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Market Analysis: Sep 10, 2004

posted on September 10, 2004


The buzz in the grain pits Friday was whether Dec corn would hold its $2.25 contract low or slip further on news of the big crop. For the week, nearby wheat futures gained 15 cents. But September corn fell nearly 13 cents.

In the bean pits, traders are still watching the weather even though the post harvest fundamentals got more positive on today's report. For the week, September beans lost nearly 52 cents. The nearby meal contract dropped $4 per ton.

The cotton market moved sideways and for the week was up 25 cents.

In livestock, the October live cattle contract gained $2.30. Nearby feeders jumped $2.90. And the October lean hog contract edged up 65 cents.

In the financials, Comex gold gained $1.30 an ounce. The Euro gained 207 basis points against the dollar. And the CRB Index dropped nearly three points to close at 272.50.

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

Market Analysis: Sep 10, 2004 Martin: THANK YOU, MARK.

Pearson: BIG CORN NUMBER FROM THE USDA, 11 BILLION BUSHELS. THEY RILED IT UP, SAID IT'S GOING TO BE 11 BILLION BUSHELS. WHAT'S THAT BODE AS FAR AS PRICE IS CONCERNED FOR THE NEXT MARKETING YEAR?

Martin: WELL, I THINK THAT OVERALL, WE'RE GOING TO STILL HEAD A LITTLE BIT LOWER AS WE GO TOWARDS -- THROUGH OUR HARVEST PRESSURE. WE CONTINUE TO HEAR VERY GOOD YIELDS. THE SOUTH HAS VERY GOOD YIELDS, RECORD YIELDS. AND I KNOW, TALKING TO CLIENTS OUT OF INDIANA AND PARTS OF ILLINOIS THAT ARE HARVESTING, THAT YIELDS ARE JUST FABULOUS. BUT THEY'RE DUE BECAUSE IF THEY COMPARE THEM TO LAST YEAR, WELL, LAST YEAR WAS A TOUGH YEAR WITH DRYNESS, BUT THE CORN CROPS WERE BETTER THAN THE BEAN CROP LAST YEAR. IN THE MEANTIME, DEMAND OVER THE NEXT YEAR, WELL WE SHOULD HAVE SOME DECENT EXPORT DEMAND. BUT HAVING SAID THAT, ON THE WORLD FRONT, WE'RE GOING TO SEE FEED WHEAT COMPETE WITH CORN A LITTLE BIT. SO I THINK THAT WHEN I LOOK AT THE CORN MARKET, WHAT DO I LOOK FOR OVER THE NEXT YEAR? I SUSPECT THAT THE MARKETS WILL RALLY IN THE JANUARY/FEBRUARY/MARCH TIME FRAME. BUT I HAVE A FEELING WE'LL SEE EARLY HIGHS NEXT YEAR, AND MAYBE THE MARKET COMES BACK TO 2.50, 2.60, MAYBE EVEN 2.80. AND THAT MIGHT BE ABOUT AS GOOD AS IT GETS.

Pearson: ALL RIGHT. SO NOT GET IN A BIG HURRY TO MAKE SALES THIS FALL. IT'S A CLASSIC HARVEST LOW THIS YEAR, DO YOU THINK?

