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Market Analysis: Jul 11, 2003

posted on July 11, 2003


The grain markets were mixed this week on several factors, including the latest USDA grain stocks report. For the week, wheat prices gained more than eleven cents, while corn prices were four to seven cents lower.

Soybean futures were six to seven cents lower. Soybean meal gained $3.65 per ton.

Cotton futures were $1.80 lower.

In livestock, fed cattle futures were 25-cents lower. Feeder cattle gained 68-cents. The lean hog contract closed the week $2.53 lower.

In the financials, Comex gold closed $6.10 lower per ounce. The Euro was down 190-basis points against the dollar. And, the CRB index closed more than a point lower to finish at 234.

Here now to further elaborate on these and other market trends is one of our regular market analysts, Sue Martin. Welcome back.

Market Analysis: Jul 11, 2003

Pearson:WELL, SUE THIS GRAIN STOCKS REPORT WAS HIGHLY ANTICIPATED. LET'S TALK ABOUT THE IMPACT: WHEAT, CORN, AND BEANS. LET'S START WITH WHEAT.

Martin: WELL, I THINK FOR THE WHEAT MARKET, THE NUMBERS WERE THE MOST NEGATIVE, SHOWING MORE PRODUCTION AND, OF COURSE, INCREASING THE STOCKS. BUT SURPRISINGLY THAT HAPPENED TO BE THE ONE MARKET THAT RALLIED ON FRIDAY. AND SO I THINK THAT WHEN WE LOOK AT THE WHEAT MARKET, GETTING NEGATIVE NEWS AFTER YOU'VE GOT HARVEST JUST ABOUT COMING TO AN END, I MEAN IT ISN'T TOTALLY DONE BUT WE'RE GETTING THERE. AND USUALLY WHEN YOU GET TO THAT LATTER PART AND HERE WE HAVE NEGATIVE NEWS AND THE MARKET REVERSES, THAT'S A GOOD SIGN FOR THAT MARKET. WE ARE TECHNICALLY A LITTLE BIT OVERDONE, EVEN IN TIME PERCENTAGE, ON LONG-TERM DATA, ESPECIALLY MONTHLY DATA. SO I THINK IT'S POSSIBLE WE CAN RALLY THE MARKET HERE, BUT EVEN IF THE MARKET BROKE, IT WOULD PROBABLY BE JUST ABOUT ANOTHER 10, 15 CENTS IS PROBABLY ALL I COULD SEE. I THINK ANOTHER THING THAT'S GOING ON IS WE'RE SEEING WHERE THE SPREADING IS GOING ON BETWEEN THE REALIZATION THAT THE CORN CROP LOOKS PRETTY GOOD AT THE PRESENT TIME WITHOUT A WEATHER SCARE SO FAR AND A LARGER CROP, OF COURSE. AND I THINK WHAT'S HAPPENING IS THAT THEY'RE BUYING WHEAT AND SELLING CORN. AND THOSE SPREADS COULD GO ANOTHER 20, 30 CENTS.

Pearson: OKAY. LET'S MOVE OVER TO THE CORN MARKET AND TALK ABOUT WHAT'S AHEAD THERE. WE TALKED ABOUT THE -- WE HAVE SOME LOANS EXPIRING HERE THIS FALL IN MANY PARTS OF THE CORN BELT. ALSO GOING TO WEIGH ON MARKETS. SO STRATEGY STANDPOINT, WITH A 10.3 BILLION BUSHEL CORN CROP, IT LOOKS LIKE THERE WILL BE PLENTY OF CORN, SUE.

