAT'S ONE YOU HAVE TO BE -- A LOT OF PEOPLE ARE DOING THAT, AND THAT'S ONE YOU'VE GOT TO BE A LITTLE CAREFUL WITH BECAUSE YOU GET RID OF THAT -- YOU TAKE THE LDP AND THEN ALL OF A SUDDEN THE FLOOR IS GONE OUT FROM UNDER YOU. AND I THINK THERE'S ANOTHER 10 TO 15 CENTS DOWN HERE IN THE CORN. NOW, IF YOU GET THAT KIND OF A BREAK, THEN YOU CAN KIND OF LOOK AT TAKING THAT LDP. AND THERE IS A CARRYING CHARGE IN THE MARKET, SO YOU GO OUT AND SELL JULY FUTURES ABOVE 230, 235, 240, ANY KIND OF A RALLY IN THERE THAT YOU CAN GET. AND THAT I THINK IS THE MARKETING STRATEGY. TRY TO MAXIMIZE LDP, SELL THE CARRYING CHARGE, AND THAT'S PROBABLY AS MUCH AS YOU CAN EXPECT OUT OF THE CORN MARKET.

Pearson: ALL RIGHT. WHAT ABOUT OVER ON SOYBEANS? GEE, A BIG CROP THERE.

Pfitzenmaier: WELL, NOT ONLY A BIG CROP THERE, BUT WE ALSO HAVE A BIG CROP COMING IN SOUTH AMERICA. THEY PLANT 75 PERCENT OF THEIR CROP IN THE NEXT FIVE WEEKS, SO THAT'S ONE -- AND USDA IS LOOKING FOR BIG -- WELL, EVERYBODY YOU TALK TO IS LOOKING FOR A PRETTY GOOD SIZED CROP DOWN THERE, 60 MILLION METRIC TON TO 62.5, DEPENDING ON WHO YOU TALK TO. SO YOU'RE GOING TO HAVE ANOTHER BIG DUMP OF BEANS ON TOP OF THAT. SOME PEOPLE THINK WE COULD HAVE AS MUCH AS A DOLLAR LDPs IN BEANS, AND THAT'S TALKING ABOUT AT A POINT NOW WHERE WE'RE BASICALLY AT NONE. SO, I MEAN, THERE'S A LOT OF DOWNSIDE POTENTIAL IN BEANS HERE. THAT'S ONE AREA, IF THERE IS A LITTLE LDP, I MEAN IF YOU DON'T TAKE IT -- I THINK WITH THAT KIND OF DOWNSIDE POTENTIAL, THE GOVERNMENT HAS BOUGHT YOU A PUT, YOU NEED TO MAKE SURE THINGS ARE FAIRLY WELL DONE GOING DOWN BEFORE YOU START EXERCISING THAT PUT.

Pearson: ON THE FLIP SIDE OF THE BEAN MARKET, YOU MENTIONED A POTENTIALLY HUGE CROP IN SOUTH AMERICA. A BIG CROP HERE IN THE U.S. OBVIOUSLY ALL COMING TOGETHER AT THE SAME TIME. WHAT ARE YOU GOING TO DO FOR NEXT YEAR?

Pfitzenmaier: WELL, I MEAN YOU'VE GOT NOVEMBER OF '05 BEANS UP AT 550, YOU KNOW. GIVEN THE WAY THE MARKET OUTLOOK LOOKS, THAT'S PROBABLY NOT A BAD SALE. NOW, HAVING SAID THAT, I CAN TELL YOU RIGHT TONIGHT THAT NOBODY IS GOING TO DO IT BECAUSE EVERYBODY STILL HAS THE $7 BEANS FROM LAST YEAR IN MIND. AND THEY -- AND THERE'S JUST HUGE OPTIMISM THAT FOR SOME REASON WE'RE GOING TO GO UP IN BEANS. I MEAN WE'RE LOOKING AT AROUND A 4- TO 450 MILLION BUSHEL CARRYOUT NEXT YEAR. WE'RE NOT GOING TO RALLY BEANS TO $7 WITH THOSE KIND OF CARRYOUT NUMBERS. BUT I STILL THINK 550 IS PROBABLY A VERY GOOD SALE FOR NEXT YEAR'S BEANS. YOU KNOW, MAYBE 550, 580, 570, SOMEWHERE UP IN THERE. I'M FAIRLY SURE VERY FEW PEOPLE WILL DO IT, BUT IT'S PROBABLY WHAT SHOULD BE DONE.

