Iowa Public Television

 

Market Analysis: May 07, 2004

posted on May 7, 2004


The record pace of planting plus wet and warm weather in Chicago made all that corn planted on LaSalle Street look like a bumper crop. For the week, the nearby wheat futures contract gained 12 cents. But the May corn contract drifted lower by more than nine cents.

Better-than-expected export sales and reduced acreage estimates from private sources boosted soybean prices. For the week, the nearby bean contract gained more than 16 cents. May meal was up by another $11 per ton.

May cotton staged a nice rally, gaining $5.39 over last week's close.

In livestock, the new nearby live cattle contract gained $4.10. May feeders advanced by the same amount. And the lean hog contract jumped another $3.65.

In the financials, Comex gold dropped another $8.40 an ounce. The Euro was down 85 basis points against the dollar. And the CRB Index lost less than a half point to close at 270.40.

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

Market Analysis: May 07, 2004

Hjort: THANK YOU, MARK.

Pearson: WELL, LET'S FIRST KICK OFF SOMETHING WE HAVEN'T TALKED AS MUCH ABOUT, AND THAT'S BEEN THIS WHEAT MARKET. DRY WEATHER OUT IN MANY PARTS OF THE WHEAT BELT ARE CAUSING SOME CONCERN, BUT THERE SEEMS TO BE ADEQUATE WORLDWIDE PRODUCTION.

Hjort: YEAH, I THINK THE SUPPLY/DEMAND BALANCES ARE ADEQUATE FOR THE OLD CROP ESPECIALLY AND GOING INTO THE NEW. AS WAS POINTED OUT EARLIER ON THE SHOW, IT LOOKS LIKE WE SHOULD HAVE A FAIRLY DECENT WORLD CROP. THERE'S STILL QUITE A BIT TO BE SAID HERE ABOUT CHINA'S CROP, ABOUT RUSSIA'S CROP, AND THE FORMER SOVIET UNION CROP, AS WELL AS HERE IN THE UNITED STATES. SO ON WEDNESDAY MORNING, USDA WILL GIVE US A LOOK AT THE WINTER WHEAT PRODUCTION ESTIMATE FOR THE UNITED STATES. WE'RE LOOKING AT NUMBERS COMING DOWN. I WOULD JUST MAKE ONE COMMENT COMPARING THIS YEAR TO LAST YEAR. ON THE KANSAS WHEAT TOUR THIS YEAR, THEY CAME UP WITH A PRODUCTION ESTIMATE FOR KANSAS PRETTY MUCH THE SAME AS THEIR TOUR RESULTS WERE A YEAR AGO. WELL, A YEAR AGO THE WEATHER IN MAY WAS JUST PERFECT FOR WINTER WHEAT AND THAT PRODUCTION GREW OVER A HUNDRED MILLION BUSHELS FROM THEIR ESTIMATE TO THE FINAL PRODUCTION. THIS YEAR IT'S JUST KIND OF THE OTHER WAY AROUND, AS WE SAW THIS WEEK. VERY HOT, KIND OF WINDY, DRY WEATHER OUT THERE IN AT LEAST THE WESTERN HALF OF THE WINTER WHEAT PRODUCING AREA. SO DON'T LOOK FOR ANY BIG INCREASES THIS YEAR. THAT COULD MAKE OUR FINAL OUTCOME ON WINTER WHEAT SHARPLY LOWER, ESPECIALLY FOR THE HARD RED WINTER WHEAT.

Pearson: AS WE GO AHEAD NOW AND PRODUCERS ARE LOOKING TOWARD HARVEST, WHICH ISN'T THAT FAR AWAY, I ALSO MENTIONED EARLIER, WE'RE GETTING THINGS STARTED DOWN IN SOUTH TEXAS AND WORKING OUR WAY UP TO THE NORTH. AS WE START TO SEE THE HARVEST BEGIN IN WHEAT, ARE WE GOING TO BEGIN TO SEE MORE PRESSURE ON THESE NEARBY CONTRACTS?

Hjort: WELL, I THINK WE WILL BUT I DON'T LOOK FOR VERY MUCH. NOT A NORMAL SEASONAL PATTERN AT ALL. AND ONE OF THE REASONS FOR THAT IS WORLD STOCKS OF WHEAT RIGHT NOW, BEFORE WE REALLY DIG INTO THIS NEW CROP, ARE REALLY KIND OF TIGHT. ALSO, YOU GET THE SUPPORTIVE FACTOR FROM CORN PRICES AT $3 OR HIGHER AND, OF COURSE, SOYBEAN PRICES WHERE THEY'RE AT. DEMAND FOR TOTAL GRAINS AND ALSO, AS WAS POINTED OUT A FEW MINUTES AGO ON THE SHOW, TOTAL WORLD GRAIN PRODUCTION, YEAH, IT MIGHT REACH A RECORD LEVEL, BUT IT'S STILL GOING TO COME FAR SHORT OF WHAT THE EXPECTED DEMAND IS. THIS IS MORE OBVIOUS IN THE CORN MARKET THAN IT IS IN WHEAT. BUT IT IS A LINGERING IMPACT ON THE WHEAT, AND THAT WILL KEEP THESE WHEAT PRICES FROM FALLING TOO MUCH. BASIS LEVELS, OF COURSE, MOST LIKELY WILL SUFFER AS THE WHEAT STARTS TO ROLL INTO THE LOCAL ELEVATORS.

