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Market Analysis: Feb 27, 2004

posted on February 27, 2004


Traders this week acted on growing evidence that tight supplies will impact grains as well as oilseeds.

For the week, the March wheat futures contract gained more than nine cents. Nearby corn climbed by more than 11 cents, and the May contract closed above $3.00 Friday.

As mentioned, tight supplies and red-hot demand pushed soybean prices to new highs. For the week, nearby beans soared another 50 cents and now have posted a two-week gain of $1.13 a bushel. March meal jumped almost $10 per ton.

Cotton also had a great week, with the March futures contract up by $4.41.

In livestock, the February live cattle contract closed out Friday with a gain of $3.65. March feeders improved $2.33. And the new lean hog contract jumped another $1.92.

In the financials, Comex gold lost 70 cents an ounce. The Euro lost a mere 32 basis points against the dollar. And the CRB Index rocketed up by more than nine points to close at 273.90.

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

Market Analysis: Feb 27, 2004

Martin: THANK YOU, MARK.

Pearson: I CAN'T WAIT. I'VE GOT TO ASK YOU ABOUT SOYBEANS. THE SOYBEAN MARKET HAS BEEN UNBELIEVABLE. WE JUST TALKED ABOUT $1.13 GAIN ON THE NEARBY IN THE LAST TWO WEEKS. I MEAN WE'RE SEEING SOME UNPRECEDENTED -- NOT UNPRECEDENTED BUT CERTAINLY MARKETS WE HAVEN'T SEEN IN A LONG TIME ON SOYBEANS. EVERY ONE IS JUST WONDERING WHAT'S AHEAD. WHAT DO YOU THINK? WHERE COULD THIS THING POTENTIALLY GO, SUE?

