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Market Analysis: Apr 25, 2003

posted on April 25, 2003


The grain markets finished the week mixed as the trade focuses on crop conditions for 2003. Fr the week, wheat prices gained more than six cents. Corn prices were down six cents. Soybean futures were down seven to more than 23-cents. Soybean meal finished $7.20 lower per ton.

Cotton futures closed 80-cents lower.

In livestock, fed cattle futures gained 30-cents. Feeder cattle gained 70-cents. The lean hog contract gained $1.75.

In the financials, COMEX gained $6.20 per ounce. The euro gained 125-basis points against the dollar. The CRB index finished the week more than a half point lower to finish at 233.20.

Here now to lend us her insight is one of our regular market analysts, Sue Martin. Welcome back.

Market Analysis: Apr 25, 2003

Martin: THANK YOU, MARK.

Pearson: SUE, I'VE GOT TO ASK YOU ABOUT SOYBEANS. YOU WERE AN $8 GIRL A COUPLE MONTHS AGO, AND WE'VE HAD HUGE MOVES UP. NEW LIFE-OF-CONTRACT HIGHS IN THIS NEARBY SOYBEAN COMPLEX. PEOPLE ARE GETTING KIND OF EXCITED. BOOM, BIG PULLBACK THIS WEEK. WAS THIS EXPECTED?

Martin: WELL, I THINK IT WAS. SEASONALLY AS YOU GET INTO THIS THIRD WEEK OF APRIL, IT'S VERY TRADITIONAL OR VERY SEASONAL TO HAVE A PULLBACK IN BEANS, EVEN IN BULL YEARS, A PULLBACK. AND THAT PULLBACK USUALLY LASTS UNTIL ABOUT THE 28TH OF APRIL, SOMETIMES THE 29TH. WE HAVE TIMING HERE NEXT WEEK. MY TIMING IS AROUND THE 30TH, SO MAYBE IT TAKES US A COUPLE OF DAYS LONGER. BUT CERTAINLY THE ONE THING YOU HEAR, THERE WAS LOTS OF BEARISH NEWS ABOUNDING THIS WEEK. THE BIGGEST ONE WAS EVERYBODY WAS TALKING ABOUT THE FUND LENGTH, HOW LONG THEY WERE. AND A NEW COMMITMENT OF TRADERS REPORT CAME OUT ON FRIDAY AFTERNOON SHOWING THAT THE FUNDS WERE STILL LONG ABOUT 69,000 CONTRACTS OF FUTURES. NOW, ON MONDAY WE'LL PUT THE OPTIONS WITH THAT TO SEE JUST WHERE THEIR LENGTH REALLY IS. WE ESTIMATE THEM TO BE RIGHT AROUND 75- TO MAYBE 74,000 CONTRACTS, SO IT WILL BE INTERESTING TO SEE. I THINK THAT, YOU KNOW, THE ONE THING THAT WE HAVE TO REMEMBER, FUNDS HAVE BEEN THE MONEY MAKERS. THEY'VE MADE MONEY SO FAR IN BEANS. AND THEY MADE THE MONEY ON THE DOWNSIDE IN THE CORN, WHILE THE COMMERCIAL WAS ON THE WRONG SIDE, AND THEY MADE MONEY IN THE WHEAT MARKET ON THE DOWNSIDE. AND THEY DID MAKE MONEY IN THE GOLD MARKET AND IN THE CRUDE. SO THEY HAVEN'T BEEN TOO FAR OFF HERE, SO WE HAVE TO KIND OF WATCH AND SEE HOW THIS PLAYS OUT. I THINK THAT THE LOCALS ARE TRYING VERY HARD TO PUSH THIS MARKET DOWN, AND THE BEARS ARE TRYING TO GET BACK TO THAT GAP THAT WE LEFT ON THE CHARTS ABOUT TWO WEEKS AGO. AND IF THEY CAN GET THAT, THEIR ATTITUDE IS THAT THE FUNDS WILL START TO LOOSEN UP THEIR LENGTH. THAT COULD HAPPEN. I SUSPECT WE'LL BE TESTING THAT GAP AGAIN ON MONDAY MORNING. HOWEVER, WHEN WE LOOK AT WHAT'S GOING ON AROUND THE WORLD AND EVERYBODY WANTS TO TALK ABOUT THIS SARS -- AND I THINK IT'S A LOT OF HYPE. I THINK THAT PEOPLE IN CHINA, SOME ARE STAYING HOME OR WHATEVER, AND THEY'RE PASSING ON THE HOLIDAY, THE MAY DAY WEEK-LONG HOLIDAY. THAT MEANS, THEN, THAT THE EXPORTER AND IMPORTER IS GOING TO BE WORKING, WHERE USUALLY HE'S NOT. SO HE'S GOING TO BE INVOLVED IN THE WORLD MARKET, AND THAT COULD LEAD TO SOME GOOD DEMAND. SECONDLY, CHINA, IT'S MY UNDERSTANDING, DID NOT BOOK THEIR BEANS. THEY LOCKED UP THE BASIS BUT THEY DIDN'T LOCK UP THE PRICE. SO WHO WOULD WANT TO SEE THE PRICES BREAK ON ALL THE RHETORIC OF SARS? IT WOULD BE THE CHINESE? ALSO, YOU'VE GOT THE BRAZILIAN COMMERCIAL WHO IS HEAVILY SHORT BEANS. AND OF COURSE, SOME OF THAT HAS BEEN WHAT'S HELPED US GET TO THE 620 AREA, BUT HE'S SHORT. NOW, WE'VE GOT SOME HOOPS TO JUMP HERE. WE'VE GOT, FIRST OF ALL, ON A MONTHLY BASIS, WE NEED JULY BEANS TO CLOSE OVER $6. WE HAVE NOT DONE THAT SINCE JUNE 1998. ALSO ON A MONTHLY BASIS, NEXT WEDNESDAY ON APRIL 30, I WOULD LIKE TO SEE BEANS CLOSE OVER THEIR 200-MONTH MOVING AVERAGE. WE HAVE NOT DONE THAT SINCE JUNE OF '98 EITHER, AND THAT IS 610. IF WE DO THAT, WE'RE STILL IN THE BALLPARK. BUT WE NEED TO GET THIS MARKET UP AND MOVING. IT CAN'T LABOR MUCH LONGER.

