Iowa Public Television

 

Market Analysis: Sep 05, 2003

posted on September 5, 2003


Fund buying this week helped sustain rallies in both corn and beans. Fund selling had the opposite affect on wheat.

For the week, nearby wheat futures prices were off by more than 22 cents. September corn finished 4 1/2 cents higher.

Talk in the pits about reduced yield pushed the nearby soybean contract past the $6.00 resistance level. For the week, beans were up 13 cents. Soybean meal gained $4.70 per ton.

Cotton futures finished 82 cents higher and closed at $60 a hundredweight.

In livestock, September live cattle were 97 cents higher, September feeders gained 93 cents, and the lean hog contract continued to flourish, closing more than three dollars higher.

In the financials, Comex gold was nearly two dollars higher per ounce. The Euro was 142 basis points higher against the dollar. And the CRB index rose more than a point to close at 244.50.

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: Sep 05, 2003

Pearson: WELL, LET'S TALK A LITTLE BIT ABOUT WHAT'S HAPPENED IN THE COMMODITY MARKETS THIS WEEK. WE WANT TO GET TO THE LIVESTOCK. THAT WAS VERY EXCITING. BUT FIRST OFF, LET'S TALK ABOUT WHEAT, WHICH DID NOT HAVE THE EXCITEMENT IN IT THIS WEEK ON THE UPSIDE THAT THE OTHER MARKETS DID.

Martin: WELL, IT CERTAINLY DIDN'T. AND THE WHEAT MARKET, OF COURSE, HAS BEEN UNDER A FAIRLY DIRECT DOWNWARD CORRECTION. CHICAGO WHEAT MANAGED TO COME RIGHT AGAINST THE 200-DAY MOVING AVERAGE ON FRIDAY, SO THAT SHOULD BE A LITTLE BIT OF SUPPORT. IN THE MEANTIME WE'VE HAD -- FRIDAY AFTERNOON, THE U.S. AG ATTACHE TO AUSTRALIA CAME OUT AND PROJECTED THEIR CROP AT 22.8 MILLION METRIC TONS, WHICH IS DOWN FROM ABOUT -- EARLIER IN THE WEEK THERE WAS AN ESTIMATE OF AROUND 24.3, SO THAT SHOULD BE A LITTLE POSITIVE ON MONDAY. WE HAVE REACTION TIMING DUE MONDAY, SO I THINK WHEAT WILL TRY TO FORM A BOUNCE IN HERE OR A CORRECTION. I THINK WHEAT SHOULD BE BOUGHT. GRANTED, WE HAD RAINS A WEEK AGO. THAT SORT OF HELPED OUT THE KANSAS SUBSOIL MOISTURE, AND THAT WAS A LITTLE NEGATIVE TO THE MARKET AS WELL. AND THEN WE HAD THE E.U. LOOKING AT SUBSIDIZING -- OR NOT SUBSIDIZING, BUT THEY HAVE RESTITUTIONS THAT HAVE TO BE UTILIZED ON A MILLION AND A HALF MILLION METRIC TONS OF WHEAT, AND THEY HAVE TO BE UTILIZED BY THE END OF NOVEMBER. IF THEY ARE NOT USED, THEN THE EXPORTER HAS TO PAY A PENALTY. AND OF COURSE, IN THE MEANTIME YOU GO FROM A PENALTY TO ALSO MAKING $7 TO $8 A METRIC TON.

Pearson: SO THE WHEAT MARKET HAS SOME OPPORTUNITIES OUT THERE. WHAT -- AND YOU SAY THIS IS ONE TO BE BUYING, NOT SELLING.

Martin: WELL, I THINK SO. WE'VE HAD A PRETTY HEALTHY CORRECTION, AND I THINK THAT WE STILL HAVE A HIGHER HIGH COMING BACK. BUT WE LEFT AN ISLAND TOP SO, YOU KNOW, WHEN WE COME BACK, WE'RE GOING TO HAVE TO DO SOME DUTY HERE. BUT THIS MARKET LOOKS TO ME LIKE IT'S HAD A PRETTY HEALTHY CORRECTION. THE $3.60 AREA SHOULD BE PRETTY GOOD SUPPORT, I THINK.