Pearson: DOUG, LET'S MOVE OVER TO CORN. VERY TIGHT SCENARIO FOR THE '04-'05 CORN CROP. OBVIOUSLY WE NEED GOOD YIELDS. WE'RE OFF TO A GREAT START. SPARKS TALKING ABOUT AN EXTRA 2.5 MILLION ACRES. WE'LL SEE MORE IN THE USDA REPORT. RIGHT NOW OUR FIRST INITIAL GLANCE AT THE U.S. CROP, IT LOOKS AWFULLY GOOD.

Hjort: WELL, IT REALLY DOES. PRODUCTION IS GOOD, ABOUT AS GOOD AS IT COULD BE PERHAPS, ALTHOUGH WEATHER HAS NOT BEEN PERFECT BY ANY STRETCH OF THE IMAGINATION, IT'S BEEN HIGHLY VOLATILE: HOT TEMPERATURES, COLD TEMPERATURES, AND SO ON. AND THERE WAS A FORECAST OUT LATE THIS PAST WEEK THAT TALKS ABOUT POSSIBLE FROST AGAIN IN THE NORTHERN CORN BELT AREAS, LAKE STATES AND SO ON, A WEEK FROM THIS WEEKEND. WELL, THAT'S NOT OUT OF THE ORDINARY PERHAPS, BUT IT PROBABLY PUTS A LITTLE STRESS ON SOME OF THESE PLANTS TOO. I WOULD POINT OUT ON SPARKS NUMBER, I DON'T HAVE IT EXACT BUT THEIR PRODUCTION NUMBER WAS SOMETHING OVER 10.4 BILLION BUSHEL. BUT USDA IN FEBRUARY ALREADY PREDICTED THE DEMAND FOR THE NEW YEAR WOULD BE 10.5 BILLION BUSHEL, AND FOR THIS YEAR OUR TOTAL DEMAND IS GOING TO WIND UP AT ABOUT 10.5 BILLION. SO THIS MARKET FOR CORN IS VERY, VERY STRONG. AND IF WE DO NOT -- IF WE DO NOT MAINTAIN A RECORD HIGH YIELD WITH AT LEAST 2 MILLION ACRES MORE PLANTED, THESE CORN PRICES ARE GOING TO GO SHARPLY HIGHER IN THE NEW YEAR.

Pearson: STRATEGY-WISE YOU STILL WOULDN'T BE PRICING NEW CROP.

Hjort: I AM NOT. WE'RE DOWN A DIME, 15 CENTS, SOMETHING LIKE THAT, FROM THE BEST NEW CROP PRICE THAT WE HAD SEEN BACK A MONTH AGO. BUT I'M NOT WILLING TO PRICE NOW AND MOST LIKELY NOT AT THAT HIGH LEVEL, SHOULD WE GET BACK THERE.

Pearson: YOU MENTIONED SOYBEANS AND THE VOLATILITY. THAT'S CERTAINLY BEEN THE CASE AGAIN THIS WEEK, WIDE SWINGS IN THIS BEAN MARKET. A LOT OF CONCERN ABOUT OLD CROP AND GETTING THROUGH TO NEW CROP PRODUCTION. LET'S TALK FIRST ABOUT OLD CROP. THERE'S NOT A LOT OF OLD CROP SOYBEANS LEFT OUT THERE TO SELL.

