Iowa Public Television

 

Market Analysis: May 16, 2003

posted on May 16, 2003


The grain and oilseed markets finished the week in a mixed fashion. Wheat prices continued to climb, gaining 21 cents on the week. But corn prices for new and old crops gained but a quarter cent, still substantially higher than two weeks ago. Soybean prices closed 4 to ten cents higher. Soybean meal finished three-dollars 17 a ton lower. December Cotton futures finished 91 cents higher.

In livestock, fed cattle futures gained 60-cents. Feeder cattle gained 93-cents. The lean hog contract, switching to the June contract gained more than $7 on the week.

In the financials, COMEX gold gained $6 per ounce. The EURO closed 95-basis points higher against the dollar. And the CRB index gained four points to close at 241 even.

Here now to lend us his insight is one of our regular market analysts, Tomm Pfitzenmaier. Welcome back.

Market Analysis: May 16, 2003

Pfitzenmaier: THANKS, MARK.

Pearson: BOY, ANOTHER BIG UPSWING IN THIS WHEAT MARKET, WHICH HAS BEEN A RELATIVELY DULL AND FEATURELESS MARKET FOR SOME TIME.

Pfitzenmaier: OH, BOY. WELL, YOU KNOW, IT WAS KIND OF STARTING TO GO UP ANYWAY. AND THEN WE HAD THAT REPORT MONDAY MORNING AND IT SHOWED A PRETTY DRAMATIC DROP IN WORLD WHEAT STOCKS AND, BOY, THAT JUST SHOT IT. I THINK -- I THINK IT'S PROBABLY FAIRLY PRICED UP HERE IN THIS 340 TO 350 AREA, AND IT'S GOING TO HAVE A DIFFICULT TIME GOING ON BEYOND THAT. BUT IT CERTAINLY HAS BEEN A NICE MOVE AND CREATING A GREAT OPPORTUNITY HERE. THE OTHER THING IS YOU'VE GOT THE DOLLAR MIXED IN THERE A LITTLE BIT. YOU'VE GOT SOME WEATHER CONCERNS, BOTH TOO DRY IN SOME AREAS AND TOO YET IN OTHER AREAS. THAT'S TENDING TO SUPPORT IT TOO. SO, YEAH, IT'S KIND OF AN INTERESTING MARKET ALL OF A SUDDEN.

Pearson: WHAT ARE WE GOING TO DO, TOMM? WE'RE UP HERE IN THIS PRICE RANGE. WE'VE GOT TO MAKE SALES.

Pfitzenmaier: YEAH, THIS IS -- I DON'T WANT TO USE THE WORD IT'S A "GIFT" BECAUSE, GIVEN THE FACT THAT THE FUNDAMENTALS HAVE CHANGED, IT'S PROBABLY WHERE IT SHOULD BE OR MAYBE A LITTLE ABOVE WHERE IT SHOULD BE. BUT IT ALSO IS FAIRLY PRICED AND IS AN OPPORTUNITY TO TAKE ADVANTAGE OF.

Pearson: WELL, IT'S SOMETHING WHEAT PRODUCERS NEED TO TAKE ADVANTAGE OF, PARTICULARLY AS WE'RE HEADING INTO THE HARVEST SEASON BEFORE MUCH LONGER.

Pfitzenmaier: YEAH. I MEAN WE HAD A GOOD EXPORT NUMBER THIS WEEK -- OR A DECENT ONE. IF WE COULD HAVE A STRING OF THOSE, THEN YOU COULD START TO MAYBE GET A LITTLE MORE CONFIDENT. BUT IF WE FALL RIGHT BACK TO HAVING POOR EXPORTS AGAIN, THEN, YOU KNOW, THE PARTY COULD END PRETTY FAST TOO.

Pearson: YOU'VE BEEN TALKING ABOUT TAKING

ADVANTAGE OF -- LET'S MOVE OVER TO CORN. DECEMBER NEW CROP CORN, AT 250 OR BETTER, YOU WANT TO START SCALING INTO THAT.