Martin: WELL, I THINK THERE WILL BE AND THIS MAY BE ONE OF THOSE YEARS THEY GET A CHANCE TO LDP CORN. WHEAT PRODUCERS ARE CERTAINLY GETTING A CHANCE TO LDP THERE TOO, SO I THINK THAT THE CORN CROP IS -- IT'S A MARKET THAT I'VE NEVER BEEN REAL ENTHUSED ABOUT ALL YEAR. I FELT THAT IF IT WAS EVER GOING TO BE GOOD, IT HAD TO HAVE A BEAN MARKET PULLING IT BECAUSE, YOU KNOW, EXPORTS WERE SLUGGISH AT BEST. DOMESTIC DEMAND WAS GOOD AND THAT'S SHOWING UP IN THE BASIS LEVELS, BUT BEYOND THAT, FARMERS HOLDING A LOT OF CORN AND STILL HOLDING CORN. THEY NEED TO FIND ANY LITTLE BLIP IN THIS MARKET AND LET IT GO. THERE'S A POSSIBILITY YOU CAN STILL GET A WEATHER SCARE. EVERYTHING LOOKS PRETTY ROSY RIGHT AT THE MOMENT. WE TOOK YEARS IN WHICH, SINCE 1986, THAT WE HAD CROP CONDITION RATINGS AS HIGH AS THEY ARE NOW OR HIGHER, AND WE FOUND THAT IT WAS NOT UNCOMMON TO FIND A LOW IN JULY, BOUNCE FOR ABOUT MAYBE TWO WEEKS, POSSIBLY A MONTH AT THE MAX, AND THEN, OF COURSE, THE TREND RESUMED TO THE DOWN SIDE. SO RALLIES ARE FOR SELLING. AND 215, OF COURSE, WAS A DOUBLE BOTTOM FROM LAST YEAR. WE'RE VERY CLOSE TO THAT, 215.5 AS WE CLOSED OUT ON FRIDAY. AND I SUSPECT YOU MIGHT TAKE THAT OUT ON MONDAY AND TRY FOR THE 211, 212 MARK. THAT IS A THIRD WAVE COUNT PRICE PROJECTION THAT WE HAVE, AND USUALLY MARKETS WILL REACT TO THAT. 205 IS ANOTHER LAYER OF SUPPORT UNDER THAT, AND THEN THE $2 PSYCHOLOGICAL SUPPORT UNDER THAT. SO WE'RE TALKING ANYWHERE FROM 10 TO 15 CENTS DOWN YET IN THIS MARKET. SO IF YOU GET A RALLY AND YOU CAN MUSTER UP ENOUGH -- AND WITH THE WEATHER SCARE, YOU KNOW, ALL OF ILLINOIS' CORN IS GOING TO POLLINATE THIS NEXT WEEK, AND THE WEEK THEREAFTER A LOT OF IOWA CORN WILL START IN. SO I'M GOING TO SAY IF YOU DO GET A WEATHER SCARE -- AND THERE ARE SOME, A FEW WEATHER FORECASTERS CALLING FOR HEAT AND DRYNESS FOR THE NEXT TWO WEEKS, WHILE ALL THE OTHERS HAVE KIND OF JOINED ON THE BANDWAGON OF SAYING, NO, THE RIDGING ISN'T GOING TO HAPPEN, THAT TYPE OF THING. MONDAY THAT COULD CHANGE. AND IF WE DID, AFTER ABOUT A WEEK OF WARMTH, THEN THOSE DRY AREAS WILL COME BACK DRY AGAIN. AND AFTER HAVING HAD A SHOT OF RAIN, THEY'LL BE BACK DRY. THE POLLINATION -- DEPENDS ON HOW HOT WE GET. AND IF THAT DOES INDEED OCCUR, YOU KNOW, THERE'S A LOT OF HEAT OUT IN THE WEST, BUT YOU ALSO HAVE A BERMUDA HIGH OUT IN THE SOUTHEAST MOVING THIS WAY. SO I THINK THAT POTENTIAL IS THERE. AND IF YOU GET THAT CHANCE, DON'T GET SO CAUGHT UP IN THAT WEATHER MARKET THAT YOU DON'T MAKE SALES BECAUSE -- AND I'D EVEN MOVE SALES OUT INTO NEXT YEAR TOO, BECAUSE NEXT YEAR WE'RE GOING TO HAVE A BIGGER CROP STILL.

Pearson: ALL RIGHT. LET'S MOVE OVER TO THIS SOYBEAN MARKET. THE GOOD SIDE THERE HAS BEEN THIS DEMAND HAS BEEN PHENOMENAL. IS IT ENOUGH TO SUSTAIN THESE PRICES, OR ARE WE LOOKING AT LDPs ON BEANS?

