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Market Analysis: Nov 28, 2003

posted on November 28, 2003


A potential trade war with China and tight world supplies have pushed most of the markets into narrow trading ranges.

At Wednesday's close, the nearby wheat futures contract gained just more than three cents for the week. December corn was up by 6½ cents.

The Chinese trade flap and rain in South America dampened soybean prices. Nearby beans dropped nearly eight cents. December meal lost $1.70 per ton.

Cotton futures gained 40 cents.

In livestock, November live cattle gained $1.35. January feeders advanced $2.97. The lean hog contract lost $1.40.

In financials, Comex gold gained 80 cents an ounce. The Euro basically was unchanged, up 23 basis points against the dollar. And the CRB Index lost a point and a half to close at 249-even.

Here now to lend us her insight on just where these markets may be headed is one of our regular market analysts, Sue Martin. Welcome back.

Market Analysis: Nov 28, 2003

Martin: THANK YOU, MARK.

Pearson: WELL, LET'S GET STARTED. LET'S START WITH THIS WHEAT MARKET. WE'VE HAD DECENT ROUNDS IN WHEAT, CORN, AND BEANS. THIS WEEK REALLY WAS ONE OF THE LESS INTERESTING WEEKS, AS FAR AS MARKETED ACTION WAS CONCERNED. THAT WAS TRUE WITH WHEAT.

Martin: WELL, THAT'S TRUE. THE WHEAT MARKET, ALTHOUGH IT DID SHOW SOME SIGNS OF COMING BACK, TESTING LAST WEEK'S HIGHS, AND THAT WAS A GOOD SIGN FOR THE MARKET. WE NEEDED TO SEE IT AFTER MONDAY BEING BACK DOWN FROM OFF OF THE FRIDAY RALLY, THE PREVIOUS FRIDAY RALLY. IT WAS NICE TO SEE THAT MARKET SHOW SOME ENTHUSIASM. WE CONTINUE TO BE BELIEVERS THAT THE WHEAT MARKET IS STILL GOING TO TRY TO COME BACK AND TEST THE HIGHS AGAIN. OF COURSE, MINNEAPOLIS WHEAT IS AT THE HIGHS OF THE RECENT MOVE. SO WE THINK THAT THE CHINESE TRADE DELEGATION IS EXPECTED TO COME HERE NEXT WEEK, THE FIRST WEEK OF DECEMBER, AND WE THINK THAT THEY'LL BE INTERESTED IN BUYING WHEAT. THEY'VE ALREADY BEEN LOOKING AT AUSTRALIAN WHEAT AND SO -- IN FACT, RUMORS ARE THAT THEY'RE LOOKING AT UP TO A MILLION METRIC TONS. SO I THINK THAT THAT'S A GOOD SIGN. IT SHOWS THAT THEY ARE INDEED INTERESTED IN BUYING IN THE WORLD MARKET.

Pearson: STRATEGY-WISE, IF YOU HAVE WHEAT THERE, ARE YOU INTERESTED IN PRICING ANYTHING AT THIS POINT?

Martin: WELL, I HAD THOUGHT IF YOU COULD GET THE WHEAT MARKET UP AROUND THE $4.40 AREA BASIS CHICAGO WHEAT THAT THAT WOULD BE A SPOT THAT YOU TAKE ADVANTAGE OF AND LET SOME OF YOUR CASH WHEAT GO. I HAVE A FEELING THERE'S BETTER TIMES YET DOWN THE ROAD. KANSAS REMAINS FAIRLY DRY, BUT IT'S GOING INTO DORMANCY, SO WE HAVE A WHILE TO WAIT. IN THE MEANTIME, THE MARKET HAS A TENDENCY TO TRY TO SEESAW THROUGH THE MONTH OF DECEMBER, MAYBE SELLS OFF A LITTLE BIT HERE, AND THEN COMES BACK AS WE GO IN TOWARDS JANUARY. THEN YOU DIP INTO FEBRUARY AND THEN ON UP INTO MAY. AND I THINK THAT WE DO HAVE A CHANCE FOR THIS WHEAT MARKET TO BE BETTER DOWN THE ROAD.

Pearson: ALL RIGHT. LET'S -- WE NEED TO MOVE OVER AND TALK ABOUT WHAT'S HAPPENING AS FAR AS THE CORN MARKET IS CONCERNED. AND CORN WAS UP A LITTLE BIT THIS WEEK. THERE'S SOME OPTIMISM LONGER TERM FOR WHAT'S HAPPENING AS FAR AS THE CORN IS CONCERNED.