Martin: I THINK SO. I THINK CORN IS MORE OF A TRADITIONAL, YOU KNOW, ALL YEAR LONG I HAVE NOT FELT THAT THE CORN MARKET WAS REALLY THE TRUE BULL MARKET. I FELT IT WAS MORE IN BEANS THAT THE BULLISHNESS WAS AND THAT THE CORN WAS A FOLLOWER BUT REALLY BUILT UP. IF YOU LISTEN TO THE TRADE TALK, THE RHETORIC YOU HEAR IS THAT NEXT YEAR IS GOING TO BE A BULLISH YEAR FOR CORN. WELL, IT VERY WELL MAY BE BUT I DON'T THINK IT'S GOING TO BE THE HOT ITEM. I THINK ON MARKETS, AS I LOOK AT NEXT YEAR, I THINK THE FIRST QUARTER IS GOING TO BE RATHER INTERESTING. MAYBE THAT'S THE BEST TIME TO BE SELLING. AND FROM THERE ON, I THINK WE'RE GOING TO HAVE SOME ISSUES TO DEAL WITH. THE ONE THING I WILL SAY, THOUGH, IN CORN'S FAVOR IS WHEN YOU LOOK AT CHINA, THEY'RE BUILDING THREE NEW BIG HUGE ETHANOL PLANTS TO THE NORTH WHERE THEY PRODUCE CORN, WITH THE INTENTION THAT THEY'LL SEND ETHANOL SOUTH. BUT HAVING SAID THAT, BECAUSE THEY CAN'T SEEM TO GET ENOUGH ENERGY OUT OF RUSSIA AND, OF COURSE, INDIA IS GROWING BY LEAPS AND BOUNDS TOO, SO SEEING ETHANOL PLANTS BEING BUILT AROUND THE WORLD, IT SAYS THAT YOU'RE GOING TO HAVE A BIG DRAW ON DEMAND ELSEWHERE, TOO.

Pearson: ANOTHER POSITIVE FOR BUILDING DEMAND DOWN THE ROAD, CERTAINLY. LET'S TALK ABOUT SOYBEANS NOW. AGAIN, THE USDA IS LOOKING FOR A BIG CROP OF SOYBEANS. BRAZIL, EARLY SIGNAL IS IT'S GOING TO BE A BIG CROP DOWN THERE. WHAT SHOULD A SOYBEAN PRODUCER BE THINKING ABOUT IF MAYBE HE HASN'T MADE MUCH IN THE WAY OF NEW CROP SALES YET?

Martin: WELL, I'M GOING TO RECOMMEND IF THEY HAVE NOT MADE NEW CROP SALES, THEY JUST BYPASSED AN OPPORTUNITY HERE RECENTLY. OF COURSE, HINDSIGHT IS GREAT. BUT WE HAD A DOLLAR RALLY OF A REPRIEVE COMING OFF THE LOWS, AND THAT'S PROBABLY BEEN OUR PRE-HARVEST RALLY HIGH. IN THE MEANTIME, I'M NOT REAL NEGATIVE LIKE A LOT OF TRADERS ARE. I THINK THAT THE BEAN MARKET IS GOING TO $8 BASIS THE MAY FUTURES, AND I THINK THAT HAPPENS IN THE JANUARY/FEBRUARY TIME FRAME. IF THERE'S A WEATHER ISSUE IN SOUTH AMERICA, THAT'S GOING TO ENHANCE THAT MOVE A LITTLE BIT. BUT THE THING I LOOK AT IS THAT I THINK WE'RE IN FAIRLY LOW TERRITORY. IF YOU WANT TO SELL AND DELIVER YOUR BEANS BY THE END OF SEPTEMBER AND CAN DRAW A GOOD BASIS, GO AHEAD AND DO SO AND REPLACE BACK ON THE BOARD; THE 5.52 TO 5.58 AREA. WE CAME DOWN ON FRIDAY, TOUCHED THE 5.57, WHICH WAS A SPIKE LOW FROM BEFORE. THERE'S SOME TECHNICAL SUPPORT AT 5.58, AND THE MARKET IN A HEARTBEAT RALLIED 20 CENTS. SO IT SHOWED SOMEBODY WANTED TO OWN BEANS DOWN THERE. I THINK THE MARKET HAS MERIT ON BREAKS. MY LONG-TERM TIME INDICATOR ON THE CONTINUATION CHARTS, WHICH WOULD BE YOUR LEAD MONTHS ALWAYS ON THAT CHART AND, OF COURSE, SEPT. BEANS GO OFF THE BOARD NEXT TUESDAY AND THEN NOVEMBER BEANS WILL BE ON THAT CHART, IS AT 8-10 PERCENT ON THE CLOSE TODAY. IT SAT AT ONE PERCENT FOR THREE WEEKS. THAT'S GETTING AWFULLY LOW AND IT TELLS YOU NOT TO BE TOO BEARISH AT THE TIME. WE'LL HAVE A HARVEST BREAK HERE THAT'S PROBABLY NOT GOING TO BE LONG-LIVED, AND I THINK THE MARKETS WILL TURN AND TRY TO START TO RALLY.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE WHEAT MARKET. AGAIN, IT HASN'T BEEN AN OVERLY BULLISH PICTURE THERE EITHER. GOOD CROPS WORLDWIDE. AND DEMAND HAS BEEN SO-SO. WHAT ABOUT WHEAT PRODUCERS RIGHT NOW?