Pearson: ALL RIGHT. LET'S TALK ABOUT CORN. AGAIN, A SOFT WEEK FOR CORN. WHEAT WAS A LITTLE BIT STRONGER, BUT CORN A LITTLE BIT UNDER PRESSURE. YOU HAVEN'T BEEN TOO FRIENDLY TO CORN ANYWAY.

Martin: NO. I CONTINUE TO SAY CORN IS ONLY GOING TO BE AS GOOD AS THE BEAN MARKET IS. IF CORN SETS BACK, YOU'LL STILL HAVE A GOOD BASIS. I SUSPECT THAT BASIS WILL REMAIN VERY STRONG BECAUSE WE'RE MOVING CORN TO THE AREAS OF THE HAVES TO THE AREAS OF THE HAVE-NOTS. AND OF COURSE, ETHANOL USAGE FOR CORN WAS UP, I THINK, 30, 35 PERCENT IN THE MONTH OF MARCH FROM THE YEAR PREVIOUS. SO THERE IS GOOD USAGE FOR CORN AND DEMAND, BUT STILL THERE'S A LOT OF CORN IN FARMERS' HANDS. AND WE KNOW THAT WE'RE GOING TO PICK UP SOME ACRES THIS YEAR. I JUST -- I'M AFRAID I'M JUST NOT A BULL IN CORN UNLESS WE HAVE A BEAN MARKET LEADING.

Pearson: YEAH, WE'RE DOWN UNDER WHAT YOU WOULD LIKE TO SELL OR HEDGE NEW CROP CORN AT ANYWAY, RIGHT?

Martin: WELL, NEW CROP CORN YOU HAVE TO WATCH BECAUSE IT'S AROUND THAT 239, -40 AREA. THAT'S NOT ALL BAD BUT YOU DON'T -- I WOULD SAY MAYBE DO SOME BUT LEAVE THE DOOR OPEN YET, JUST IN CASE WE START TO PULL THIS BEAN MARKET BACK UP. THE CORN WILL DRAG WITH IT. NOW, CORN ALSO IS A VICTIM OF SPREADS, WINDING BETWEEN SHORT WHEAT, LONG CORN, LONG BEANS. SO CORN IS KIND OF THE VICTIM OF THE SPREADS WITH THE WHEAT TOO.

