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Market Analysis: Jan 16, 2004

posted on January 16, 2004


The bulls were well fed this week, first by USDA's crop reports and then by news of Chinese interest in U.S. wheat.

For the week, the nearby wheat futures contract jumped by more than 12 cents. And the March corn contract was up by more than 21 cents.

Tighter inventories and reduced 2004 crop estimates pushed soybean prices sharply higher. For the week, March beans advanced nearly 43 cents. Soybean meal gained $20.20 per ton.

March cotton edged up by just 55 cents for the week.

In livestock, the nearby live cattle contract was up $4.60. January feeders gained $2.93. And the lean hog contract advanced by 95 cents.

In financials, Comex gold plunged by nearly $20 an ounce. The Euro retreated for the first time in weeks, losing 458 basis points against the dollar. And the CRB Index lost nearly three points to close at 265.50.

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: Jan 16, 2004 SUE, GOOD TO HAVE YOU WITH US.

Martin: THANK YOU, MARK.

Pearson: WE HAVE CERTAINLY SEEN AN EXCITING MARKET FOR THE LAST, OH GOSH, FOUR MONTHS. AND IT'S CONTINUING NOW AS WE HEAD IN TOWARDS THE WINTER AND THE FEBRUARY TIME FRAME. YOU'VE BEEN FRIENDLY TO ALL OF THESE MARKETS, BUT I WANT YOU TO FIRST TALK ABOUT THIS WHEAT MARKET. AGAIN, ANOTHER DRAMATIC PUSH HIGHER.

Martin: WELL, IT CERTAINLY DID. AFTER STARTING FRIDAY A LITTLE BIT LOWER, IT RALLIED QUITE WELL AND IT ENDED UP THE DAY -- IT TRIED TO TEST A LITTLE OVER $4.00. OF COURSE, $4.00 IS VERY PSYCHOLOGICAL IN THIS MARKET BASIS THE CHICAGO WHEAT, AND IT FELL BACK A LITTLE BIT, JUST CLOSING A LITTLE UNDER $4.00. I LIKE THE WHEAT MARKET. I STILL THINK IT HAS MERIT AND I THINK IT'S KILLING A LOT OF TIME. IT JUST HAS A LOT OF CONGESTION HERE THAT I THINK SAYS WE'RE GOING HIGHER. I LOOK FOR EVENTUALLY WHEAT TO TRY THE $4.29 AREA, THEN THE $4.40 AREA. AND IF THE RIGHT THINGS HAPPEN AS WE GET WHEAT COMING OUT OF DORMANCY, IF WE STILL HAVE SOME DRY AREAS AND, OF COURSE, DEMAND SHOULD REMAIN PRETTY GOOD, I THINK THE WHEAT COULD EVEN PUSH HIGHER.

Pearson: ALL RIGHT. SO AT THIS STAGE OF THE GAME, YOU'RE NOT IN A BIG HURRY TO MAKE SALES.

Martin: NO, I'M NOT. I THINK I'D WAIT THIS OUT AND, OF COURSE, WHEAT IS KIND OF LIKE A CAT WITH NINE LIVES. IF IT CATCHES RAIN AS IT COMES OUT OF DORMANCY -- OR MOISTURE, IT'S GOING TO LOOK PRETTY GOOD. IT WILL COME OUT OF ITS SLUMP, BUT I THINK THAT WE'VE GOT THE CHINESE DELEGATION -- WHEAT TRADE DELEGATION COMING HERE AFTER THE TURN OF THE MONTH. AND THEY'VE ALREADY ANNOUNCED ONE MILLION METRIC TONS OF SALES, SO WHAT ARE THEY GOING TO DO WHEN THEY GET HERE? THEY MUST OBVIOUSLY BE INTERESTED IN BUYING MORE.

Pearson: ALL RIGHT. SO POSITIVE NEWS ALL THE WAY AROUND ON THE WHEAT FRONT. LET'S TALK ABOUT THE CORN MARKET, ALSO GOOD NEWS THIS WEEK. TIGHTER SUPPLIES THAN WHAT PEOPLE HAD ANTICIPATED ON THIS 2003 CORN CROP. WHERE ARE PRICES HEADED THERE? HAVE WE SEEN MOST OF THE GAINS?