Martin: WELL, I THINK THAT WE'RE IN AN EXCITING TIME IN THE BEAN MARKET. HOW MANY YEARS HAS IT BEEN SINCE WE'VE SEEN SOUTH AMERICA HAVE HICCUPS IN THEIR CROP PRODUCTION? BUT THEY'RE HAVING THEM THIS YEAR. SO THAT'S A BENEFIT FOR THE PRODUCER. WE'VE GOTTEN TO ABOUT $9 BEANS -- OR I SHOULD SAY $8 TO $8.50, MAYBE, ON DEMAND, AND THE DOLLAR BEING DOWN. NOW WE'RE RALLYING ON SOUTH AMERICAN ISSUES IN WEATHER. THE NORTHERN REGIONS HAVE RECEIVED WAY TOO MUCH RAIN. QUALITY IS A BIG ISSUE WITH THE BEANS THERE IN THOSE REGIONS, AND ALSO, OF COURSE, BEAN SPROUTING IN THE PODS, COMMON NEWS THAT YOU HEAR EVERYWHERE, AND BEANS TURNING BLACK, THAT TYPE OF THING. BUT ALL IN ALL AT THE END OF THE DAY, THE YIELDS ARE GOING TO BE DOWN, AND ALSO THE PRODUCTION IS STARTING TO -- THE ESTIMATES ARE STARTING TO COME DOWN. CONAB A WEEK AGO CAME OUT WITH 57.6 MILLION METRIC TONS. NOW, KEEP IN MIND THE USDA, IN FEBRUARY, WENT FROM 60 MILLION METRIC TONS TO 61. WE THINK THEY'RE WRONG. WE THINK THAT THEY CAME UP WITH THAT NUMBER BY LOOKING AT SATELLITE IMAGERY AND SEEING ALL THE EXTRA ACRES AND THINKING THEY HAD TO RAISE THEIR PRODUCTION. WE LOOK FOR THAT TO TURN AROUND AND COME BACK DOWN. IT MIGHT START HERE IN THE MARCH REPORT. SO I THINK THAT WE'VE HAD SAFFRAF MERCADOS COME OUT AT 56.6 MILLION METRIC TONS. SPARKS CAME OUT WITH THEIR ESTIMATES AT 55. AND TO BE HONEST WITH YOU, I THINK WHEN THIS IS ALL SAID AND DONE, WE'RE GOING TO BE NO BETTER THAN WE WERE A YEAR AGO AT 52. SO I THINK THAT WE'VE GOT MORE TO LOOK FOR. I THINK YOU'VE GOT A MARKET THAT IS NOW GOING TOWARDS REALIZATION AND EVOLVING, AND IT'S ALSO STARTING TO COME INTO A SEASONAL. MARKETS HAVE BEEN COUNTERSEASONAL ALL FALL AND THE FIRST TWO MONTHS OF THIS YEAR. I THINK NOW WE'RE GOING TO TURN INTO A SEASONAL MARKET, AND THAT WILL STILL BENEFIT -- ANY BREAKS THAT WE HAVE WILL BE JUST SHORT LIVED, AND THE MARKET WILL COME BACK HIGHER. THE MAY CONTRACT OF BEANS HAS HAD A VERY STRONG TENDENCY IN THE PAST, FIVE TIMES OVER THE LAST 33 YEARS, TO HAVE $10-PLUS BEANS. SO MAY BEANS IS NOT VIRGIN TO $10 BEANS. AND IF THERE'S ANY YEAR A MAY CONTRACT SHOULD DO $10, IT'S THIS YEAR. ON TOP OF IT, THE CONTRACT HIGH FOR -- AN ALL-TIME HIGH, I SHOULD SAY, FOR MAY BEANS IS 1076.5. AND THE TREND LINES -- THAT WAS IN THE YEAR OF 1977. IF YOU TAKE THE NEXT HIGHEST MARKET BEFORE THAT WAS 1973. THAT TREND LINE IS MOVING UP. AND AS WE GO TOWARDS MAY, THAT TREND LINE, IF WE TAKE OUT THAT 1076 HIGH, WHICH I THINK WE'RE GOING TO THIS YEAR, THAT PROJECTS BEANS UP TO 460 -- 1463, 1466, SOMEWHERE IN THERE. IF YOU TAKE AN EQUAL LEG SWING IN THIS MARKET FROM THE VERY LOW THAT YOU HAD IN 1969 TO THE 1973 HIGH FOR A LEAD MONTH OF BEANS, THAT RANGE, TAKE THAT OFF OF THE 401 LOWS THAT YOU HAD IN 1999 AND PROJECT THAT LEG BACK UP LIKE CATTLE DID, PROJECTS YOU TO 1445 TO 1455, RIGHT IN THERE. SO I THINK THERE IS POTENTIAL HERE. BUT I REALLY BELIEVE BEANS ARE GOING TO PUT A TEN IN FRONT OF THEM. I THINK YOU'LL SEE THAT IN THE MONTH OF MARCH. IT MAY COME HERE VERY QUICKLY, AND I THINK VERY POSSIBLY WE TAKE BEANS OVER 1076.

Pearson: THE REAL INTEREST SEEMS TO BE WHEN WE LITERALLY START TO RUN OUT OF BEANS, BECAUSE AT THIS POINT, ARE WE STARTING TO FINALLY RATION SUPPLIES? AT LEAST COMMERCIALS ARE IN THERE BUYING.