Pearson: ALL RIGHT. HOW DO YOU ACCOUNT FOR THIS WHEAT MOVE THIS WEEK?

Martin: WELL, I THINK THAT WE'VE GONE SIDEWAYS FOR FOUR WEEKS. USUALLY WHEN A MARKET CONTINUES TO MOVE SIDEWAYS AFTER A PROLONGED DOWN MOVE, THAT'S PROBABLY WHAT WE'RE GETTING IS WE'RE GETTING OUR SEASONAL MARKET, BUT IT'S GOING SIDEWAYS RATHER THAN UP. AND I SUSPECT THAT THE WHEAT MARKET CAN STILL HAVE A LITTLE PULLBACK. THE WHEAT TOUR STARTS ON MONDAY, AND I THINK THEY'RE GOING TO FIND A GOOD LOOKING CROP OUT THERE. SO I DON'T KNOW AS IF I WOULD BE SUCH A RAMPANT BULL OR ANYTHING LIKE THAT IN WHEAT. I THINK HERE AGAIN, I WOULD BE A FOLLOWER. IF I HAD TO BUY WHEAT, I'D PROBABLY GO TO THE MINNEAPOLIS WHEAT AND BUY THAT. I'M NOT REAL KEEN ON K.C. OR CHICAGO WHEAT. BUT IT COULD BOUNCE A LITTLE BIT MORE UNTIL WE SEE THAT MARKET DISPEL NEGATIVE NEWS. GET NEGATIVE NEWS OUT AND THEN IT TURNS AND GOES HIGHER. THAT'S A GOOD SIGN FOR THE MARKET, BUT UNTIL WE SEE THAT, WE HAVE TO BE CAREFUL.

Pearson: LET'S TALK QUICKLY ABOUT THE COTTON MARKET, BACK UP A LITTLE BIT THIS WEEK. BUT WE'RE AT SOME DECENT LEVELS AGAIN ON COTTON.

Martin: WE SURE ARE. COTTON HAS DONE A GOOD JOB. AND, OF COURSE, IT'S MADE A DOUBLE TOP HERE, SORT OF LIKE BEANS. AND NOW WE'LL SEE WHAT IT'S CAPABLE OF. I THINK COTTON COULD BACK OFF A LITTLE BIT. AND THEN I THINK IN EARLY MAY, WE'LL TRY TO MAKE ONE MORE SURGE HERE. BUT COTTON GETTING UP IN THAT 62- TO 64-CENT AREA PROBABLY IS WORTH SOME SALES. AND OF COURSE, USUALLY YOU'RE HEADING IN TOWARD THE HARVESTTIME SITUATION BEFORE TOO LONG. SO I WOULD SAY I'D BE WILLING TO -- PROBABLY BE LOOKING AT SELLING SOME COTTON.

Pearson: LET'S TALK ABOUT THE LIVESTOCK MARKET. LET'S TALK FIRST ABOUT FED CATTLE. AGAIN, IT'S BEEN INTERESTING -- SOME INTERESTING MOVES ON THE CASH SIDE HERE. AND WHAT'S GOING TO HAPPEN, CASH OR FUTURES? WHO'S GOING TO LEAD WHO AS THEY COME TOGETHER? WHAT'S YOUR OUTLOOK NOW, SUE?

Martin: WELL, I THINK THAT, FIRST OF ALL, WHEN WE LOOK AT THE CATTLE-ON-FEED REPORT THAT CAME OUT HERE A WEEK AGO, WE NOTICED THAT, AGAIN, HEAVYWEIGHT PLACEMENTS WERE PRETTY AGGRESSIVE, UP 28 PERCENT OVER THE FIVE-YEAR AVERAGE. THAT'S PRETTY AGGRESSIVE. THEN YOU COMBINE THAT WITH ALL THE LIGHTWEIGHT PLACEMENTS THAT WE'VE HAD EARLIER. IT TELLS US WE'RE GOING TO HAVE A GOOD SUPPLY OF CATTLE HITTING US IN THE JULY/AUGUST/SEPTEMBER TIME FRAME. NOW, THAT MEANS THAT WE'RE GOING TO PROBABLY EQUAL -- SOMEWHERE ALONG THE LINE THERE, WE'RE GOING TO EQUAL IN SLAUGHTER TO WHAT WE WERE BEFORE AND, OF COURSE, BEEF PRODUCTION. IN THE MEANTIME BECAUSE OF THE LIGHT WEIGHTS AND THE WIDE SPREAD OF JUNE'S DISCOUNT TO THE FUTURES MARKET AND -- TO THE CASH MARKET, I SHOULD SAY, WHAT WE'RE GOING TO SEE IS THAT WILL CONTINUE TO FORCE THE PRODUCER TO STAY VERY CURRENT AND KEEP PUSHING THESE CATTLE BECAUSE HE DOESN'T WANT TO MISS THESE PRICES. AND THEY CERTAINLY SHOWED THIS WEEK THEY WERE WILLING TO CAVE IN EASY.