Martin: WELL, ONE WANTS TO THINK SO. FARMERS ARE SELLING AVIDLY RIGHT NOW, AND THEY'RE EVEN LOOKING AT NEW CROP DECEMBER AND A LOT OF HEDGE-TO-ARRIVE IS STARTING TO BE LOOKED AT AND FARMERS LOOKING AHEAD TO SELLING SOME NEW CROP CORN. BUT THE ONE THING I WILL SAY IS THAT CORN SEEMS TO HAVE A LOT OF GOOD UNDERLYING FUNDAMENTALS FOR IT. YOU HAVE CHINA, YOU KNOW, OF COURSE, WHICH EVERYBODY UNDERSTANDS AND KNOWS IS THAT CHINA IS NOT IN THE EXPORT MARKET. THEY'RE GOING TO IMPORT CORN INTO THE SOUTHERN PARTS OF THEIR COUNTRY. THAT SENDS BACK THEIR BUYERS TO US, WHICH WE USED TO HAVE AS CUSTOMERS. AND THAT, ALONG WITH THE FACT THAT EASTERN EUROPE HAD A LOT OF WEATHER ISSUES LAST YEAR, THERE JUST ISN'T ANY OTHER PLACE TO GO FOR CORN BUT THE U.S. SO WE'RE VERY BLESSED. EXPORT SALES RUNNING WAY AHEAD OF WHAT THE USDA HAS PROJECTED US. NOW, IN THE MEANTIME, WE HAVE OUR PLASTICS INDUSTRY HERE IN THE U.S. UTILIZING AN AWFUL LOT OF CORN. ETHANOL USAGE WAY UP EVERY MONTH COMPARED TO THE USDA EXPECTATIONS, AND THEN YOU HAVE YOUR LIVESTOCK INDUSTRY. I THINK THAT WE HAVE A MARKET HERE THAT'S GOT A LOT OF POTENTIAL, AND THAT'S NOT EVEN WITH WEATHER.

Pearson: WHAT'S YOUR TARGET NOW FOR OLD CROP CORN, AND WHAT DO YOU THINK ABOUT THOSE DECEMBER NEW CROP SALES?

Martin: WELL, FIRST OF ALL, THE DECEMBER CORN AROUND THIS $2.72 TO $2.77, THERE IS SOME RESISTANCE. BUT THERE IS MORE POTENTIAL UP AROUND $2.90, -95. IT'S NOT A COMMON THING TO SEE DECEMBER CORN THIS HIGH THIS EARLY IN THE YEAR. BUT I DO THINK THAT WE HAVE POTENTIAL TO TAKE DEC. CORN TO $2.90, -95. AND THE OTHER -- AND, YOU KNOW, IF A PRODUCER WANTS TO DO SOME HEDGE TO ARRIVE HERE -- YOU KNOW, THEY HAVE A NEW NAME FOR IT, BUT IT'S ALL THE SAME THING -- THERE'S NOTHING WRONG WITH THAT. IF THAT'S THE CHEAPEST SALES YOU MAKE THIS YEAR, YOU'RE GOING TO HAVE A VERY GOOD YEAR. AS FAR AS OLD CROP CORN, WELL, I STILL THINK WE HAVE HIGHER TO GO. I THINK THAT ALTHOUGH IN THE PAST WHENEVER DECEMBER CORN FUTURES HAS MADE THEIR HIGH, A NEW CONTRACT HIGH IN THE MONTH OF DECEMBER, WHICH DID HAPPEN THIS LAST DECEMBER, CORN ON THE JULY FUTURES MAKES NEW HIGHS AFTER THE TURN OF THE YEAR. IN THE PAST FORTY-THREE YEARS, THERE'S ONLY BEEN FIVE TIMES I THINK THAT THAT'S OCCURRED, AND TWO OR THREE OF THOSE TIMES DID PUT TOPS IN JANUARY. SO THAT IS SOMETHING TO BE CONCERNED ABOUT. BUT WHEN I LOOK AT SOUTH AFRICA, 50 PERCENT OF THEIR CORN IS POLLINATING IN HIGH HEAT AND DRY CONDITIONS. IT LOOKS LIKE THEY'LL TURN IMPORTER BEFORE THE YEAR IS DONE. WHEN I LOOK AT ARGENTINA, WHO IS NOW NUMBER SECOND IN EXPORTS -- AND THEY'RE WAY BEHIND US IN EXPORTS -- THEY'RE HAVING TROUBLE WITH THEIR CROP. REMEMBER, THEY DIDN'T GET ALL THEIR CORN PLANTED, AND NOW THEY'RE HAVING HOT, DRY WEATHER AS WELL. IT'S EXPECTED TO BE IN THE UPPER 90S, LOW 100S THIS NEXT WEEK. THEY'RE POLLINATING AS WELL. I THINK THERE'S A LOT OF POTENTIAL IN THIS MARKET.