Martin: WELL, IF WE GET LDPs ON BEANS, THEY MIGHT NOT BE VERY BIG ONES. I DON'T SEE A VERY BIG LDP ON BEANS. I THINK WHAT WE'VE GOT GOING HERE IS, YES, WE HAVE VERY GOOD DEMAND IN THIS MARKET. AND THAT DEMAND, I THINK, IS GOING TO STAY WITH US. JUST ON FRIDAY WE HAD EXPORT SALES OF 8.5 MILLION OLD CROP BEANS, 12 NEW, AND THAT'S ON A FOUR-DAY WEEK, YOU KNOW, AFTER A HOLIDAY. WE'VE HAD GOOD WORD OF NEWS OF EXPORT SALES AGAIN THIS PAST WEEK. SO I SUSPECT NEXT WEEK'S NUMBERS ARE JUST AS GOOD. WHEN WE LOOK AT THE OLD CROP STOCKS, WELL, YOU KNOW, THEY DID INCREASE TO 155 MILLION BUSHELS BUT, GOSH, THE TRADE HAD BEEN LOOKING FOR 160, 170 PRETTY MUCH, AFTER THE STOCKS REPORT OF JUNE 30. WHEN YOU LOOK AT THE FACT THAT THEY INCREASED EXPORTS 20 MILLION BUSHELS, WELL, HELLO, THEY SHOULD HAVE DONE THAT A LONG TIME AGO, SO THERE'S STILL MORE TO GO THERE. BUT THEY LEFT THE CRUSH ALONE, WHICH REALLY SURPRISED ME THAT THEY LEFT THAT CRUSH ALONE. MAYBE THEY'RE USING THAT FOR AN AUGUST OR SOMETHING. I THINK THAT WE'VE GOT A MARKET THAT WHERE IT'S GOING TO REALLY SHOW UP MORE THAN ANYTHING IS THE BULL SPREADS WILL CONTINUE TO WORK. I LOOK FOR AUGUST/NOVEMBER BEAN SPREADS TO MAKE NEW CONTRACT HIGHS FOR THE YEAR. THE JULY/AUGUST ALREADY ARE MAKING NEW HIGHS, AND THE JULY/NOVEMBERS ARE PRETTY CLOSE TO MAKING NEW HIGHS AS WELL. SO I THINK THAT AFTER WE GET THE EXPIRATION OF THE JULY CONTRACT, THEN THE BURDON OF PROOF WILL BE, OKAY, CAN THE AUGUST CONTINUE TO PUSH. YOU'LL HAVE SOME BEANS COMING OUT OF LOAN BY THE END OF THE MONTH OF JULY, MORE IN AUGUST. I THINK THAT IT'S A LITTLE EARLY YET TO WORRY ABOUT WEATHER ON BEANS. ACTUALLY SOME DRY WEATHER MIGHT BE HELPFUL TO THE BEANS. THE BEANS IS THE CROP THAT DOESN'T LOOK AS GOOD. CORN LOOKS MUCH BETTER. SO I THINK THAT THE CHART FORMATIONS WERE WEEPING A LOT. OF COURSE, NEW CROP, YOU KNOW, THAT WAS LEADING US. MY TIMING INDICATORS, I'VE TALKED ABOUT THEM EVERY TIME I'VE BEEN ON THE SHOW SINCE EARLY JUNE. THEY ARE WAY OVERCOOKED; 98.6 PERCENT ON THE LEAD MONTH AND, OF COURSE, AUGUST AT 98 PERCENT. IT WOULDN'T TAKE MUCH AT ALL TO TURN THESE THINGS DOWN. YOU GET THE JULY OFF THE BOARD ON MONDAY MORNING. THERE'S ABOUT A 14-CENT SPREAD THERE AT THIS TIME. THAT MIGHT HELP THE AUGUST TRY TO COME UP. BUT 610 IS YOUR 200-MONTH MOVING AVERAGE, AND WE'RE TRADING UNDER IT AND HAVING TROUBLE GETTING OVER IT. WE'VE GOT TO GET OVER THAT PRICE LEVEL TO START FEELING LIKE WE'VE GOT SOMETHING SAVED HERE, OTHERWISE YOU'RE GOING TO START TO LEAK ON THE OLD CROP AS WELL.

Pearson: ALL RIGHT. LET'S MOVE OVER TO COTTON. A LITTLE BIT OF PRESSURE THIS WEEK, BUT THIS COTTON MARKET HAS DONE EXTREMELY WELL. IT LOOKS LIKE A GOOD PLACE TO MAKE SOME SALES.

