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Market Analysis: Apr 04, 2003

posted on April 4, 2003


The grain markets finished the week strongly higher following a couple of key government reports. For the week, wheat prices gained more than a nickel. Corn prices gained eight to eleven cents. Soybean futures gained a dime on old crop contracts, while the new crop was only fractionally higher. Soybean meal gained 80-cents per ton. Cotton futures were $1.15 higher.

In livestock, fed cattle gained $1.27. feeder cattle were $1.05 higher. The lean hog contract closed the week 80 cents higher.

In the financials, COMEX gold closed $6.20 lower per ounce. The euro was down nearly a point against the dollar. The CRB index finished the week up one-and-a-half points to finish the week at 229.80.e

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

Market Analysis: Apr 04, 2003 Martin: : THANK YOU, MARK.

Pearson: : WELL, LET'S TALK ABOUT THIS PROSPECTIVE PLANTINGS AND THE USDA'S OUTLOOK AND SO FORTH. AND FIRST OFF, WE TALKED ABOUT EARLIER IN THE SHOW THERE WAS A SHORT-TERM JUMP IN WHEAT PRICES. AND YET, YOU KNOW, WE'VE GOT SOME OTHER FACTORS IN WHEAT THAT MAY NOT BE THE FINAL VERDICT. WHAT'S YOUR OUTLOOK NOW FOR WHEAT?

Martin: : WELL, I THINK WHEAT HAS BEEN IN A LONG DEMISE OF PRICE. I DON'T HAVE TO TELL A PRODUCER THAT. THEY KNOW IT. WE'RE COMING INTO THE TIME OF THE YEAR WHERE WE SHOULD BE TRYING TO PUT IN SOME LOWS AND GET A BOUNCE HERE. THE WEATHER FORECAST, OF COURSE, FOR THE WEEKEND IS WITH FREEZING TEMPS ALL THE WAY DOWN THROUGH TEXAS AGAIN, THE SECOND WEEKEND IN A ROW. AND THIS IS FOLLOWING HIGH 80-DEGREE TEMPERATURES, WHICH REALLY PROMOTED GROWTH OF THE WHEAT CROP. SO THIS ONE

COULD DO SOME DAMAGE IF IT GETS DOWN COLD ENOUGH AND STAYS THERE LONG ENOUGH. BUT THE MARKET WAS IN DENIAL TODAY. IT WAS ONLY LIKE, MAYBE, JUST MINIMALLY HIGHER. IT'S GOT AN ATTITUDE: PROVE IT TO ME AND THEN WE'LL THINK ABOUT IT. I THINK THE WHEAT MARKET IS WAITING FOR OTHER MARKETS TO TAG IT ALONG, AND THAT'S GOING TO HAVE TO BE THE BEAN MARKET.

Pearson: : ALL RIGHT. WE'RE GOING TO TALK ABOUT BEANS IN JUST A SECOND. THIS CORN MARKET WITH THIS JUMP THIS WEEK AND THE MOVE IN OLD CROP, I MEAN YOU'RE INTO SOME SALES RANGES, AREN'T YOU?

Martin: : WELL, THE 240 AREA, IF YOU LOOK AT JULY FUTURES, 242, THE LAST TIME WE CROSSED OVER THAT, THAT'S A HUNDRED-DAY MOVING AVERAGE, WAS BACK IN OCTOBER WHEN THE FUTURES WERE ABOVE IT COMING DOWN THROUGH IT. THE ONE THING THAT WE'VE GOT GOING FOR THE MARKET -- AND THIS SHOWED UP IN THAT CROP REPORT IN THE SUPPLY DEMAND SIDE OF IT -- WAS THAT IT DID SHOW THAT WE ARE UTILIZING THE CROP

FASTER THAN WHAT THE USDA HAD BEEN SAYING. SO WE'RE GOING TO -- THEY'RE STARTING TO ADMIT THAT. AND IT'SBASICALLY, YES, MAYBE WE HAVE A FEW MORE HOGS THAN WHAT THEY EXPECTED THE LAST QUARTER, BUT POULTRY NUMBERS ARE A LITTLE

BIT ON THE DECLINE AND CATTLE NUMBERS ARE CERTAINLY ON THE DECLINE, BUT YOU HAD A COLDER WINTER SO MAYBE UTILIZED MORE CORN. I THINK IT'S THE BASIC FACT THAT WE DIDN'T HAVE ALTERNATIVE FEEDS. AND SO THE LACK OF ALTERNATIVE FEEDS

IS REALLY PUTTING A PUSH ON THIS CORN CROP. AND YOU'D THINK THAT WOULD BE GOOD FOR THE PRODUCER, BUT IT DOESN'T -- ALL IT'S DOING IS HELPING THE BASIS HOLD TOGETHER VERY STRONGLY. AND, OF COURSE, AS WE GO INTO PLANTING, THAT BASIS IS GOING TO BE VERY STRONG. WHAT I REALLY SEE IN THE CORN MARKET THAT WOULD BE HELPFUL TO PRICE IS IF WE CONTINUE WITH THIS DRY PATTERN THAT WE'VE BEEN IN.