Pearson: ALL RIGHT. LET'S MOVE OVER TO THE CORN MARKET. AND OF COURSE, THAT HAS HAD AN EXTRAORDINARY MONTH. THE MONTH OF AUGUST, THE WEATHER HAS NOT CHANGED. CONTINUED DRY WEATHER. IN FACT, GOING FORWARD, CONTINUED DRY WEATHER. NOT MUCH RELIEF IN SIGHT FOR ABOUT TWO-THIRDS OF THE CORN BELT. A LOT OF PRODUCERS ARE FRUSTRATED, SAYING WHY AREN'T THESE MARKETS HIGHER.

Martin: WELL, I THINK THE ONE THING THAT HAPPENED TO CORN -- NOW, CORN BROKE ON FRIDAY. IN FACT, IT HELPED TUG ON -- YOU KNOW, IT FELL WITH WHEAT. THERE'S BEEN A LOT OF SPREADING, WHERE YOU'VE GOT TRADERS BUYING CORN, SELLING WHEAT, THAT TYPE OF THING. BUT I THINK WHAT HAPPENED TO CORN IS, IS WHEN THE SPARKS NUMBERS CAME OUT -- AND, OF COURSE, FC STONE'S NUMBERS WERE A 9.8 PLUS NUMBER AND SPARKS NUMBERS WERE A 9.9 PLUS NUMBER -- IT KIND OF ADDED A LITTLE BEARISH TONE BECAUSE NOW WE'RE GOING BACK TOWARDS THAT 10 NUMBER. AND I THINK THAT, COMBINED WITH THE FACT THAT THEY'RE STARTING TO REALIZE THAT THE ILLINOIS AND INDIANA CROP MAY BE BETTER, YOU KNOW, 16 TO 22 PERCENT CONSECUTIVELY BETTER THAN A YEAR AGO, IF THAT IS INDEED THE CASE, THERE'S GETTING TO BE A MENTALITY OUT THERE THAT THAT, COMINGLED WITH THE INCREASED CROP OR BETTER CROP IN NEBRASKA, COULD BE ENOUGH TO OFFSET THE DECLINES IN IOWA AND MINNESOTA AND WISCONSIN. ALL SAID, THEN THAT MEANS WE COULD HAVE JUST UNDER A TEN CROP. AND SO THE NUMBERS THAT SPARKS CAME OUT WITH COULD BE PRETTY REALISTIC, AND I THINK THE TRADE THOUGHT THAT WAS A LITTLE NEGATIVE. AND OF COURSE, WE WERE AGAINST THE 250 AREA THIS WEEK, AND THAT WAS SORT OF PSYCHOLOGICAL TOO.

Pearson: THAT'S TRUE. WITH THE CORN MARKET GOING FORWARD, ARE YOU FAIRLY FRIENDLY? I MEAN THAT'S STILL A PRETTY TIGHT NUMBER, AN UNDER 10-BILLION-BUSHEL CORN CROP.

Martin: IT IS. AND I BELIEVE THAT THE USDA MASSAGES THE NUMBERS WHEN THEY COME OUT. AND I THINK THAT WHEN WE'RE LOOKING AHEAD, I THINK THEY HAVE UNDERESTIMATED THE DEMAND WE'RE GOING TO HAVE GOING FORWARD THROUGH NEXT YEAR. SO I THINK DOWN THE ROAD, THERE'S POTENTIAL FOR THE CORN CROP, AND I THINK PRICES WILL BE HIGHER AS WE GO INTO NEXT YEAR.

Pearson: STRATEGY-WISE, WHAT ARE YOU TELLING PRODUCERS?

Martin: WELL, I THINK IF YOU'RE A PRODUCER AND YOUR HABIT IS NOT TO HOLD CORN OR STORE CORN AND YOU NEED TO BE SELLING OFF THE COMBINE, THEN TAKE ADVANTAGE OF THIS MARKET AND UTILIZE IT. AND IF YOU'VE GOT OLD CROP ON HAND, CERTAINLY TAKE ADVANTAGE OF IT BECAUSE THE BASIS IS WONDERFUL.