Martin: WELL, THE COTTON MARKET IS A VERY GOOD MARKET. IT'S BEEN KIND OF REFRESHING TO SEE, BECAUSE IT GIVES YOU HOPE FOR OTHER MARKETS LIKE SOYBEANS. COTTON HAS HAD VERY GOOD SALES ALL YEAR, EXCELLENT SALES. WE'RE WAY AHEAD OF A YEAR AGO. AND THEN ON TOP OF IT, YOU'VE GOT A CROP THAT WAS HARD TO GET IN. COTTON LIKES DRY FEED, JUST LIKE SOYBEANS. WELL, THEY'RE GETTING WAY TOO MUCH WEATHER IN THE SOUTH. THAT'S HURTING IT. AND THEN, OF COURSE, YOU'VE GOT DEMAND JUST COMING AT IT RIGHT AND LEFT ALL THE TIME. AND THEN WITH THESE TROPICAL STORMS, COTTON IS MAKING NEW CONTRACT HIGHS. I LOOK FOR COTTON FUTURES TO GO TO 64 CENTS. CROSS THAT AND THEY'LL GO TO 67.

Pearson: ALL RIGHT. LET'S TALK LIVESTOCK FOR A MINUTE. THERE WAS TALK -- MAYBE EVEN AN ANNOUNCEMENT WE HAD EARLIER IN THE SHOW ABOUT THE POSSIBILITY OF EVENTUALLY GETTING THIS CANADIAN BORDER SITUATION SQUARED AWAY AS IT RELATES TO MAD COW. IT'S GOING TO BE AN IMPACT. IT'S KIND OF AN OVERHANG ON THIS BEEF MARKET. WHAT'S AHEAD FOR CATTLE PRODUCERS?

Martin: WELL, I THINK THAT CATTLE PRODUCERS HAVE BEEN REALLY LOOKING AT THIS. AND, OF COURSE, WITH HAVING A FUTURES DISCOUNT TO THE CASH MARKET, THEY ARE PUSHING CATTLE AS FAST AS THEY CAN TO GET THEM GONE. I THINK THEY WERE A LITTLE DISAPPOINTED THIS WEEK THAT THEY COULDN'T AT LEAST GARNER A 75, 76 TRADE. SOME WERE LET GO IN THE PLAINS AT 74. THIS NEXT WEEK PACKERS MAY BE PUSHING AT THEM TO TAKE 74 TO 73. WE'RE GOING TO SEE FUTURES GO PREMIUM OVER CASH BY THE AUGUST CONTRACT, AND THAT WILL SLOW UP THESE MARKETINGS A LITTLE BIT. BUT I FEAR THAT DEMAND IS SLOWING, AND IF YOU BRING BEEF IN FROM CANADA, THAT'S GOING TO SLOW IT MORE. AND, OF COURSE, THEN, WE'RE DEALING WITH JAPAN AND MEXICO AND SOUTH KOREA ALL WANTING TO SEE COUNTRY-OF-ORIGIN LABELING, AND SO WE'VE GOT SOME PROBLEMS.

Pearson: GOT SOME ISSUES THERE. ON THE PORK SIDE REAL QUICK, SUE, WHAT'S YOUR TAKE THERE?

Martin: WELL, THE HOG MARKET, I'M NOT AS NEGATIVE. THE MARKET HAS REALLY BEEN ACTING POORLY. BELLY PRICES ARE QUITE HIGH, ADMITTEDLY, BUT CASH IS EVEN HIGHER. AND WHEN WE LOOK AT SLICER DEMAND, IT'S VERY GOOD. IT CONSUMES EVERYTHING THAT COMES OUT OF THE COOLERS PLUS ALL THE FRESH. BUT YET WE STILL ARE NOT TAKING OUT -- AS MUCH OUT OF THE COOLERS AS WE DID A YEAR AGO AT THIS TIME, BUT WE DON'T HAVE AS MUCH IN THERE EITHER. SO I LOOK AT HOGS -- I LIKE OCTOBER HOGS AND I WANT TO BUY THE OCTOBER HOGS ON A BREAK. IF I CAN GET THEM AROUND 56.5, I'LL TRY TO BUY THOSE.

Pearson: ALL RIGHT. APPRECIATE IT, SUE -- SUE MARTIN. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE'LL SEE HOW ONE MAN AND AN ARMY OF VOLUNTEERS ARE HELPING CLEAN UP THE NATION'S WATERWAYS. 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