Martin: WELL, I THINK THE WHEAT PRODUCER IS THE ONE THAT'S JUSTIFIED TO REALLY SEE SOME KIND OF A FORMATION SET UP, A BOTTOM HERE, WHICH WE MAY HAVE SEEN ON THE END OF THE WEEK HERE. IN FACT, A LOT OF THINGS THAT ENDED UP CLOSING HIGHER FOR THE WEEK ENDED UP DOING SO ALL ON THE LAST DAY OF THE WEEK. I THINK THAT WHEN I LOOK AT THIS WHEAT MARKET, YOU KNOW, MINNEAPOLIS WHEAT WAS UP SHARPLY AND THAT LED THE WAY FOR THE K.C. AND THE CHICAGO. BUT, YOU KNOW, YOU HAVE A QUALITY ISSUE THERE. SO BASIS LEVELS ARE VERY FIRM THROUGHOUT MINNESOTA AND THE DAKOTAS. BUT WHEN I LOOK AT THE CHICAGO, YOU KNOW, I THINK THAT YOU'RE SEEING SPREADING WHERE THEY'RE BUYING -- TODAY, I THINK WE'VE SEEN A LOT OF SPREADING WHERE THEY WERE ACTUALLY SELLING BEANS AND BUYING WHEAT, SELLING CORN AND BUYING WHEAT. FINALLY WHEAT IS TRYING TO STAND ON ITS OWN. LET'S HOPE THAT -- ON ITS OWN -- HOPEFULLY THIS NEXT WEEK WE CAN SEE IT CONTINUE.

Pearson: LET'S TALK ABOUT THE COTTON MARKET. HAD THE WTO NEWS ON EARLIER. THERE'S ALWAYS THOSE ISSUES OUT THERE. COTTON EXPORTS, YOU KNOW, A DECENT YEAR. THERE'S STILL A LOT OF CONCERN ABOUT COTTON AND HOW MUCH IS TOO MUCH. IT'S HAD A HUGE BREAK AND IT'S RALLIED BACK. WHAT'S AHEAD NOW?

Martin: WELL, I THINK WHEN I LOOK AT THE COTTON, IT'S BEING HELPED OUT BY ALL THE HURRICANES THAT WE'RE SEEING, THE FEAR THAT THEY'VE COME INTO THE GULF AND NOW, WITH THE BOLLS JUST OPENING, THAT THAT'S GOING TO DAMAGE A LOT OF OUR COTTON CROP. AND SO THAT KEEPS GIVING US SOME WEATHER BOUNCES, BUT THE 55-CENT AREA IS KIND OF A TOUGH LITTLE AREA TO DEAL WITH. AND SO I THINK AROUND THIS .55 TO .58 AREA, IF THE MARKET GETS BACK UP THERE ON WEATHER ISSUES, I PROBABLY WOULD LOOK TO SELL SOME.