Pearson: WE'VE NEVER SEEN A BASIS QUITE LIKE THIS IN RECENT MEMORY. SO YOU'RE RIGHT, CASH SALES ARE DEFINITELY WARRANTED. LET'S TALK ABOUT SOYBEANS. AND THERE, THERE'S FRUSTRATION THERE TOO. PEOPLE ARE LOOKING AT THESE SOYBEAN FIELDS. NORTHWESTERN ILLINOIS, SOUTHERN MINNESOTA, WISCONSIN, IOWA, NEBRASKA CERTAINLY SUFFERING WITH THE HOT, DRY CONDITIONS, LOOKING AT DIMINISHED YIELDS. WE SAW THE QUALITY COME DOWN IN THE USDA'S WEEKLY REPORTS. WHAT'S YOUR OUTLOOK FOR SOYBEANS? WE'VE COME THROUGH $6.

Martin: WELL, I THINK THAT, FIRST OF ALL, THE DEMAND REMAINS PRETTY GOOD FOR SOYBEANS, AND I BELIEVE THAT THE CROP IS VERY HARD TO TELL AT THIS POINT AS TO WHAT IT'S GOING TO END UP BEING. EARLY YIELDS THAT WE HEAR COMING OFF THE COMBINE ARE GOING TO BE POOR YIELDS, AND I THINK THAT THERE'S GOING TO BE A FAIR AMOUNT OF THAT. I THINK THE BEANS ARE GOING TO BE THE CROP THAT'S GOING TO BE A DISAPPOINTMENT. YOU KNOW, ON TUESDAY THE TRADE WANTED TO THINK THAT THE ILLINOIS CROP, HAVING CAUGHT RAIN AND CERTAINLY HELPED OUT A PORTION OF THAT CROP AND ESPECIALLY THE DOUBLE CROP BEANS AS WELL, WAS GOING TO BE THE CAT'S MEOW. BUT YOU HAVE TO REMEMBER WEST OF MISSISSIPPI DID NOT RECEIVE RAINS. IOWA, MINNESOTA, THE DAKOTAS, YOU KNOW, THE RED RIVER VALLEY AREA RAISES AN AWFUL LOT OF BEANS. AND YOU'VE GOT WISCONSIN AND THEN, OF COURSE, THE EASTERN THIRD OF NEBRASKA ALL SUFFERING AND LOOKING AT LOWER YIELDS. SO IT'S UP IN THE AIR AS TO WHERE WE'RE AT IN THIS BEAN CROP. BUT BEANS ARE, YOU KNOW, NOT NEARLY PODDED LIKE THEY WERE A YEAR AGO, WHERE UNLIKE CORN HAS MORE EARS PER PLANT THIS YEAR OR EVEN LARGER PLANT POPULATIONS. THE BEANS ALSO STARTED SETTING PODS HIGHER OFF THE GROUND FOR WHATEVER REASON THAT IS THIS YEAR, AND THAT'S PRETTY GENERAL THROUGH THE CORN BELT AND SOYBEAN BELT. SO I THINK WHEN WE LOOK AT THE BEAN MARKET, WE HAVE A MARKET THAT CAN GO HIGHER. I THINK WE'VE SET AN EARLY HARVEST LOW. IN FACT, IT'S POSSIBLE THAT THIS LAST TUESDAY COULD HAVE BEEN OUR HARVEST LOW. AND THE LOWS FOR THE FOURTH QUARTER WAS PROBABLY SET OFF IN THE JULY BREAK INTO EARLY AUGUST. AND SO WE MAY HAVE SEEN OUR BOTTOMS IN THESE MARKETS. I THINK WE HAVE. AND I THINK IT'S VERY POSSIBLE OUR HARVEST LOWS ARE IN. SO I THINK PULLBACKS ARE BUYING OPPORTUNITIES. I THINK WE'RE TAKING THIS MARKET HIGHER. IT WOULD NOT SURPRISE ME IF BEANS RALLY INTO NOVEMBER EXPIRATION AND ON FORWARD WITH THE CONTRACTS AFTER THAT INTO THE TURN OF THE YEAR. NOW, THERE'S A MENTALITY IN CHICAGO THAT THEY SEEM TO THINK, OKAY, SO WE'RE SUFFERING IN OUR CROP HERE. INSTEAD OF STEPPING BACK, WELL, SO WHAT, SOUTH AMERICA IS GOING TO INCREASE 10 PERCENT. WELL, FIRST OF ALL, WE NEED TO REALIZE THAT SOUTH AMERICA IS GOING TO PROBABLY NOT INCREASE AS GREAT OF A MOVE THIS YEAR AS THEY HAVE IN THE PAST. THEY HAVE AN AGRARIAN RESISTANCE MOVEMENT WITH MILITANT HOMELESS PEOPLE AND LANDLESS PEOPLE THAT'S GOING TO BE REAL JEOPARDY OF THAT CROP. I THINK IF THE RIGHT THINGS HAPPEN AND YOU ADD A WEATHER MARKET TO IT, WITH THE SOUTH AMERICAN CROP THIS YEAR, YOU'RE GOING TO HAVE BEANS BEING JUST LIKE CATTLE.