Pearson: : ALL RIGHT. AND WE HAVE SEEN THAT. IT CERTAINLY STARTED IN NEBRASKA AND EASTERN COLORADO AND REALLY THROUGH IOWA AND UP THROUGH NORTHERN ILLINOIS.

Martin: : ABSOLUTELY. AND FROM THE WAY DIFFERENT WEATHER SOURCES THAT WE USE, IT SOUNDS LIKE IT'S GOING TO CONTINUE AND MAYBE GET MORE SO ENHANCED AS WE GO INTO JUNE.

Pearson: : ALL RIGHT. WELL, THAT'S GOING TO BE A FACTOR THEY'LL BE WATCHING IN CHICAGO. BUT AROUND 242, DO YOU WANT TO PULL THE TRIGGER?

Martin: : I WOULD SAY AROUND 242 I'D PULL SOME. I'M NOT ANXIOUS TO GET TOO CARRIED

AWAY WITH IT BECAUSE NOW WE'RE INTO A TIME FRAME WHERE WE'VE GOT THE BEAN MARKET MAYBE STARTING TO DO WHAT IT SHOULD BE DOING, AND THAT WILL DRAG CORN TO SOME SMALL DEGREE.

Pearson: : ALL RIGHT. NOW, WE HAVEN'T EVEN GOTTEN TO BEANS YET, AND YOU'VE MENTIONED THEM THREE TIMES, SUE. SO LET'S GO OVER TO THIS BEAN MARKET. YOU'VE BEEN TRACKING IT VERY CLOSELY. NOW, WE HIT A CONTRACT HIGH. WE'VE

BEEN -- CYCLICALLY WE'VE BEEN MOVING UP HERE ABOUT THE RANGE YOU WERE EXPECTING, CLOSE TO $6. IN FACT, I THINK 591, I THINK, IS ONE OF YOUR TARGETS. SO WE'VE HIT THAT SO ARE WE GOING TO KEEP THIS GOING? ARE WE GOING TO KEEP THIS MOVING? Martin: : WELL, I THINK WE ARE. THE ONE THING THAT I WILL SAY IS HERE'S THE HOOPS WE'VE GOT TO JUMP IN THE NEAR TERM. FIRST OF ALL, WE NEED TO CLEAR OUT THE 591.5 AREA, 91.75. NOW, WE DID PENETRATE THAT. THAT'S THE JANUARY HIGHS FOR A LEAD MONTH. WE NEED TO CLEAR THAT OUT. THEN THE NEXT TARGET IS GOING TO BE 595.5 TO 595.75. THAT IS A 200-MONTH MOVING AVERAGE. AND THE 200-MONTH MOVING AVERAGES WE NEVER CLOSED OVER A YEAR AGO, AND SO WE NEED TO GET UP ABOVE THAT. THEN THE

NEXT TARGET IS 606 BASIS THE MAY CONTRACT. THAT 606 IS A200-MONTH MOVING AVERAGE FOR THAT CONTRACT. ONCE WE CLEAR THAT, THEN IT'S THE HIGHS OF 622 -- LAST YEAR'S HIGHS. AND THEN YOU'RE OFF TO A RACE. AND ACTUALLY THERE ARE PROJECTIONS TO 655 THAT ARE PRETTY MUCH OPENED ALREADY NOW, HAVING SAID THAT, THE MARKET IS VERY OVERBOUGHT ON DAILY TIME FRAME, AND THE HOURLY DATA IS GETTING A LITTLE BIT RIPE AS WELL. SO I SUSPECT THAT AS WE COME IN HERE, I THINK WE HAVE A STRONG MARKET MONDAY MORNING ON ATECHNICAL BASIS, AND THEN MAYBE WE SIT BACK A LITTLE BITFROM THERE AND RESET THE STAGE. BUT WE'VE HAD THE HIGHEST CLOSE WE'VE HAD ON A WEEKLY BASIS IN A LONG TIME, AND THAT HAS OPENED THE DOOR. WE'RE FINALLY STARTING TO DO WHAT WE SHOULD DO. THIS 591 TO 595 AREA IS A38-PERCENT RETRACEMENT FROM THE 1997 HIGH DOWN TO THE 1999 LOW. SO WE'RE IN AN AREA THAT THERE'S SOME STATIC, BUT WE'RE ALSO GETTING READY. THE FORMATION ON THE CHARTS IS A VERY BULLISH FORMATION AND IT USUALLY HAS ONE THAT POWERS UP OR HAS POWER BEHIND IT. SO WE NEED TO SEE THIS MARKET MOVING NOW, AND I DON'T WANT TO SEE HESITATION FOR VERY LONG PERIODS. AND EVEN IF WE PUT A PEAK IN HERE ON MONDAY AND THEN WE STEP BACK, THAT'S FINE, BUT MARKET SHOULDN'T BE LONG LIVED ON THE DOWNSIDE. IT SHOULD BE TURNING RIGHT BACK UP TO THE TOPSIDE AND GETTING QUITE STRONG.