Pearson: ALL RIGHT. LET'S TALK ABOUT LIVESTOCK. YOU'VE BEEN A LITTLE NERVOUS ABOUT THIS CATTLE MARKET. ABOUT MIDSUMMER, YOU TURNED A LITTLE -- GOT A LITTLE CHILLED ON IT. AND WE'VE SEEN THAT MARKET BREAK DOWN, $80 ON THE FED CATTLE MARKET. HAD A NICE RALLY BACK UP THIS WEEK. WHAT'S YOUR TAKE? WE'VE GOT THIS HOLDING-CATTLE-BACK PHENOMENON OCCURRING RIGHT NOW. HOW MUCH OF THAT IS GOING TO IMPACT US ON THIS BEEF MARKET DOWN THE ROAD?

Martin: WELL, I THINK THAT THE PACKER CAME IN, OF COURSE, SHORT BOUGHT. AND WITH A SHORT KILL WEEK, HE NEEDED TO BE PROBABLY STEPPING UP TO BAT AND GETTING HIS CHAIN SPEED GOING. HOWEVER, IF THE PACKER WAS FEELING REAL ENTHUSIASTIC AND THOUGHT THAT HE WAS GOING TO BE MAKING A LOT OF GOOD MONEY, THAT THINGS ARE ABOUT TO CHANGE, HE'D BE RAMPING UP HIS CHAIN SPEED A LITTLE BIT AND BE BUYING EVERYTHING HE COULD GET HIS HANDS ON. I DON'T THINK THAT'S THE CASE. I JUST THINK HE NEEDED TO FILL HIS COFFERS A LITTLE BIT FOR ONE WEEK. AND I THINK THAT THE RETAIL LEVEL, WE'VE SEEN BEEF PRICES DROP 24 CENTS NATIONWIDE ON THE AVERAGE THIS WEEK WHICH, AS THE RETAILER IS STARTING TO FEATURE BEEF A LITTLE BIT AND OF COURSE HAS ROOM TO DO SO, BUT WHEN YOU LOOK AT THE WEIGHTS, WE'RE STILL RUNNING 22 POUNDS OVER A YEAR AGO, 14 OVER THE FIVE-YEAR AVERAGE. THAT'S STILL ADDING TOO MUCH TONNAGE, AND I SUSPECT HEAVY WEIGHTS WILL BE WITH US AT LEAST THROUGH NOVEMBER. SO I THINK WHAT WE'RE GETTING HERE IS A BRIEF RALLY IN A MARKET THAT'S GOING TO DOWNSIZE. AND I THINK THAT THE FEEDERS ARE PROBABLY THE ONE YOU OUGHT TO BE LOOKING AT EVEN MORE THAN FATS, AND I THINK PEOPLE SHOULD BE HEDGING CATTLE. THE ONE COMMENT I HEAR CONSTANTLY IS, "WELL, THE CASH MARKETS OR THE AUCTIONS ARE MUCH HIGHER." WELL, I'M SORRY, BUT I REALLY THINK THAT THIS IS NOT GOING TO HOLD HERE, THAT WE'RE LOOKING AT ABOUT A THREE-, MAYBE AT THE BEST FOUR-DAY RALLY, AND THE MARKETS ARE GOING TO END UP AT THE END OF THE MONTH ON THEIR LOWS.

Pearson: ALL RIGHT. SO WITH THAT KIND OF A SCENARIO IN MIND, DO YOU SEE THAT IMPROVING AS WE GET INTO THE FIRST QUARTER OF NEXT YEAR ON FED CATTLE?

Martin: YES, I DO. I THINK THAT AS WE GO TOWARDS THE FIRST WEEK OF DECEMBER, I FIRST THOUGHT MAYBE THE FIRST WEEK OF OCTOBER WOULD TURN US. AND I THINK WE WILL, FOR THE OCTOBER CONTRACT, GET A LITTLE BLIP AGAIN, TURN DOWN, AND HAVE THE NOVEMBER UNDER THE GUN TOO. BUT BY THE FIRST WEEK OF DECEMBER, I'M WONDERING IF WE AREN'T GOING TO PUT A LOW IN THIS MARKET AND THEN TURN HIGHER INTO THE WINTER.