Hjort: WELL, THAT'S RIGHT. AND ON FRIDAY WE SAW THIS FUTURES MARKET JUST SKYROCKETING BECAUSE FARMERS AREN'T SELLING ANY BEANS. AND AS YOU POINT OUT, THERE AREN'T VERY MANY LEFT IN FARMER HANDS. ON PAPER, WE ARE GOING TO RUN OUT OF SOYBEANS IN MAYBE JULY... I DON'T KNOW JUST WHEN, BUT THIS SUMMER SOMETIME. SO WHAT'S GOING TO HAPPEN? THE CRUSH ARE SHUT DOWN AND WE IMPORT MEAL, WE IMPORT OIL TO OFFSET. I'M NOT SURE WHAT WILL HAPPEN, BUT WE'RE USING WAY TOO MUCH -- TOO MANY SOYBEANS. THIS WEEK WE SAW THE EDIBLE OIL CONSUMPTION REPORT SHOWING THAT CONSUMPTION DURING MARCH -- AND REMEMBER MARCH WAS A TIME WE PUT IN OUR CONTRACT HIGHS -- WAS UP 2.5 PERCENT, BOTH FOR TOTAL EDIBLE OILS AND FOR SOYBEAN OIL. THAT'S HERE IN THE UNITED STATES. WELL, IF THOSE HIGH PRICES DID NOT SLOW DOWN DEMAND -- AND THAT DEMAND HAS TO DROP DRAMATICALLY BELOW A YEAR AGO TO GET US THROUGH, YOU SEE, TO THE NEW CROP. SO WE'RE REALLY IN A BIND RIGHT NOW. AND MAYBE ON FRIDAY, THE STRONG OLD CROP FUTURES GAINS AND, BY THE WAY, EVEN ON TOP OF THAT, BASIS LEVELS IMPROVED ANYWAY. SO THEY'RE GOING AFTER THE BEANS JUST LIKE IN THE SUMMER OF 1996, THE END USER WENT SCRAMBLING AFTER CORN AND COULD NOT FIND IT BECAUSE WE PHYSICALLY RAN OUT OF CORN IN SEVERAL AREAS. SO THIS NEXT TWO MONTHS OR THREE, ARE REALLY GOING TO BE AN EXPLOSIVE SITUATION ON SOYBEANS. AND, YES, WE'LL SEE IMPORTS COMING IN OF THE PRODUCT, BUT IT'S GOING TO BE REALLY -- A REALLY VOLATILE PRICE TIME.

Pearson: HOW MUCH OF AN IMPACT WILL THAT HAVE ON NEW CROP, AND WHERE ARE YOU WILLING TO START MAKING SOME NEW CROP BEAN SALES?

Hjort: ON NEW CROP, WE DON'T HAVE TIME TO REALLY GET INTO IT NOW BECAUSE IT'S NOT THAT IMPORTANT. BUT RIGHT NOW PEOPLE ARE LOOKING FOR A NEW CROP STOCK TO INCREASE 100 MILLION, MAYBE 150 MILLION BUSHEL FROM THIS YEAR. IF WE WOULD TAKE AN AVERAGE YIELD, A MOST COMMON YIELD OVER THE LAST TEN YEARS OF 38.5 BUSHEL PER ACRE INSTEAD OF TREND LINE AT 40 BUSHEL PER ACRE, WE WOULD WIND UP WITH ENDING STOCKS AS LOW AS THEY ARE GOING TO BE THIS FALL. AND IF ANY SORT OF A WEATHER PROBLEM COMES, WE COULD BE IN A TIGHTER SUPPLY/DEMAND RELATIONSHIP NEXT YEAR ON SOYBEANS THAN WE ARE THIS YEAR. NOW, THAT'S REALLY SAYING A LOT. OBVIOUSLY IT DEPENDS ON WHAT HAPPENS IN SOUTH AMERICA TOO. THE DEMAND FOR PROTEIN IS SO STRONG THAT WE'RE FALLING INTO THE SAME PATTERN NOW ON SOYBEANS AS WE HAD BEEN IN CORN FOR A LONG TIME. WE'VE GOT TO PLANT MORE ACRES. WE'VE GOT TO HAVE VERY HIGH YIELDS JUST TO STAY UP WITH THIS DEMAND. SO I'M NOT READY TO SELL ANY NEW CROP BEANS NOW. THE PRICE ISN'T THAT BAD. THAT'S NOT THE PROBLEM. THE PROBLEM WILL BE WHAT HAPPENS WHEN THESE PRICES JUST REALLY START TO SWING, AND I THINK THAT WILL TAKE NEW CROP PRICES UP WITH IT. WE SAW SOME OF THAT STARTING TO HAPPEN THIS WEEK IN THE SOYBEAN MARKET.

Pearson: VOLATILE MARKET IN COTTON THIS WEEK AS WELL. A BIG UP MOVE.

Hjort: YEAH, IT IS. THE SUPPLY/DEMAND BALANCE-WISE, IT'S NOT THAT BAD, BUT YOU'RE STARTING TO SEE INTEREST IN PULLING COTTON ACRES AWAY AND PUTTING THEM TO SOYBEANS. THAT MARKET IS GOING TO STAY VERY VOLATILE.