Pearson: AND AT THIS STAGE OF THE GAME, WE DON'T SEE THAT FUTURES MARKET REALLY RESPONDING THAT MUCH.

Martin: NO, IT'S NOT, NOT LIKE I WOULD HAVE THOUGHT. EVIDENTLY, WE HAVE SUCH A GOOD SUPPLY OF SELECT CATTLE THAT THAT'S MAKING THE RETAILER HAPPY ENOUGH TO KNOW HE'S GET SELECT CATTLE, EVEN THOUGH CHOICE IS BETTER AND THE SPREAD BETWEEN THE TWO IS REALLY GOING TO, MAYBE, PUT ON A NEW RECORD. BUT EVIDENTLY, THE PACKER DIDN'T FEEL A NEED TO BUY THE FUTURES AND FORCE THE MARKET UP TO GET DELIVERIES OF CHOICE CATTLE. SO -- BECAUSE CERTAINLY I WOULD HAVE THOUGHT WE COULD HAVE DONE THAT. BUT THERE'S A GOOD SUPPLY OF SELECTS, AND I THINK THAT'S WHAT'S KEEPING US FROM DOING THAT.

Pearson: A LITTLE LONGER TERM, SUE. I MEAN SECOND -- OR THIRD, FOURTH QUARTER, WHAT ARE YOU GOING TO SEE FOR FED CATTLE?

Martin: WELL, I THINK WE'RE GOING TO SEE CATTLE PRICES DECLINE. AND OF COURSE, I THINK WHAT WILL HAPPEN IS WE'RE GOING TO SEE THE SPREAD BETWEEN -- IN THE AUGUST TIME FRAME AND THE FUTURES -- OF AUGUST FUTURES AND CASH NARROW IN. IT COULD COME MORE WITH CASH COMING DOWN AND THE FUTURES GOING UP. IF WE GET SOME RALLIES HERE ON THE CATTLE MARKET AS WE GO TOWARDS JUNE, I WANT TO GET THOSE CATTLE LOCKED UP, I THINK, ALL THE WAY THROUGH OCTOBER.

Pearson: OKAY. LET'S TALK HOGS. DO YOU WANT TO DO ANYTHING THERE?

Martin: WELL, THE HOG MARKET, I THINK THE PRODUCER HAS HAD SUCH A STRUGGLE AND A LONG-ENDURED DECLINE OR BEAR MARKET. I THINK THAT'S CHANGED NOW AND I THINK THE BOTTOM IS IN. AND I LOOK FOR THE HOG MARKET TO BE GOOD AS WE GO INTO THE JUNE TIME FRAME. SEASONALLY WE LIFT HERE AS WELL, AND THAT MARKET CERTAINLY IS BOUNDING BACK. WE COULD SEE 65-CENT JUNE HOGS ON THE BOARD. I WILL SAY THIS, I DO THINK THAT WE'RE A LITTLE BIT OVERDONE AS WE CLOSED OUT THE WEEK ON THE TECHNICALS, ON TIMING AND OTHER INDICATORS THAT INDICATE OVERBOUGHT, OVERSOLD. BUT I WOULD SAY -- SO I WOULD BE RELUCTANT TO CHASE THE MARKET HERE, BUT PULLBACKS TOWARDS THE 60, 50 AREA, I'D BUY.

Pearson: ALL RIGHT. SOME GOOD POINTS, AS USUAL. SUE MARTIN, WE APPRECIATE IT VERY MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT IF YOU'D LIKE TO HEAR ADDITIONAL ANALYSIS FROM SUE, BE SURE TO CHECK OUT THE MARKET PLUS PAGE ON THE "MARKET TO MARKET" WEB SITE. UNTIL NEXT TIME, THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

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