Pearson: I'M HEARING THE SAME COMMENTS FROM COW/CALF PEOPLE ABOUT THESE FEEDER MARKETS. THEY DON'T REALLY SEE THE POINT IN HEDGING WHEN THESE PRICES HAVE BEEN PHENOMENAL. AND THEY HAVE BEEN PHENOMENAL.

Martin: THEY HAVE BEEN BUT THEY NEED TO KEEP PUSHING THEM AND GET THOSE CALVES GONE. AND I THINK PEOPLE BUYING FEEDERS, YOU NEED TO BE, YOU KNOW, PROTECTING YOURSELF. BUY PUTS IF NOTHING ELSE, AND FLOOR THEM. BUT, YOU KNOW, AT LEAST HAVE SOME PROTECTION. YOU KNOW, I SEE THE MENTALITY OUT HERE IN THIS CATTLE MARKET THAT ALMOST SEEMS THE SAME AS WHAT WE HAD WHEN WE HAD BEANS OVER $10. PEOPLE JUST DIDN'T THINK IT COULD GO DOWN, AND THEY GOT LEFT IN THE DUST. FEEDLOT PEOPLE ARE VERY FRIENDLY TO THE MARKET. SOMEWHAT I CAN UNDERSTAND BECAUSE THEY'RE LOOKING AT THE NUMBER SIDE AND SAYING, WELL, BUT WE'RE NOT KILLING AS MANY CATTLE, THAT TYPE OF THING. BUT THEY'RE GOING TO TALK POSITIVE. THEY HAVE TO FILL THEIR LOTS. AND IF THEY WANT PEOPLE WILLING TO BUY THESE HIGH-PRICED FEEDERS, THEY'RE GOING TO HAVE TROUBLE GETTING THEIR LOTS FULL. IT DOESN'T KEEP THEIR GUYS BUSY.

Pearson: ALL RIGHT. SO WITH THAT IN MIND, HOPEFULLY A LITTLE CAUTIONARY NOTE TO BOTH THE CATTLEMEN AND -- BOTH CATTLE FEEDERS AND THE COW/CALF PRODUCERS OUT THERE. LET'S TALK ABOUT THE PORK PRODUCER. ACTUALLY, WE'RE GETTING ALONG THIS SUMMER PRETTY WELL. THEY DIDN'T BAN PORK IN JAPAN AND ELSEWHERE, SO THAT DEMAND HAS BEEN STRONG. THE PORK MARKET HAS COME BACK PRETTY GOOD. WE ARE KILLING A TREMENDOUS NUMBER OF HOGS RIGHT NOW.

Martin: WE ARE. WE'RE DOING ALMOST 400,000 A DAY, 399-, 400,000. I CAN'T EVER RECALL A TIME THAT WE'VE DONE THIS CONSISTENTLY AND KEPT THE HOG MARKET UP. I THINK IT'S CONDUCIVE TO THE FACT THAT -- IT'S KIND OF LIKE WITH THE CATTLE. IT'S ALL ABOUT DEMAND AND THE CONSUMER DEMAND ON BEEF HAS SLACKENED A LITTLE BIT. IN THE MEANTIME -- AND THE RETAILER IS HOPING BY LOWERING PRICES THAT WILL PICK UP. BUT IN THE MEANTIME, THEY'RE GOING AFTER THE PORK, WHICH IS A CHEAPER PRICED PRODUCT BUT GOOD, YOU KNOW. IT'S THE OTHER WHITE MEAT. AND IT'S CERTAINLY HOLDING ITS VALUE, AND EXPORTS ARE VERY GOOD, AS WELL.

Pearson: ALL RIGHT. SO POSITIVES ALL THE WAY AROUND RIGHT NOW IN THE PORK INDUSTRY. BIG NUMBERS AND GOOD DEMAND. SUE MARTIN, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT IF YOU'D LIKE MORE INFORMATION FROM SUE 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 OF COURSE, BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE'LL EXAMINE EFFORTS UNDER WAY IN MINNESOTA TO BOOST THE STATE'S ETHANOL INDUSTRY. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

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