Pearson: : AND THAT'S IN SPITE OF THE FACT BIG CROPS COMING OUT OF

SOUTH AMERICA?

Martin: : WELL, THAT'S THE BEAR'S STORY. THE BEAR KEEPS TALKING ABOUT THE BIG CROP IN SOUTH AMERICA. BUT NOW WE'VE GOT TO REMEMBER, FIRST OF ALL, I WANT TO SAY BETWEEN 50 AND 60 PERCENT OF THAT CROP WAS SOLD BY THE END OF THE YEAR OF LAST YEAR, AND FARMERS HAD SOLD AHEAD. AND, OF COURSE, THEN WHEN TIME CAME TO DELIVER, THEY WANTED OUT OF THOSE CONTRACTS BECAUSE THE CURRENCY HAD LIFTED ON THEM ON THE REAL AND THE DOLLAR HAD DROPPED. COST OF INPUTS WAS GOING UP, AND THEY WANTED OUT OF THOSE CONTRACTS. AND SO, YOU KNOW, HELLO, WE DON'T GET OUT OF

THEM, BUT THAT'S THE WAY LIFE IS. BUT BESIDE THAT, THERE'S PROBLEMS IN BRAZIL. FIRST OF ALL, IN MATO GROSSO AND GOIAS, THEY'RE FINING THE YIELDS ARE DROPPING.

THEY'RE NOT AS GOOD AS THEY THOUGHT. THERE'S BEEN MORE PROBLEMS WITH RUST THAN THEY ORIGINALLY THOUGHT. YOU'VE BEEN ENCOUNTERING RAIN ALMOST ON A DAILY BASIS IN SOME AREAS FOR THE LAST MONTH, SO THAT'S SLOWING UP HARVEST. BUT EVEN MORE SO AT PORTS LIKE PARANAGUA, FARMERS – NOT FARMERS, BUT TRUCKERS -- SOME OF THEM ARE SITTING THERE THREE DAYS, MAYBE FOUR DAYS WAITING TO UNLOAD AND THEY'RE GETTING REAL FRUSTRATED AND THERE'S TALK OF A TRUCKER STRIKE. THAT SOUNDS LIKE THAT COULD START MONDAY. WELL, ALL OF THOSE DISRUPTIONS IS KEEPING BEANS FROM MOVING

INTO EXPORT, BUT THERE'S ANOTHER THING. IT'S THIS GMO ISSUE. AND PRESIDENT LULA HANDED DOWN THE STATEMENT THAT THEY WENT WITH ZERO TOLERANCE. GOVERNMENT HAD PREVIOUSLY SAID, "OKAY, WE'LL GIVE YOU 4 PERCENT GMO AND ANYTHING ABOVE

THAT IS GMO BEANS."WELL, NOW HE'S ZERO TOLERANCE AND HE'S GIVEN IT TO CONGRESS TO PASS. AND THAT'S KIND OF LIKE PASSING THE BUCK, BUT THEY HAVE 60 DAYS TO VOTE ON THIS.AND JUST THIS WEEK THEY'VE HAD 70 AMENDMENTS AGAINST IT HANDED INTO CONGRESS, SO WE'LL SEE. THAT'S ALL DISRUPTION. AND THOSE GMO BEANS HAVE TO BE LABELED. THAT'S THIS YEAR'S NEW CROP THAT HAS TO BE LABELED WHAT HAPPENS TO THE REST THAT GOES INTO THE MARKET FOR EXPORT?CAN THEY BE EXPORTED?