Pearson: I REMEMBER YOU MADE THAT COMMENT AFTER WE HAD $5 CORN. WE HAD TWO LOUSY MARKETING YEARS AFTER WE HAD $5 CORN.

Pfitzenmaier: YEAH. AND I THINK THAT'S WHAT WE'RE GOING TO HAVE AGAIN THIS YEAR. I THINK THE CORN, WITH THE CARRYOUT WE'VE GOT IT'S GOING TO BE -- SIT DOWN HERE AND NOT DO A WHOLE LOT AGAIN ALSO. NOBODY WANTS TO SELL THIS YEAR BECAUSE LAST YEAR THEY SOLD TOO EARLY AND LOOK WHAT HAPPENED. AND THEY MISSED OUT ON THE MOVE SO EVERYBODY IS BOUND AND DETERMINED TO STORE AS MUCH AS THEY CAN. AND PROBABLY THAT'S GOING TO BE THE WRONG THING TO DO THIS YEAR.

Pearson: LET'S TALK ABOUT THE WHEAT MARKET. A LITTLE BIT BRIGHTER PICTURE THERE, AT LEAST IN TERMS OF THE DEMAND SIDE. GOOD EXPORT NUMBERS.

Pfitzenmaier: WELL, THE DEMAND IS GOOD BUT THE EUROPEAN CROP IS HUGE. THE WINTER WHEAT CROP HERE IS GOING IN IN JUST EXCELLENT SHAPE, GOOD EMERGENCE, GOOD EXCELLENT CATEGORY HIGH ON IT. SO I MEAN MAYBE YOU CAN RALLY WHEAT -- DECEMBER WHEAT UP IN THAT 330, 340, MAYBE 345 AREA, AND THEN I THINK YOU HAVE TO BE SELLING WHEAT BECAUSE, AGAIN, WHEAT IS GOING TO BE COMPETING AGAINST $2 CORN AND A HUGE CROP IN EUROPE. NOW, EVERYBODY SAYS, YEAH, WELL THE DOLLAR IS CHEAP, AND THAT'S TRUE. BUT TRANSPORTATION FREIGHT RATES ARE ALSO VERY HIGH, AND THAT'S OFFSETTING QUITE A BIT OF THIS CHEAP DOLLAR. SO AGAIN, RALLY POTENTIAL IS THERE. IT WAS NICE TO SEE IT TURN AROUND. YOU'RE PROBABLY GOING TO GET SOME TECHNICAL CARRY THROUGH ON THAT, BUT DON'T LET YOURSELF GET OVERLY EXCITED ABOUT THAT BECAUSE IT'S PROBABLY NOT GOING VERY FAR.

Pearson: OKAY. LET'S TALK ABOUT THE COTTON MARKET, WHICH HAS BEEN DULL, TO SAY THE LEAST. A BIG CROP THERE TOO.