Martin: WELL, THERE CERTAINLY IS. THE FACT THAT CHINA IS SHOWING INDICATIONS THAT THEY'RE NOT GOING TO EXPORT CORN AFTER THE TURN OF THE YEAR AND ALSO THE FACT THAT OUR USAGE SHOULD BE UP, WE THINK THAT CORN HAS GOT SOME AWFUL GOOD EXPORT POTENTIAL. WHILE IT MAY NOT BE RIGHT IN FRONT OF US -- AND YET THIS LAST WEEK WE HAD A NICE SURPRISE OUT OF RUSSIA COMING IN TO BUY -- WE THINK THAT THE CORN MARKET IS GOING TO SEE SOME INCREASED EXPORTS. THE DEMAND IS ALREADY BETTER THAN IT WAS A YEAR AGO AT THIS TIME. WE THINK THAT'S GOING TO BE HELPFUL TO THE CORN MARKET. BUT I THINK CORN HAS GOT PROBLEMS AROUND THE $2.55 TO $2.60 AREA. WE'RE PROBABLY IN A RANGE FOR JUST A LITTLE BIT LONGER BEFORE WE CAN BRING THE CORN MARKET OUT OF HERE AND TRY TO MOVE IT HIGHER. I THINK THE CORN IS GOING TO HAVE TO CHOP AROUND IN HERE UNTIL WE GET MAYBE MORE IN TOWARDS THE MARCH/APRIL TIME FRAME, AND THEN I THINK CORN WILL START TO ENHANCE A BETTER MOVE, ESPECIALLY IF WE COME INTO THE SPRING DRY.

Pearson: WE'RE GETTING SOME ENCOURAGEMENT TO HOLD CORN AT THIS POINT.

Martin: YES, WE ARE. AND I THINK CORN HAS GOT VALUE. NOW, AS A PRODUCER, IF YOU'RE NEEDING TO GENERATE SOME CASH AS THE YEAR ROLLS OVER, THEN I WOULD SAY TAKE ADVANTAGE OF THE RECENT RALLY THAT WE'RE GOING TO BE SEEING HERE. AND IN THE MONTH OF DECEMBER, MAYBE TOWARDS THE FIRST OF THE YEAR, USE THAT RALLY AND MARKET SOME OF YOUR CORN. YOU'LL GET ANOTHER PULLBACK AND THEN REPLACE IT BACK ON THE BOARD. I WOULD TRY TO RETAIN SOME OWNERSHIP, THOUGH, BECAUSE REMEMBER, THE YEAR OF THIS YEAR OF 2003, THE RANGE HAS SO FAR BEEN -- AND I EXPECT IT TO REMAIN THAT WAY -- HAS BEEN IN AN INSIDE RANGE YEAR, LOWER HIGH THAN LAST YEAR AND A HIGHER LOW. SO IT'S BEEN A NOTHING YEAR, AND I THINK THAT MEANS WE'RE GOING TO TAKE ANOTHER LOOK AT THE $3 LEVEL BEFORE ALL THIS IS SAID AND DONE.

Pearson: LET'S TALK ABOUT ONE OF THE MARKETS WHERE YOU REALLY HIT IT. YOU SAID THAT YOU WERE OUR $8 GIRL. WE'RE GETTING DOLLARS IN SOYBEANS SO WE'RE FLATTENING OUT A LITTLE BIT RIGHT NOW. THIS CHINA FLAP HAS THE TRADE A LITTLE CONCERNED; DOESN'T IT?

Martin: WELL, IT HAS. BUT, YOU KNOW, WITH THE CHINESE, I'VE ALWAYS SAID YOU HAVE TO -- YOU KNOW, YOU DON'T LISTEN TO WHAT THEY SAY, YOU WATCH WHAT THEIR ACTIONS ARE. ACTIONS SPEAK LOUDER THAN WORDS. THEY'VE BEEN CONTINUING TO SHOW INCENTIVE OR INTEREST IN THE MARKET. THEY HAVEN'T CANCELED U.S. ORDERS PREVIOUS -- YOU KNOW, THAT THEY'VE BOOKED. AND ALSO WHEN THEY DID ALL THIS BUYING, IT WAS IN BASIS AND FREIGHT. SO THIS RHETORIC THAT THEY'RE PUTTING OUT HELPS THE MARKET BREAK BACK IN PRICE, ALLOWS THE MARKET TO KIND OF CLEAN UP AN OVERBOUGHT CONDITION ANYWAY, AND ALLOWS THEM TO DO SOME PRICING AT A BETTER PRICE THAN WHAT WAS BEFORE THEM. SO I THINK THAT WE'RE GOING TO CONTINUE TO SEE THEM COME BACK AT US. REMEMBER, THEY HAD AWFULLY HIGH PRICES THROUGH HARVEST. THAT SHOWED THERE WAS A REASON FOR THAT, THAT THEIR PRODUCTION WAS DOWN A LITTLE BIT. STOCKPILES ARE A LITTLE BIT TIGHT, AND THEY HAVE A VERY GOOD GROWING DEMAND FOR THE VEG OIL. I THINK THAT BEAN OIL OVER THE NEXT YEAR, I WOULD SAY OVER THE NEXT SIX TO NINE MONTHS, IS PROBABLY GOING TO 43 CENTS. I THINK THAT SOYMEAL IS GOING TO STILL COME BACK, GO TO $2.60, MAYBE TEST BEYOND THAT TO $2.75. AND THAT TELLS ME WE'RE GOING TO SEE NEW HIGHS AGAIN IN BEANS. IT JUST MAY NOT BE RIGHT SMACK IN FRONT OF US. BUT AS WE GO INTO DECEMBER, IT'S REAL INTERESTING HOW WE END THIS WEEK OF NOVEMBER BECAUSE I THINK THAT THE EARLY PART OF DECEMBER, WE COULD PUT A LOW IN AND THEN TRY TO RALLY IF WE DON'T HOLD STRENGTH AFTER THANKSGIVING.