Pfitzenmaier: YEAH, ABSOLUTELY. I MEAN WE'RE THERE. YOU KNOW, MAYBE WE'RE GOING TO GO A LITTLE HIGHER THAN THIS. I DON'T KNOW. IT DEPENDS ON HOW THE WEATHER SHAPES UP AND WHETHER THIS WINDOW OF OPPORTUNITY OVER THE NEXT FEW DAYS IS GOING TO ALLOW PEOPLE TO GET CORN PLANTED. BUT HISTORICALLY, SPRING WET WEATHER RALLIES ARE RALLIES TO BE SOLD. AND I SUSPECT THAT IF YOU SELL CORN ABOVE 250, YOU'RE GOING TO BE HAPPY COME FALL THAT YOU DID SO. NOW MAYBE FOR TWO OR THREE DAYS OR A WEEK OR WHATEVER, YOU MIGHT BE A LITTLE DISTRAUGHT OVER THE SITUATION BUT, ULTIMATELY, I THINK IT'S GOING TO BE A GOOD THING TO DO. AND IT'S ALSO GOING TO BE A MARKET BOTH IN CORN AND BEANS WHERE SELLING EARLY IS GOING TO BE IMPORTANT, BECAUSE SELLING LATE IS GOING TO BE TOUGH TO DO.

Pearson:THAT'S RIGHT. THIS IS A PARTY YOU WANT TO COME TO EARLY.

Pfitzenmaier: RIGHT.

Pearson: LET'S TALK ABOUT THAT. WE HAVE HAD STALLED PLANTINGS. WE'RE RUNNING A LITTLE BIT BEHIND. WE'RE NOT PAST ANY KIND OF OPTIMUM YIELD AT THIS STAGE OF THE GAME, BUT IT'S CAUSING CONCERN. AND WE DO HAVE THE WEAKENING DOLLAR. THERE'S A LOT OF PEOPLE OUT THERE MAKING A VERY BULLISH SCENARIO OUT OF THIS.

Pfitzenmaier: WELL, WE HAD WORLD STOCKS WERE DOWN A LITTLE BIT TOO. THAT'S ANOTHER ONE TO FACTOR IN THAT PEOPLE ARE TRYING TO MAKE A LITTLE BIT. BUT WE ALSO HAVE RISING U.S. ENDING STOCKS AGAIN. RISING -- WAY RISING. NEXT YEAR'S PROJECTION WAS QUITE A BIT HIGHER. SO I MEAN 1.3 MILLION -- BILLION, EXCUSE ME, CARRYOUT FOR NEXT YEAR IS LESS THAN THE TWO BILLION WE KIND OF GOT USED TO THERE FOR A WHILE. BUT THERE'S STILL PLENTY OF CORN AROUND. AND THERE'S STILL A LOT OF UNCERTAINTY OVER OUR ACREAGE. IS ACREAGE REALLY UNCHANGED FROM LAST YEAR OR, LIKE A LOT OF PEOPLE THINK, IS THERE GOING TO BE A BUMP IN ACREAGE WHICH, YOU KNOW, MAKES A TEN-BILLION-BUSHEL CROP MORE LIKELY? THOSE ARE THE QUESTION MARKS. AND THE OTHER ONE IS ETHANOL. YOU KNOW, WE HAVE MORE AND MORE PLANTS COMING ON-LINE HERE. THAT'S GOING TO HAVE HIGHER USAGE. THAT COULD BE A MINOR FACTOR ALSO.

Pearson: SO COUPLE ALL THOSE TOGETHER. AND THEN YOU LOOK AT WHAT'S HAPPENING IN THE CORN MARKET, AND YOU'RE SAYING NOW IS THE TIME TO GET PRICED ON SOME NEW CROP AND CLEAN OUT OLD CROP.

Pfitzenmaier: ABSOLUTELY. AND I THINK PEOPLE ARE KIND OF STARTING TO DO THAT. THERE WAS A FEELING, WHEN WE WERE 20 CENTS LOWER HERE, ON A LOT OF PEOPLE'S PART THAT THEY MISSED IT AND KIND OF BLOWN IT THROUGH THE WINTER. WELL, THIS IS THE OPPORTUNITY TO GET CAUGHT UP HERE. WE STILL HAVE FAIRLY STRONG BASIS. THIS IS A RALLY TO UTILIZE TO TAKE ADVANTAGE OF.