Pearson: LET'S TALK ABOUT LIVESTOCK; FED-CATTLE MARKET FIRST. YOU WERE TALKING ABOUT WHETHER THE CASH MARKET WAS GOING TO COME UP AND MEET THE FUTURES OR WHETHER THE -- OR GO DOWN TO MEET THE FUTURES OR WHETHER THE FUTURES WOULD COME UP. FUTURES ARE COMING UP.

Hjort: THEY'RE COMING UP BUT THE CASH THIS WEEK WENT GOOFY. THE LAST TWO WEEKS WERE UP SHARPLY ON CASH PRICES. THE PACKER HAD THE MONEY TO PAY BECAUSE WHOLESALE PRICES HAD JUMPED, WHAT, THREE AND FOUR WEEKS BEFORE -- OR EARLIER. I SHOULD SAY TWO AND THREE WEEKS BEFORE THAT, THE CASH PRICE TOOK OFF. BUT, YEAH, IT'S CRAZY. YOU KNOW, THERE WAS $94 PAID FOR A FEW CATTLE THIS WEEK. THIS MARKET IS VERY STRONG AND IT LEADS INTO THE PORK AS WELL BECAUSE DEMAND FOR PROTEIN -- AGAIN, WE'RE TALKING PROTEIN THE SAME AS WE ARE IN THE BEANS AND THE CORN. YOU'RE TALKING PROTEIN AT THE RETAIL LEVEL HERE. RETAILERS SAID THIS WEEK THAT THEY INTEND TO FEATURE KIND OF A SMORGASBORD, BEEF, PORK, CHICKEN, THE WHOLE WORKS FOR THE MONTH OF MAY. PORK IS GAINING ON THAT DEMAND FROM BEEF, BUT BEEF DEMAND STILL VERY, VERY STRONG. I DON'T KNOW THAT WE COULD DO MUCH BETTER ON THESE PRICES THAN WE SAW THIS WEEK, BUT THEY WILL REMAIN VERY STRONG.

Pearson: ALL RIGHT. YOU MENTIONED HOGS. LET'S MOVE OVER TO THE HOG MARKET AND WHAT'S BEEN HAPPENING. THERE AGAIN, A LOT OF STRENGTH. YOU MENTIONED THE PROTEIN AND THE FEATURING -- THE RETAIL FEATURING OF PORK.

Hjort: IT'S PARTLY BECAUSE THE RETAIL PRICE OF BEEF IS UP AT SUCH A HIGH LEVEL HERE. THEY ARE SEEING A LITTLE BIT OF CONSUMER RESISTANCE AT SOME OF THESE BEEF PRICES, ALTHOUGH THEY'RE NOT GETTING AS MANY SPECIALS COMING ALONG TO BUY WHAT YOU REALLY WANT. IN THE PORK, RETAILERS ARE STARTING TO PUSH THAT MORE. THE PRODUCT CAN BE PRICED MORE AGGRESSIVELY THAN THE BEEF CAN. AND RETAIL -- OR EXCUSE ME, THE CARCASS VALUES ON THE PORK UP SHARPLY THIS WEEK. THAT SUGGESTS OR CONFIRMS, WHICHEVER YOU WANT TO USE, THAT THE RETAIL DEMAND IS VERY, VERY STRONG. SO I LOOK FOR CASH HOG PRICES TO STAY QUITE STRONG FOR SEVERAL MORE WEEKS.

Pearson: AT THIS STAGE OF THE GAME FROM A HEDGING STANDPOINT, ANYTHING YOU WANT TO DO?

Hjort: NO, NOT REALLY. THE PRICE, AGAIN, IS NOT THAT BAD OUT THERE, BUT THE VOLATILITY IS NOT THE TIME TO DO ANY HEDGING.

Pearson: DOUG HJORT, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT IF YOU'D LIKE ADDITIONAL DETAILS FROM DOUG ON WHERE THESE VOLATILE MARKETS MAY BE HEADED, BE SURE TO CHECK OUT THE STREAMING AUDIO ON THE "MARKET PLUS" PAGE ON OUR "MARKET TO MARKET" WEB SITE. BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE'LL REVIEW THE DEBATE ON WHOLESALE LIVESTOCK TESTING IN AN EFFORT TO REOPEN FOREIGN MARKETS TO U.S. BEEF. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

"MARKET TO MARKET" IS A PRODUCTION OF IOWA PUBLIC TELEVISION, WHICH IS SOLELY RESPONSIBLE FOR ITS CONTENT. MAJOR FUNDING IS PROVIDED BY THIS AND OTHER PUBLIC TELEVISION STATIONS.

AND 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."

THIS PROGRAM IS BROUGHT TO YOU BY JOHN DEERE AND YOUR JOHN DEERE DEALER, WHERE TECHNOLOGY IS PROVING, ONCE AGAIN, NOTHING RUNS LIKE A DEERE.

Tags: agriculture commodity prices corn markets news