Pearson: REAL QUICK, SUE, THE MARKET HAS BEEN SCREAMING FOR CASH BEANS. IS THIS A SITUATION WHERE YOU SELL THE CASH BEANS, GO BACK ON THE BOARD?

Martin: WELL, UNFORTUNATELY, NOT ALL PRODUCERS UTILIZE THE BOARD, SO THAT TIES THEIR HANDS. AND IF THAT'S THE CASE, THEN WE RECOMMEND THAT THEY MAYBE HANG ON THEN AND LOOK DOWN THE ROAD. THE ONLY THING IS, THOUGH, IF THEY DID USE THE BOARD, THEY CAN BE SELLING AND CAPITALIZING ON THIS AND THE GOOD BASIS. AND I THINK I TALKED ABOUT THIS LAST TIME I WAS ON, THAT THEY CAN SELL THIS AND TURN AROUND AND COME BACK AND OWN IT ON THE BOARD INTO THE MAY TIME FRAME -- I WOULDN'T GO ANY FURTHER OUT THAN MAY -- AND SAVE SOME MONEY. RIGHT NOW THOSE SPREADS HAVE NARROWED A LITTLE BIT, BUT AT ONE TIME YOU'D BE 50, 60 CENTS.

Pearson: SOMETHING TO THINK ABOUT. LET'S TALK ABOUT COTTON REAL QUICK, AGAIN, ANOTHER PAWN IN THE CHINESE WORLD TRADE GAME.

Martin: WELL, THE COTTON MARKET GOT UP AROUND 85 CENTS, AND IT WAS THE FIRST MARKET TO PEAK OUT EVEN BEFORE ANY OF THIS RHETORIC HIT AND BEFORE THE BEAN MARKET PEAKED. WE'VE HAD A GOOD $20-BREAK IN COTTON. I THINK COTTON HAS A CHANCE TO COME BACK NOW. WE'VE GOT A TRADE DELEGATION THAT'S ALSO GOING TO BE LOOKING AT COTTON THIS NEXT WEEK. I THINK WE'LL SEE COTTON RALLY, MAYBE TRY TO COME BACK AROUND 75 TO 78 CENTS, AND THEN WE NEED TO TAKE ANOTHER LOOK.

Pearson: ALL RIGHT. LET'S TALK ABOUT LIVESTOCK. THE FED CATTLE MARKET HAS BEEN PHENOMENAL. YOU'VE BEEN FRIENDLY ALL THIS TIME TO THIS FED CATTLE MARKET. IS IT GOING TO STAY THIS GOOD FOR A WHILE?

Martin: WELL, I THINK THAT THE FEEDER MARKET HAS BROKEN OUT OF A PENNANT FORMATION THAT I THOUGHT IT HAD. AND I THOUGHT IT WOULD BREAK OUT TO THE TOPSIDE, AND IT DID THAT THIS WEEK. NOW WE NEED TO WATCH IT CLOSELY. I THINK WE'RE GOING TO GO BACK AND TRY TO TAKE THE HIGHS OUT FOR THE JANUARY FEEDERS. I THINK JANUARY FEEDERS ARE PROBABLY THE BEST ONE UP THERE, AND SO WE'RE GOING TO TRY TO TEST THESE HIGHS THAT THEY HAVE. BUT DO WE MAKE NEW HIGHS FOR NEEDERS? NO, AS FAR AS THE WHOLE MOVE HAS BEEN. FAT CATTLE SAME THING. I THINK THAT THE FATS HAVE MADE THEIR TOPS. AND THIS IS JUST KILLING TIME IS ALL THIS IS, AND THEN EVENTUALLY I THINK WE ROLL THE MARKET DOWN. NOW, IF WE GET A WEATHER ISSUE THIS WINTER, THEN THAT'S GOING TO CHANGE THE PICTURE A LITTLE BIT AND EXTEND. BUT I THINK FOR THE MOMENT, ELECTIONS IN CANADA DON'T OCCUR TILL MARCH. I JUST REALLY WONDER IN WE WON'T HOLD THIS BORDER CLOSED UNTIL THE MARCH ELECTIONS COME AROUND. WE'LL SEE. I THINK THERE'S A LOT OF POLITICS BEING INVOLVED IN THAT ONE TOO.