Martin: WELL, THE COMMERCIALS ARE VERY AGGRESSIVE AND THEY'RE BUYING VERY AGGRESSIVELY. NOW, THERE'S WORD THAT THERE'S A VESSEL OF SOYBEANS HEADED TO THE U.S. AND OF COURSE, SOME WONDER WHAT'S GOING TO HAPPEN WITH MONSANTO, HOW THEY'RE GOING TO REACT TO IT. IT'S ALL IFS AND WONDER. BUT IN THE MEANTIME, BEANS ARE GOING TO COME INTO THE U.S. IT'S THOUGHT THAT THE BEANS THAT COME INTO THE U.S. MORE THAN NOT BY ADM, CARGILL, THAT TYPE OF THING, WILL PROBABLY COME IN VIA FROM ARGENTINA. AND THOSE BEANS SHOULD BE PRETTY MUCH, FOR ALL PRACTICAL PURPOSES, ASIAN RUST-FREE. SO WE'RE GOING TO IMPORT BUT I THINK THAT WE -- I DON'T REALLY THINK WE'RE RATIONING BEANS JUST YET, BECAUSE OUR CRUSH FOR THE MONTH OF FEBRUARY IS EXPECTED TO SHOW TWO MILLION MORE BUSHELS CRUSHED THAN LAST MONTH, AND THAT MEANS OVER 140 MILLION BUSHELS. WE'RE NOT SLOWING THE CRUSH AND WE CAN'T KEEP THAT UP. BUT IN THE MEANTIME, EXPORT SALES THAT PAST WEEK WERE A DISAPPOINTMENT. SO THAT WAS A SURPRISE BUT I THINK THAT'S NOTHING MORE THAN A PLOY BY CHINA TO DRIVE PRICES BACKWARDS, AND IT DIDN'T LAST LONG. CHINA WILL COME BACK. THEY'LL COME BACK TO US.

Pearson: THE OLD CROP STORY IS PHENOMENAL. I TALKED TO A LOT OF PRODUCERS. THEY DON'T HAVE ANY OLD CROP BEANS. WHAT ABOUT NEW CROP, SUE?

Martin: WELL, I'VE ALWAYS BEEN A BULL SINCE LATE FALL, EARLY WINTER. I WAS A BULL FOR NOVEMBER BEANS. IT WAS JUST LIKE A GIVEN. YOU HAD TO SEE BEANS GO TO 735. WE'VE DONE THAT. NORMALLY WHEN WE HIT OUR THIRD COUNTS, THE MARKET WILL GIVE YOU A HESITATION AND PULL BACK, BUT I DON'T SEE THE HESITATION BEING VERY LONG LIVED BECAUSE, REMEMBER, WE HAD ONE CORRECTION IN HERE ON THE NOVEMBER BEANS BEFORE THEY CAME UP TO THIS 735 AREA. SO I THINK THE HESITATION IS SLOW, OR SHALLOW IS A BETTER WORD. AND THEN I THINK WE TAKE NOVEMBER BEANS UP TO $8.

Pearson: ALL RIGHT. LET'S MOVE ON. I WANT TO TALK ABOUT THE CORN MARKET. AGAIN, VERY TIGHT SCENARIO THERE, $3 MAY CORN. BUT WHAT'S AHEAD NOW FOR CORN?

Martin: WELL, HERE'S THE SURPRISE. I'M NOT FRIENDLY CORN AT THIS LEVEL. I THINK THAT CORN HAS HAD A FAIRLY GOOD MOVE. I THINK IT'S OVERPRICED AT THE MOMENT, ALTHOUGH SOME WOULD DISAGREE WITH ME. OUR TIMING INDICATORS, I'VE MENTIONED THOSE OFF AND ON OVER A PERIOD OF TIME, ON WEEKLY DATA. ON A LEAD MONTH OF CORN, OR WHEN MARCH GOES OFF, MAY WILL GO ON THAT CHART, IS AT 99.7 PERCENT. THAT INDICATOR DOESN'T GO TO A HUNDRED. IN THE MEANTIME, YOU'VE GOT JULY CORN AT 99.9 PERCENT AND THE DECEMBER IS AT 99.6. I THINK CORN IS A SELL HERE. AND IF I WAS A PRODUCER WHO NEEDS TO BE SELLING SOMETHING HERE IN THE VERY NEAR TERM, I WOULD BE SELLING MY CORN BEFORE MONDAY MORNING'S OPENING. IN THE MEANTIME, WHAT CAN CAUSE THIS? WELL, FIRST OF ALL, YOU'VE GOT WHEAT THAT'S NOT TOO FAR FROM BEING COMPETITIVE INTO FEED RATIONS. AND WE'VE HEARD THAT KANSAS IS OUT OF CORN. THEY EITHER HAVE TO GO TO NEBRASKA TO GET CORN OR THEY'RE GOING TO START TO PUT WHEAT INTO THEIR RATIONS. I THINK THAT COULD BE A LITTLE BIT OF A NEGATIVE FOR CORN AS WELL.