Pfitzenmaier: HUGE CROP THERE. I MEAN EVERYBODY KNOWS THAT. WE'VE TALKED ABOUT THAT FOR QUITE A WHILE. THE PROBLEM NOW YOU HAVE TO SHIFT TO IS DEMAND. THAT SHOULD BE SUPPORTIVE. AGAIN, YOU'VE GOT THE DOLLAR ISSUE SUPPORTING US, TO SOME EXTENT. YOU'VE GOT HIGH OIL PRICES, WHICH MAKE THE SYNTHETICS THAT COMPETE AGAINST COTTON A LOT MORE EXPENSIVE, AND THEN YOU'VE GOT CHEAP COTTON. SO, YOU KNOW, THE FASHION INDUSTRY HAS A TENDENCY TO SHIFT BACK AND FORTH, DEPENDING ON PRICES. SO AGAIN, IT TAKES SOME TIME BUT YOU'RE PROBABLY GOING TO SEE A LITTLE SHIFTING AWAY FROM SOME OF THOSE SYNTHETICS TOWARD SOME OF THE COTTON PRODUCTS TO HELP STIMULATE THAT DEMAND AND BUILD THAT DEMAND BASIS UP AGAIN. THAT'S GOING TO TAKE A WHILE. WE PROBABLY HAVE THE POTENTIAL TO MOVE COTTON DOWN IN THAT 44, 43, 43.5 AREA. YOU GET UP IN THAT 47.5, 48, AND THAT'S PROBABLY ABOUT ALL YOU'RE GOING TO BE ABLE TO DO.

Pearson: ALL RIGHT. LET'S SHIFT GEARS AND TALK ABOUT LIVESTOCK. FED-CATTLE MARKET, WE'RE HEARING MORE AND MORE ABOUT THE SHOW LISTS NOT GETTING CLEARED UP AND MORE -- CATTLE-ON-FEED REPORT ALSO CONFIRMED THAT. TALK TO THESE CATTLEMEN.

Pfitzenmaier: WELL, THE CATTLE MARKET KIND OF FELL. YOUR REPORT HERE JUST BEFORE WE CAME ON SHOWED OCTOBER CATTLE UP A DIME, BUT OCTOBER CATTLE WENT OFF THE BOARD THIS WEEK. THE ACTUAL DECEMBER FUTURES WERE DOWN THE LIMIT AND WERE OFF SHARPLY, BECAUSE WE HAD A LITTLE WEAKNESS IN THE CASH MARKET. WE HAD TONS OF RUMORS FLYING AROUND THE MARKET TODAY ABOUT, YOU KNOW, THE PRESIDENTIAL ELECTION AND OSAMA BIN LADEN AND EVERY OTHER THING THAT THE MARKET COULD THROW AT IT. YOU HAD HUGE FUND LIQUIDATION, AND WE WENT RIGHT BACK DOWN TO THE BOTTOM END OF OUR TRADING RANGE, WHICH KIND OF NEEDS TO HOLD HERE. YOU'VE ALSO GOT THE PROBLEM WITH THE WEIGHTS ON THE CATTLE, YOU KNOW, ARE ABOUT AT THEIR PEAK, HOPEFULLY AT THEIR PEAK. SEASONALLY THEY SHOULD START TO DROP OFF. THE ADKIN'S LOW-CARB DIET THING IS STARTING TO WANE A LITTLE BIT, SO YOU'RE FACING THAT DEMAND PROBLEM. SOME PEOPLE WOULD LIKE TO THINK THAT THE JAPANESE MARKET IS GOING TO KICK UP, BUT THAT'S PROBABLY NOT GOING TO HELP US TILL NEXT SPRING. SO THERE'S SOME PROBLEMS WITH THE CATTLE MARKET HERE THAT WE NEED TO WORK OUR WAY THROUGH, AND WE'RE PROBABLY GOING TO STRUGGLE IN THAT FOR A WHILE. I THINK YOU GET DECEMBER, FEBRUARY CATTLE UP IN THAT $88 TO $90 AREA, YOU HAVE TO BE A BUYER OF PUTS OR SELLER OF THE FUTURES.

Pearson: REAL QUICK, FEEDER CATTLE ALSO UNDER SOME PRESSURE THIS WEEK.