Pearson: OKAY. I WANT TO TALK ABOUT CATTLE IN JUST A MOMENT. COTTON MARKET, THOUGH, WAS UP A LITTLE BIT THIS WEEK, BACK TO $60.

Martin: WELL, I THINK THE COTTON MARKET IS ANOTHER ONE OF THOSE MARKETS THAT HAS POTENTIAL TO MOVE HIGHER. AND OF COURSE, WE CONTINUE TO LOOK AT THE COTTON CROP. AND IT'S HAD ITS SHARE OF ISSUES THIS YEAR WEATHER-WISE, BUT THE DEMAND LOOKS TO BE IMPROVING, I THINK, OVER THE NEXT YEAR. SO I THINK COTTON CAN CERTAINLY GET INTO THE MID 60S. I WOULD NOT BE SURPRISED.

Pearson: ALL RIGHT. LET'S TALK LIVESTOCK. WHAT AN EXCITING WEEK IT WAS. ONE OF THE MOST EXCITING WEEKS IN THE CATTLE INDUSTRY THAT WE'VE SEEN IN HISTORY. WE'RE LOOKING AT THIS VERY DARK SITUATION; THE CANADIAN BEEF THAT WAS BUILDING UP, UP NORTH. WE'VE CONTINUED TO MOVE CATTLE IN A TIMELY FASHION, AND THE MAIN DEMAND CONTINUES TO BE STRONG. $87 FED CATTLE IN THE MIDWEST. $1.36, -37 IN THE BEEF THIS WEEK. EVERYONE WANTS TO KNOW, SUE, YOU KNOW, LET'S PINCH OURSELVES. IS THIS FOR REAL AND IS IT GOING TO LAST?

Martin: WELL, IT IS A WONDERFUL SITUATION FOR THE PRODUCER, ESPECIALLY AFTER THE LAST YEAR WHEN EVERYTHING WENT SOUTH ON US BECAUSE OF RUSSIA'S BAN ON POULTRY. NOW WE'RE GETTING TO BE THE BENEFACTOR OF SOMEONE ELSE'S PROBLEMS FOR A CHANGE, AND THAT'S KIND OF NICE. I THINK THAT THE U.S. BEEF PRODUCT HAS BEEN VIEWED AS A VERY SAFE, GOOD PRODUCT AROUND THE WORLD. AND I THINK THAT CANADA CONTINUES, OF COURSE, TO HAVE THE BAN ON JAPANESE BEEF, SO THEREFORE -- IMPORTS. AND SO THEREFORE, JAPAN FELT LIKE IT WAS PRUDENT TO REALLY LEAN ON THE U.S., KNOWING WE HAD A COMMON BORDER, THAT THEY REALLY WANTED TO MAKE SURE IT WAS NOT A CANADIAN PRODUCT THEY WERE GETTING. BONELESS BEEF WAS SUPPOSED TO BE COMING ACROSS THE BORDER HERE THIS WEEK. THERE WERE SOME SNAGS IN THIS AND, THEREFORE, IT DIDN'T GET ACROSS, AND THAT HELPED OUT INSTILL EVEN BETTER DEMAND YET. AND THE PACKER, OF COURSE, MAKING THE KIND OF MONEY HE'S MAKING -- YOU KNOW, YOU HAVE EVERY SECTOR OF THE CATTLE INDUSTRY MAKING MONEY, AND THAT'S UNUSUAL. AND SO THE PACKER IS CONTINUING TO TRY TO PULL AS MANY CATTLE TO SLAUGHTER AS HE CAN TO GET THEM INTO THE MEAT CHAIN TO MAKE AS MUCH MONEY AS HE CAN. NOW, IN THE MEANTIME, YOU HAVE THE CATTLE -- THE CARCASS BASIS LEVELS, I SHOULD SAY, EXTREMELY WIDE, $6.48 WIDER THAN THE FIVE-YEAR AVERAGE. THAT CONTINUES TO HAVE CATTLE PULLED AHEAD. I THINK CATTLE PRICES CAN STILL GO HIGHER, BUT I REALLY HAVE TO PUT OUT CAUTION. MY TIMING INDICATORS ARE AT 99.3 PERCENT FOR SEPTEMBER FEEDER CATTLE AS WE CLOSED OUT THE WEEK. NEXT MONDAY, THAT WILL MOVE UP TO PROBABLY 99.5. OCTOBER FEEDERS AT 99.1 WILL PROBABLY GO TO 99.3. AND THE FAT CATTLE -- OCTOBER FATS ARE RIGHT AROUND JUST UNDER 99 PERCENT. I'M AFRAID THAT THIS MARKET IS REALLY PUSHING THE ENVELOPE.