Pearson: NEW CROP SALES ON CORN?

Martin: I WOULD SELL SOME. I WOULD START HERE. NOW, KEEP IN MIND LONGER TERM, AS WE GO TOWARDS SUMMER, THERE'S WHERE I REALLY THINK WE'LL GET OUR HIGHS. SO I THINK WE'RE IN FOR A CORRECTION HERE AND WE MAY KILL TIME. BUT THIS IS A WEEKLY DATA. IT DOESN'T CLEAN UP IN ONE WEEK, SO WE'VE GOT SOME TIME TO KILL.

Pearson: NOW, YOU MENTIONED KANSAS RUNNING OUT OF CORN. WHEAT, OBVIOUSLY YOU SAW MOVE THIS WEEK, AGAIN A 9-CENT MOVE ON CHICAGO WHEAT.

Martin: THAT'S CORRECT. AND OF COURSE, THE REAL FRIENDLY MARKET, IF YOU'VE GOT TO LOOK AT WHEAT, THE REAL FRIENDLY ONE SEEMS TO BE THE MINNEAPOLIS WHEAT BECAUSE THEY'RE FEARING, THEY'RE LOSING ACRES TO BEANS. AND I THINK THEY WILL. CANADA WILL PROBABLY DO THE SAME THING. THEY'LL PLANT MORE BEANS OR OIL SEEDS AT THE EXPENSE OF WHEAT. SO THAT'S HELPING THE MINNEAPOLIS WHEAT, ALONG WITH CHINESE BUYING IN THAT MARKET. THE CHICAGO AND THE K.C. WHEAT AREN'T MOVING AS WELL AS THEY REALLY SHOULD OR THAT WE'D LIKE TO SEE. NORMALLY AS YOU GO INTO THE MONTH OF MARCH, WHEAT HAS A TENDENCY TO HAVE A VERY STRONG DOWN MOVE.

Pearson: THE COTTON MARKET HAD A VERY STRONG UP MOVE THIS WEEK, BIG MOVE.

Martin: IT DID. AND COTTON, YOU KNOW, WAS ONE OF THE FIRST BULL MARKETS LAST YEAR. I THINK COTTON IS COMING BACK INTO ITS OWN. I THINK YOU'RE GOING TO SEE A LEAD MONTH OF COTTON GO BACK UP TOWARDS 80 CENTS. AND I THINK THERE'S A SEASONAL HERE THAT AS YOU GO INTO MARCH, FOR THE NEXT COUPLE WEEKS ANYWAY, WE SHOULD RALLY COTTON.

Pearson: ALL RIGHT. LET'S SWITCH OVER TO LIVESTOCK. THE FED-CATTLE MARKET HAS HAD A NICE REBOUND ON THE BOARD THIS WEEK. PRETTY GOOD REBOUND ON THE CASH MARKET. A LOT OF TALK ABOUT MEXICO PERHAPS OPENING ITS BORDERS TO U.S. BEEF. WE'RE HEARING THAT FROM A LOT OF DIFFERENT PEOPLE WITHIN THE PACKING INDUSTRY. WHAT'S AHEAD NOW FOR FED CATTLE?