Pfitzenmaier: YEAH, THAT MARKET HAS GOT -- I MEAN EVENTUALLY THESE HIGH-PRICED FEEDERS THAT PEOPLE PAY FOR AND DON'T MAKE MONEY ON ARE EVENTUALLY GOING TO MAKE PEOPLE BACK OFF AND SAY, "I'M NOT DOING THAT TILL THE WHOLE THING GETS PROFITABLE." AND IT'S NOT VERY PROFITABLE AT THE LEVELS WE'VE BEEN, AND NOW IT'S STARTING TO BACK OFF A LITTLE BIT. I THINK PEOPLE ARE PULLING IN THEIR HORNS -- PARDON THE PUN. AND THAT'S GOING TO HAVE TO BACK THAT FEEDER MARKET OFF A LITTLE BIT TOO I THINK.

Pearson: LET'S TALK ABOUT HOGS. YOU KNOW, SURPRISINGLY GOOD, LATE SUMMER STRENGTH IN HOGS. WE'RE KILLING AN AWFUL LOT OF HOGS. WE ARE JUST WRAPPING UP OCTOBER PORK MONTH. WE ALWAYS PROMOTED HOGS THIS TIME OF YEAR BECAUSE THEY WERE ALWAYS UNDER SOME PRESSURE. WE'RE STARTING TO SEE SOME PRESSURE HERE IN THE LAST WEEK. WHAT'S AHEAD NOW FOR HOGS?

Pfitzenmaier: THE PORK MARKET IS HANGING IN THERE FAIRLY WELL. DEMAND ON THAT SIDE HAS BEEN VERY GOOD. I THINK THEY'RE GOING TO CONTINUE TO DO WELL IN THE JAPANESE MARKET. I THINK THERE'S SOME CONCERN OUT INTO NEXT SPRING, IF WE START TO PICK UP THE BEEF BUSINESS THERE THAT IT'S GOING TO BE AT THE EXPENSE OF THE PORK INDUSTRY A LITTLE BIT. BUT THEY'RE HANGING IN THERE VERY WELL. I THINK DECEMBER YOU'RE PROBABLY GOING TO SEE IT GO OFF THE BOARD IN THAT 55 TO 66 AREA. BUT YOU LOOK AT NEXT JUNE UP AT $69, $70, PROBABLY A PRETTY GOOD SALE BECAUSE THE WHOLE WORLD COULD CHANGE A LITTLE BIT. I MEAN THEY'RE SUBJECT TO THE SAME PRESSURES IN TERMS OF, YOU KNOW, COMPETITION WITH OIL PRICES AND THE DOLLARS THAT THAT TAKES OUT OF PEOPLE'S POCKETS. AND IT'S GOING TO LIMIT THEIR INTEREST IN BUYING PORK AND BEEF.

Pearson: SO YOU MIGHT WANT TO TAKE A LOOK AT LEAST AT THE SUMMER CONTRACTS.

Pfitzenmaier: OH, YEAH, THE APRIL AND THE JUNE CONTRACT I THINK YOU HAVE TO LOOK AT PRETTY HARD.

Pearson: OKAY, SO SOME POSITIVE NEWS THERE FOR PRODUCERS. AT LEAST THERE'S AN OPPORTUNITY OUT THERE.

Pfitzenmaier: YEAH, ABSOLUTELY.

Pearson: MAYBE WORTH TAKING ADVANTAGE OF. TOMM, WE'VE ONLY GOT ABOUT FIVE SECONDS LEFT. WITH THIS CORN MARKET DOWN WHERE IT IS, YOU'RE TALKING ABOUT LOWER BEAN MARKET. WOULD YOU START COVERING SOME CORN NEEDS FOR FEED?

Pfitzenmaier: TEN TO TWELVE CENTS DOWN FROM HERE, I'D BE AGGRESSIVELY BUYING CORN.

Pearson: VERY GOOD. TOMM PFITZENMAIER, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT IF YOU'D LIKE MORE INFORMATION FROM TOMM ON JUST WHERE THESE MARKETS MIGHT BE HEADED, THEN BE SURE TO CHECK THE STREAMING AUDIO ON THE "MARKET PLUS" PAGE AT OUR "MARKET TO MARKET" WEB SITE. AND BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE'LL EXAMINE THE IMPACT OF THE RURAL VOTE ON THE OUTCOME OF THE PRESIDENTIAL ELECTION. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

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