Pearson: : SOME GOOD QUESTIONS. BULLISH SCENARIO FOR THE SOYBEAN MARKET FOR THE TIME BEING So?–

Martin: : OH, THERE'S MORE, MARK.

Pearson: : OH, I KNOW. OU COULD GO ON FOR HOURS, I'M SURE, SUE. WE WANT TO TALK ABOUT COTTON REAL QUICK, WHICH HAS BEEN IN AN UPTREND AS WELL.

Martin: : ABSOLUTELY. COTTON HAS BEEN A GOOD MARKET. OF COURSE, COTTON, YOU KNOW, IT'S JUST ABSOLUTELY BEEN DELUGED WITH SO MUCH MOISTURE IN THE SOUTH. AND, YOU KNOW, THE WEATHER PATTERNS ALMOST ARE SO SIMILAR TO 1983 THAT IT MAY BE THAT WE SEE MORE ISSUES DOWN THE ROAD FOR COTTON. THINK COTTON HAS GOT A LITTLE HIGHER TO GO YET, MAYBE NOT QUITE THE MARKET LIKE BEANS, BUT I THINK IT'S STILL GOT A

LITTLE MORE ROOM.

Pearson: : ALL RIGHT. LET'S TALK ABOUT LIVESTOCK, SUE. THE CATTLE MARKET, USUALLY WE GET A LITTLE CONCERNED ABOUT THE CATTLE MARKET ON THE FIRST OF THE YEAR. WE KIND OF SOFTENED UP. WE HIT $80. THERE WAS SOME TALK THE MID EIGHTIES. YOU DIDN'T GO ALONG WITH THAT. WE DIDN'T SEE IT. WHAT'S AHEAD NOW FOR FED CATTLE?

Martin: : WELL, I THINK CATTLE ARE GOING TO GO HIGHER. WE GOT THROUGH THE GLUT OF THE NUMBERS. WHAT WE'RE GOING TO SEE IS -- I BELIEVE WE'RE GOING TO SEE A SPREAD BETWEEN THE CHOICE AND THE SELECTS. THAT SPREAD SHOULD WIDEN. I THINK THAT TEXAS, WE'VE SEEN THEM THIS PAST WEEK BEND TO $79 WHEN NEBRASKA GOT 80 TO

82 IN THE HOT BEEF. SO I THINK THAT WE'RE GOING TO SEE -- TEXAS PROBABLY WILL BE LUCKY IF THEY GET BACK UP TO 80. I BET THEY'LL PROBABLY BE RIGHT IN THIS AREA, 79 TO 80, AND THEY PROBABLY WON'T DO MUCH BETTER THAN THIS; HOWEVER, I DO THINK THAT WE'RE GOING TO SEE A CATTLE MARKET THAT REMAINS PRETTY GOOD. AND APRIL FUTURES, NOW THAT THEY'RE GOING INTO DELIVERY, WHICH THERE SHOULDN'T BE ANY, I THINK YOU'RE GOING TO SEE THE FUTURES GET UP TO 78 TO 79 CENTS HERE.

Pearson: : OKAY. LET'S TALK QUICKLY ABOUT THE HOG MARKET. OBVIOUSLY, WE HAD THAT LAST USDA REPORT. STILL, WE HAVEN'T SEEN A LOT OF THAT CASH CONFIRMATION OF

THOSE NUMBERS FROM THE USDA.

Martin: : NO, WE HAVEN'T. AND OF COURSE, WHEN THAT PIG CROP REPORT CAME OUT AND

SHOWED THAT WE SHOULD BE TIGHTENING UP NUMBERS AGAIN, I THINK THE TRADE THOUGHT, OKAY, PROVE IT TO ME, YOU WEREN'T RIGHT THE LAST REPORT. SO WE HAD THE HARD DOWN ON TUESDAY, BUT THEN WE'VE COME BACK EVER SINCE THE WHOLE REST OF THE WEEK. I THINK IT'S POSSIBLE WE MAY HAVE PUT A LOW IN FOR NOW IN THE HOG MARKET. YOU KNOW, 31-CENT CASH HOGS THIS TIME OF YEAR IS CHEAP. I LOOK FOR HOGS TO TRY

TO MOVE HIGHER, MAYBE JUNES TO GET UP AROUND 62.

Pearson: : ALL RIGHT. SUE MARTIN, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, YOU CAN HEAR MORE OF SUE'S THOUGHTS BY CLICKING ON THE "MARKET PLUS" ICON ON OUR WEB SITE. SO UNTIL NEXT WEEK,

THANKS MUCH FOR WATCHING. I'M MARK PEARSON.

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