Pearson: ALL RIGHT. SO DON'T GET IN A BIG RUSH TO SELL CORN AT THIS STAGE. LET'S TALK ABOUT SOYBEANS. YOU'VE BEEN VERY FRIENDLY TO THE BEANS ALL THE WAY ALONG. IT'S WORKED OUT VERY WELL. HAVE WE HAD THIS SHOT UP THAT YOU WERE LOOKING FOR, OR DO WE STILL HAVE SOME WAYS TO GO HIGHER ON THE BEANS?

Martin: I THINK WE STILL HAVE SOME POTENTIAL YET LEFT IN THIS MARKET. THE $8.12 AREA, $8.05 TO $8.12, WAS REALLY HOLDING US AT BAY AND PUT US INTO A TRADING RANGE AFFAIR FOR ABOUT FOUR OR FIVE WEEKS. WE FINALLY MANAGED TO COME OUT OF THAT AND GAP HIGHER, WHICH IS USUALLY HOW YOU'LL DO THAT. NOW, HAVING HAD A WEEK HERE WHERE YOU GAPPED UP AND HAD A VIOLENT UP MOVE -- AND WE CLOSED BARELY ON THE MARCH BEANS IN THE UPPER HALF OF THE RANGE -- THAT USUALLY PORTENDS THAT YOU'LL HAVE A STRONGER WEEK THE NEXT WEEK. I DO HAVE TIMING AROUND THE 26TH OF JANUARY, AND I THINK IT'S GOING TO BE A HIGH, NOT A MAJOR HIGH BUT A TEMPORARY HIGH. I LOOK FOR BEANS TO GET UP TO AROUND THE -- ONCE WE CLEAR THE MARCHES OVER $8.62 -- THAT WAS YOUR 1997 HIGH, LAST MAJOR HIGH FOR MARCH FUTURES -- I THINK WE CAN GO UP AND WE'RE GOING TO TEST THAT $8.90, -94, $9.00 AREA. THAT'S WHERE I REALLY THINK THE MARKET HAS GOT ITS EYES ON.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE COTTON MARKET. A LITTLE BIT OF AN UP TICK IN THAT MARKET THIS WEEK.

Martin: WELL, IT CERTAINLY WAS. AND, OF COURSE, YOU KNOW, CHINA SEEMS TO BE INTERESTED IN COTTON AS WELL. BUT YOU KNOW, MARK, THERE'S ONE THING THAT WE HAVEN'T TALKED ABOUT. AND YOU KIND OF TOUCHED ON IT IN YOUR EARLIER COMMENTS, AND IT WAS THE FACT THAT THE DOLLAR AGAINST THE EURO HAS GAINED. WE'VE HAD A VERY NICE REACTION HERE THE LAST FEW DAYS OF THIS WEEK, AND I THINK THAT'S SOMETHING WE HAVE TO WATCH. THE DOLLAR IS LONG OVERDUE FOR REACTION, AND THAT COULD PLAY A BIG HAND IN HOW THESE MARKETS EBB THROUGH THE MONTH OF FEBRUARY.

Pearson: THAT'S RIGHT. LET'S TALK ABOUT THE LIVESTOCK MARKETS. OF COURSE, THE INTERNATIONAL MARKET IS VERY IMPORTANT THERE. THIS BEEF INDUSTRY REELING WITH THE DECISION BY JAPAN AND THESE OTHER COUNTRIES NOW TO NO LONGER IMPORT U.S. BEEF BECAUSE OF OUR MAD COW OUTBREAK. IT'S NOT A HUGE PART OF OUR BEEF INDUSTRY IN THIS COUNTRY, 10 PERCENT OR SO. BUT THE IMPACT IS BETTER THAN $3 BILLION, SO IT'S GOING TO HAVE AN IMPACT ON PRODUCERS' BOTTOM LINES. HAVE WE STABILIZED NOW IN THIS FED CATTLE MARKET? ARE YOU STARTING TO SEE IT KIND OF EDGE UP?