Pearson: ALL RIGHT. LET'S TALK ABOUT THIS RALLY IN SOYBEANS. NOW, WE'RE UP IN SOME PRICES WE HAVEN'T SEEN IN QUITE A WHILE. AGAIN, THERE'S SCENARIOS GOING ON WHERE, YOU KNOW, WE COULD SEE STRONGER PRICES. AT THIS STAGE OF THE GAME, TOMM, IT LOOKS LIKE IT'S DEFINITELY OLD CROP CLEANUP TIME FOR BEANS.

Pfitzenmaier: YEAH. THE DIFFERENCE BETWEEN CORN AND BEANS IS YOU'VE GOT DEMAND FOR BEANS. I MEAN CORN DEMAND -- I MEAN WE HAD A GOOD WEEK LAST WEEK, BUT OTHER THAN THATIT'S BEEN LAGGING; WHEREAS, BEANS HAVE BEEN -- EVERY BUSHEL WE SELL GOES STRAIGHT OFF THE CARRYOUT, AND WE'VE GOT A PRETTY TIGHT CARRYOUT. SO I MEAN I DON'T KNOW THAT WE FOUND A PRICE YET THAT CHOKES OFF DEMAND. I MEAN OBVIOUSLY WE HAVEN'T. WE HAD FIVE MILLION BUSHELS SOLD AGAIN LAST WEEK. SO WE NEED TO FIND A PRICE THAT CHOKES OFF DEMAND, AND IT DOESN'T APPEAR THAT WE'VE FOUND THAT YET. NOW, WE DIDN'T CLOSE ALL THAT GREAT ON FRIDAY, AND WE'LL HAVE TO SEE HOW THAT RANSFERS INTO MONDAY. BUT I THINK YOU'RE PROBABLY RIGHT, A CHANCE TO CLEAN UP SALES. ALTHOUGH, HAVING SAID THAT, MOST FARMERS HAVE SOLD CORN -- OR BEANS, EXCUSE ME, FAIRLY AGGRESSIVELY THROUGH THE WINTER. SO THERE'S NOT A LOT OF BEANS -- THAT'S ONE THING ABOUT THE BEAN MARKET, IT'S STRUCTURED WELL. THE FARMER DOESN'T HAVE ANY -- YOU KNOW, THE DECLINING – CARRYOUTS DECLINING. WE'VE GOT GOOD DEMAND. THERE MAY BE A LITTLE MORE UP IN THESE BEANS YET.

Pearson: ALL

RIGHT. NOW, LET'S TALK ABOUT NEW CROP SOYBEANS. NOW, THAT'S THE OTHER QUESTION. DO WE USE THIS OPPORTUNITY? IS THIS GOING TO BE IT? WE DON'T HAVE THOSE GOVERNMENT PRICE DIFFERENTIALS TO TAKE ADVANTAGE OF THIS COMING YEAR.

Pfitzenmaier: THAT'S A WHOLE DIFFERENT STORY BECAUSE, NUMBER ONE, YOU'RE GOING TO HAVE THE PRODUCTION FROM THIS SUMMER, BUT THE OTHER THING IS PART OF THE REASON BRAZIL HASN'T BEEN SELLING BEANS IS BECAUSE THOSE FARMERS NEED TO HOLD ONTO THOSE BEANS TO HOLD THEIR MONEY TOGETHER TO PAY THE INPUTS IN THE FALL TO PLANT THEIR CROP, WHICH TELLS ME THAT THEY'RE PROBABLY GOING TO HAVE TO -- COME FALL, THEY'RE GOING TO START MOVING A BIG CHUNK OF BEANS AT ABOUT THE SAME TIME WE'RE HITTING HARVEST. SO OU COULD, IN SOME SENSE, HAVE A DOUBLE HARVEST COMING IN

IN THE FALL TIME PERIOD. SO THAT NOVEMBER IS GOING TOREALLY STRUGGLE TO RALLY HERE, I BELIEVE. SO YOU GET NOVEMBER BEANS IN THE 5.75 TO THE $6 AREA, YOU PROBABLY NEED TO LOOK PRETTY HARD AT EITHER SELLING THEM, BUYING A PUT, SELLING THE FUTURES OR BUYING A CALL TO COVER IT, SOME STRATEGY THAT LOCKS SOMETHING IN FOR YOU. AND THAT'S APOINT WHERE YOU CAN FINALLY -- YOU'RE UP ABOVE THE LOAN RATE WHERE YOU CAN CONSIDER IT. UP TO THIS POINT, YOU'RE AT THE LOAN RATE OR BARELY ABOVE IT.I MEAN WHAT'S THE POINT. THE GOVERNMENT HAS GOT -- BASICALLY GOT YOU AFREE PUT. WHY MESS WITH IT? WELL, NOW WE'RE UP TO THE POINT WHERE YOU CAN MAKE THE CASE FINANCIALLY THAT THERE'S SOME ADVANTAGE TO DOING IT.