Pearson: ALL RIGHT. AS FAR AS THE FED CATTLE PRODUCER OUT THERE, YOU'RE PRICING SOME PRETTY EXPENSIVE CALVES IN RIGHT NOW.

Martin: ABSOLUTELY. I THINK WHAT YOU DO IS, IN THE FEEDERS, I PROBABLY WOULD RECOMMEND AT LEAST BUYING PUTS OR YOU CAN GO AHEAD AND SELL THE BOARD AND BUY SOME CALLS AGAINST THAT. ONE STRATEGY OR THE OTHER, BUT I'D HAVE SOME PROTECTION. IN THE CATTLE, I DEFINITELY WOULD HAVE SOME PROTECTION UNDERNEATH WITH PUTS. NOW, I'M NOT SO SURE ABOUT THE DECEMBER FUTURES. I THINK NOW, UNTIL WE GET PAST THE THANKSGIVING HOLIDAY, WE'RE GOING TO MAYBE SEE SOME MORE INTEREST GROW AGAIN FOR BEEF. BUT, YOU KNOW, THE PACKER IS LOSING MONEY. EVEN THOUGH HE'S HIDING ALL FALL, HE'S MAKING GOOD MONEY COMPARED TO A YEAR AGO. HE'S LOSING MONEY, KILLING IN THE RED, AND HE ISN'T GOING TO BE WILLING TO CONTINUE THIS FOR VERY MUCH LONGER. SO HE'S GOING TO TAKE ADVANTAGE OF ANY DOOR THAT OPENS FOR HIM. AND OF COURSE, THE MORE WE TURN TOWARDS THE END OF THE YEAR, THE CLOSER WE'RE GETTING TO CHOICE CATTLE, THAT PACKER IS GOING TO TAKE ADVANTAGE AND CASH PRICES WILL DROP.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE HOG MARKET, WHICH HAS HAD REALLY NOTHING POSITIVE TO TALK ABOUT HERE FOR SOME TIME. YOU THOUGHT WE MIGHT SEE BIGGER NUMBERS. WE JUST KEEP SEEING BIGGER NUMBERS. SUE, WHEN IS THIS HOG MARKET GOING TO START TO TURN?

Martin:, WELL, I THINK, MARK, THE PROBLEM IS BETWEEN -- I THINK OUR PRODUCTION WAS UNDERESTIMATED. AND I THINK THEN YOU COMBINE THAT WITH HOGS COMING IN FROM CANADA, AND IT'S JUST KIND OF DELUSIONED US FOR THE MOMENT. BUT THE BLESSING HAS BEEN, BECAUSE OF EXTREMELY HIGH PRICED BEEF, PORK AND POULTRY HAVE BEEN HOLDING TOGETHER, AND IT'S BEEN FEATURED AT THE GROCERY STORE. AND OF COURSE, THE GROCERY STORE MAN HAS BEEN KIND OF COVERING SOME OF HIS INCREASES THROUGH THE PORK PRODUCT. AS WE GO INTO NEXT YEAR, I THINK WE'RE GOING TO SEE BETTER TIMES FOR THE PORK MAN, THE HOG PRODUCER. BUT I THINK FEBRUARY -- BETWEEN NOW AND FEBRUARY WE STILL HAVE SOME WEAKNESS AHEAD.

Pearson: VERY GOOD. SUE MARTIN, AS USUAL, APPRECIATE YOUR INSIGHT. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT IF YOU'D LIKE MORE DETAIL FROM SUE ON THESE ACTIVE MARKETS, BE SURE TO VISIT THE "MARKET PLUS" PAGE ON OUR "MARKET TO MARKET" WEB SITE. WHEN YOU REACH THE "MARKET TO MARKET" HOME PAGE, PLEASE TAKE A MOMENT TO DROP ME A LINE AND TELL US WHAT YOU THINK OF OUR PROGRAM. UNTIL NEXT WEEK, THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA


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