Pearson: OKAY. SO TAKE HEED. USE WHATEVER STRATEGIES YOU'RE MOST COMFORTABLE WITH. PUT WHATEVER --

Martin: WELL, I THINK, MARK, PRODUCERS OUGHT TO HAVE EITHER PUTS UNDERNEATH OR ELSE THEY CAN CERTAINLY BE BUYING CALLS AND THEN SELLING THE FUTURES SHORT.

Pearson: OKAY. ANOTHER GOOD STRATEGY. THIRTY SECONDS OR SO, SUE. WHAT DO YOU THINK ABOUT THIS HOG MARKET? FINALLY WE SAW SOME RECOVERY THIS WEEK.

Martin: WELL, WE CERTAINLY SHOULD. I THINK DEMAND IS STARTING TO SHOW SIGNS OF SHIFTING TOWARDS PORK. AND I THINK THAT WE CERTAINLY HAVE SEEN AN AWFUL LIQUIDATION IN THE HOG INDUSTRY AGAIN THIS YEAR. THAT TELLS ME WE'VE GOT SOME GOOD TIMES COMING NEXT YEAR. WE'RE ALREADY SEEING LARGE TRADERS BUILDING POSITIONS INTO NEXT YEAR'S MARKETS. I THINK IT'S TELLING YOU THAT AS A PRODUCER, IF YOU HAVE TO HEDGE, DO ONLY USING OPTIONS. I HAVE A FEELING YOU'RE LOOKING AT A YEAR THAT'S GOING TO BE GOOD.

Pearson: OKAY. SO IT LOOKS LIKE 2004 COULD BE THE YEAR OF PORK, WHICH WOULD BE A NICE CHANGE FOR THOSE FOLKS THIS YEAR IN THE HOG BUSINESS AFTER WHAT THEY'VE BEEN THROUGH.

Martin: ABSOLUTELY, THEY'RE DUE.

Pearson: ALL RIGHT. WELL, SUE MARTIN, IT'S BEEN QUITE A WEEK. AND I DON'T THINK IN THE HISTORY OF FED CATTLE WE'VE SEEN A WEEK LIKE THIS.

Martin: OH, IT'S PHENOMENAL. IT'S BEEN A WONDERFUL WEEK.

Pearson: SUE, THANKS SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." IF YOU'D LIKE TO HEAR ADDITIONAL INSIGHT FROM SUE ON THESE ACTIVE COMMODITY MARKETS, BE SURE AND CLICK ON THE MARKET PLUS PAGE ON THE "MARKET TO MARKET" WEB SITE. AND BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE'LL EXAMINE ONE RURAL COMMUNITY'S PUSH TO CAPTURE BIOTECH BUSINESS. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

Tags: agriculture commodity prices corn markets news