Martin: WELL, I THINK WE HAVE. WE STABILIZED. WHAT HAPPENED TO US IS THAT ONCE WE GOT PAST THE INITIAL SHOCK OF EVERYTHING AND STARTED TO SETTLE DOWN AND RELOOK AT THINGS AND FOUND THAT THE U.S. CONSUMER -- I THINK THAT WAS THE BIGGEST FEAR, THAT THE U.S. CONSUMER WAS GOING TO HAVE SHOCK WITH THE HIGH PRICES AND STEP AWAY FROM BEEF. AND THEY HAVEN'T. THEY'VE STAYED RIGHT WITH IT. AND OF COURSE, BEEF IS A VERY GOOD VIABLE PRODUCT. I THINK THAT THAT'S HELPED OUT THE MARKETS TREMENDOUSLY. PACKERS HAVE COME BACK TO BUY THE MARKET. AND OF COURSE, AFTER WE GOT PAST THE HOLIDAYS, THE PIPELINES WERE EMPTY. THEY NEEDED TO REFILL AND THAT'S PART OF THIS BUYING. THIS NEXT WEEK WE'LL PROBABLY SEE CASH TRADE AROUND 82 CENTS. NEARLY EVERYBODY THINKS SO, BUT THE CATTLE-ON-FEED REPORT WAS A LITTLE BIT ON THE NEGATIVE SIDE TOO. SHOWING MARKETINGS AT 96 PERCENT MEANT WE BACKED A FEW CATTLE UP. WE ALSO WERE EXPECTING, AS WE WENT INTO THE FIRST QUARTER OF THE YEAR, TO HAVE MORE CATTLE AND MORE HEAVYWEIGHT CHOICE CATTLE. SO I THINK THAT WE'RE GOING TO RALLY A LITTLE MORE, BUT I THINK WE'RE LIMITED AS TO HOW MUCH MORE WE CAN LIFT THE MARKET. I WOULD BE VERY INTERESTED IN HEDGING IF WE GET ANOTHER DOLLAR OR TWO HIGHER ON THE APRIL CONTRACTS. AND UP FRONT, I'D KEEP YOUR CATTLE MOVED. I DON'T THINK THIS THING IS GOING STRAIGHT UP.

Pearson: I WANT TO TALK ABOUT HOGS, BUT REAL QUICK ON THESE FEEDER CATTLE, THEY'VE ALSO HAD A NICE RECOVERY BUT THIS HIGHER CORN PRICE IS GOING TO BE IMPACTING THAT FEEDER CATTLE MARKET.

Martin: IT IS IMPACTING THE FEEDER MARKET, AND I THINK THAT IF YOU TAKE JANUARY FEEDERS UP AROUND THIS 90-CENT TO 892, THAT'S THE BEST I THINK IT CAN DO. AUGUST FEEDERS, MAYBE 90 CENTS. I DON'T SEE IT MUCH OVER THAT. SO I THINK THE FEEDER MARKET HAS GOT A LITTLE TROUBLE HERE TOO. I DON'T TRUST THE CATTLE MARKET. NOT MUCH HIGHER AND I THINK WE'VE GOT A FEW PROBLEMS AGAIN. I THINK WE'RE GOING TO BE SEESAWING HERE.

Pearson: ALL RIGHT. WHAT ABOUT ON THESE HOGS, SUE?

Martin: WELL, I THINK THE HOG MARKET STILL HAS GOT MORE MERIT. YOU KNOW, THERE'S GOOD DEMAND FOR PORK. LOINS THIS WEEK JUMPED QUITE NICELY. EVEN IN ONE DAY, IT WAS $2.00 TO $7.00 HIGHER ON EXPORT -- GOOD EXPORTS. AND DEMAND DOMESTICALLY SEEMS TO BE GOOD FOR PORK. NUMBERS ARE STARTING TO TAPER UP. WEIGHTS ARE STARTING TO TAPER DOWN LOWER THAN A YEAR AGO'S LEVELS. I THINK THE HOG MARKET CAN STILL MOVE HIGHER HERE.

Pearson: ALL RIGHT. WHAT KIND OF MOVE WOULD YOU LIKE TO SEE?

Martin: WELL, I THINK ON THE -- I GUESS RATHER THAN DOLLARS I'D SAY TIME-WISE, I THINK WE CAN MOVE UP INTO ABOUT THE FEBRUARY EXPIRATION.

Pearson: EXCELLENT. SUE MARTIN, ALWAYS GOOD TO GET YOUR INSIGHTS. THAT'S GOING TO WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT IF YOU'D LIKE MORE DETAIL FROM SUE ON WHERE THESE MARKETS MAY BE HEADED, THEN BE SURE TO VISIT THE MARKET PLUS PAGE ON OUR "MARKET TO MARKET" WEB SITE. AND BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE'LL LEARN HOW ONE SMALL MIDWEST COMMUNITY HAS BEEN IMPACTED BY THE CONSTRUCTION OF AN ETHANOL PLANT. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA


Tags: agriculture commodity prices Mad Cow markets news USDA wheat