Pearson: GOOD POINT. ALL RIGHT. LET'S TALK LIVESTOCK. FED CATTLE MARKET HANGING OVER $80 IN THIS CASH MARKET WHAT'S WRONG WITH FUTURES? WE KEEP THINKING FUTURES SHOULD BE RALLYING UP IN THE CASH.

Pfitzenmaier: WELL, THERE'S BEEN A LITTLE NEGATIVITY HANGING OVER THE MARKET BECAUSE OF THIS CATTLE-ON-FEED REPORT THAT CAME OUTTHIS AFTERNOON. THEY WERE LOOKING FOR A PLACEMENT NUMBER OF 118. PLACEMENT CAME OUT AT 129. SO I MEAN IT WAS STILL WITHIN THE RANGE OF EXPECTATIONS. THE HIGHEST RANGE WAS UP IN THE HIGH 130S. BUT STILL, THAT HAD KIND OF A NEGATIVE FEELING HANGING OVER THOSE MARKETS. IT MIGHT HURT THE AUGUST CONTRACT A LITTLE BIT COME MONDAY. MAY PULL JUNES DOWN A LITTLE TOO. BUT I THINK YOU'RE GRADUALLY GOING TO START TO SEE THAT. IF WE CAN -- THE STRUCTURE OF THIS CATTLE MARKET IS SO GOOD. WE'VETALKED ABOUT IT FOR QUITE A WHILE HERE. THE DEFERREDS ARE DISCOUNTED. THE CATTLEMEN ARE CONCERNED. THEY'RESTAYING CURRENT. THEY'RE KEEPING THEIR WEIGHTS DOWN ALL THE THINGS YOU LIKE TO SEE TO HAVE A POSITIVE, GOOD, STRONG CATTLE MARKET ARE IN EXISTENCE THERE. THERE'S A BIG FEELING THAT, YOU KNOW, AS THE SUMMER GOES ON, SUMMERTIME DEMAND FALLS OFF AND THE NUMBERS ARE GOING TO BEA PROBLEM. AND MAYBE THEY'RE NOT. MAYBE WE'RE GOING TO GO THROUGH THE SUMMER AND THOSE THINGS AREN'T GOING TO HAPPEN AND WE'RE GOING TO SEE THIS CATTLE MARKET BOUNCE UP ALITTLE BIT AND STAY FIRM.

Pearson: ALL RIGHTREAL QUICK, TOMM, THE HOG MARKET. GOING DOWN THE ROAD, WHAT DO YOU SEE? NEW CONTRACT HIGHS ON FRIDAY, GOT TO BE POSITIVE TO THAT MARKET. WE'VE BEEN SAYING ALL LONG THAT THIS IS A GOOD MARKET IF THE NUMBERS WOULD COME DOWN, AND THEY ARE STARTING TO COME DOWN. SO I THINK YOU HAVE TO BE POSITIVE ABOUT THAT HOG MARKET. AND MAKING NEW CONTRACT HIGHS, THERE'S CERTAINLY NOTHING NEGATIVE ABOUT THAT.

Pearson: WELL, SOME GOOD NEWS ON THE HOG FRONT AND REALLY SOME SUSTAINING NEWS IN THE CATTLE FRONT.

Pfitzenmaier: ABSOLUTELY.

Pearson: AND THE ECONOMY SURE LOOKS GOODS THERE ON THE CATTLE FRONT. WELL, THANKS TOMM. THAT'S GOING TO WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT IF YOU'D LIKE TO HEAR ADDITIONAL ANALYSIS FROM TOMM, BE SURE TO CHECK OUT THE "MARKET PLUS" PAGE ON THE "MARKET TO MARKET" WEB SITE. SO UNTIL NEXT TIME, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES,IOWA


Tags: agriculture commodity prices markets news