Martin: WELL, I'M FRIENDLY FED CATTLE. I LIKE APRIL FUTURES. I KNOW THERE WAS QUITE A FEW THAT WERE BEARISH, AND YET THE MARKETS COULDN'T BREAK DOWN ON NEGATIVE NEWS. IF YOU GO BACK AND LOOK AT WHAT HAPPENED LAST OCTOBER, NOVEMBER, DECEMBER, WE WERE PULLING CATTLE AHEAD. IF YOU LOOKED AT THE PRICE IN THE FUTURES AND CASH WAS PREMIUM TO THE FUTURES AND THEN YOU LOOKED AT THE NEXT MONTH OUT BEING A LITTLE BIT CHEAPER IN PRICE, PRODUCERS WERE SAYING I'M MOVING CATTLE AS FAST AS I CAN KEEP GOING. THESE ARE WONDERFUL PRICES. THEN, OF COURSE, THE BSE HIT AND WE STARTED BACKING UP BEEF AND FILLING THE COOLERS UP. BUT WHEN YOU LOOK AT WEIGHTS AND, OF COURSE, THE WEATHER HAS BEEN PRETTY AMIABLE, BUT WHEN YOU LOOK AT THE WEIGHTS ON THE CATTLE, WE'RE RUNNING ON STEERS 23 POUNDS UNDER LAST YEAR AND 10 POUNDS UNDER THE FIVE-YEAR AVERAGE. HEIFER CARCASSES ARE RUNNING ABOUT 20 POUNDS UNDER LAST YEAR AND 9 POUNDS UNDER THE FIVE-YEAR AVERAGE. SO I THINK THAT WE'RE GOING TO GO ENTER INTO A WHOLE NEW MARKETING -- FEEDLOTS THAT I TALK TO ARE TELLING ME THAT FOR THE NEXT TWO TO THREE WEEKS THEY DON'T HAVE A LOT OF CATTLE READY FOR MARKET. I THINK PACKERS ARE GOING TO HAVE TO BID FOR CATTLE FOR THE NEXT TWO WEEKS.

Pearson: WHAT ABOUT ON THESE FEEDERS NOW FOR THESE GUYS THAT ARE REFILLING THOSE LOTS? OBVIOUSLY, THAT $3 CORN NUMBER, THAT STARTS TO PUT A CRIMP IN THEIR RETURNS.

Martin: IT SURE DOES. AND HERE'S THE OTHER THING, KIND OF FILTERING BACK TO CORN A LITTLE BIT WITH FEEDERS, BUT WE'RE FINDING THAT FEEDLOTS WEREN'T REAL COVERED IN CORN EITHER. SO THAT'S ANOTHER REASON WHY THEY MIGHT SWITCH TO WHEAT. BUT I THINK THAT IF I'M RIGHT ON CORN HERE, THAT'S GOING TO GIVE THEM A LITTLE EASING, AND THAT SHOULD BE A LITTLE FRIENDLY TO FEEDER CATTLE AND WE'D PUSH FEEDERS UP AS WELL. BUT I THINK FATS LEAD THE WAY.

Pearson: ALL RIGHT. REAL QUICK, HOG MARKET. AS YOU LOOK AT THAT ONE, OBVIOUSLY IT'S BEEN THE ONE TROUBLE-FREE PROTEIN OUT THERE.

Martin: WELL, IT CERTAINLY HAS. AND OF COURSE, IT'S BENEFITTED FROM ALL THE OTHER ISSUES OF POULTRY AND BEEF. BUT EXPORTS ARE GOING TO REMAIN GOOD. I CONTINUE TO SEE JAPAN AS A VERY GOOD BUYER INTO APRIL FOR PORK. I THINK THAT THE AMERICAN CONSUMER IS VERY MUCH BUYING BEEF AND PORK. I THINK THAT THIS MARKET HAS STILL GOT A CHANCE FOR SOME BETTER PRICES. MAYBE SHORT TERM EARLY THIS NEXT WEEK WE'LL HAVE A LITTLE BIT OF A CORRECTION, BUT I THINK HOG PRICES ARE STILL GOING TO EBB HIGHER AS WE GO TOWARDS APRIL.

Pearson: VERY GOOD. SUE MARTIN, AS USUAL, WE APPRECIATE YOUR INSIGHTS. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT IF YOU'D LIKE MORE INSIGHT FROM SUE ON WHERE THESE MARKETS ARE HEADED, THEN BE SURE TO VISIT THE MARKET PLUS PAGE ON OUR "MARKET TO MARKET" WEB SITE. BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE'LL SHOW YOU HOW STAKEHOLDERS IN THE MISSISSIPPI RIVER ARE TRYING TO INFLUENCE DEBATE ON THE RIVER'S USE. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

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