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Market Analysis: Mar 28, 2003

posted on March 28, 2003


The grain markets were a lower affair this week as the trade continues to determine the impact of emerging production trends. For the week, wheat prices were down more than six cents. Corn futures were down two to three cents. Soybean futures were one to three cents higher. Soybean meal gained $2.30 per ton. Cotton futures finished the week a dime higher.

In livestock, fed cattle gained 25-cents. Feeder cattle gained $1.50. The lean hog contract finished $2.85 lower.

In the financials, COMEX gold gained $5.40 an ounce. The euro gained 263-basis points against the dollar. The CRB index finished the week one tenth of a point lower to finish at 228.25.

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

Hjort: : THANK YOU, MARK.

Pearson: : WELL, LET'S TALK. EE HAVE A WAR GOING ON. IT SEEMS LIKE THEORETICALLY IT SPURS DEMAND FOR COMMODITIES. CERTAINLY WE'VE SEEN THAT WITH SOME PRODUCTS. BUT IN THE GRAIN FRONT, IT WAS A SOFTER WEEK.

Hjort: IT SURE WAS. IT SEEMS LIKE THE GRAIN AND OILSEED MARKETS JUST KIND OF IGNORE THE WAR SITUATION, AND I SUPPOSE IT IS BECAUSE THERE'S REALLY NO CLEAR-CUT EVIDENCE AS TO WHAT IT SHOULD DO. WE DON'T KNOW THE LENGTH OF THE WAR. WE DON'T KNOW HOW LONG THE REBUILDING OF IRAQ MIGHT TAKE PLACE. WE DON'T KNOW WHAT COMES NEXT: IS THERE ANOTHER IRAQ OUT THERE;IS IT IRAN OR SOUTH KOREA OR WHATEVER? So I THINK THE GRAIN AND OILSEED MARKETS HAVE JUST KIND OF SETTLED BACK IN, LOOKING AT THEIR OWN FUNDAMENTALS. AND, OF COURSE, ON THE GRAINS, THAT'S NOT VERY POSITIVE.

Pearson: LET'S START WITH THE WHEAT MARKET, WHICH AGAIN WAS PROBABLY PRESSURED THE MOST THIS WEEK. IDEAS THAT BETTER CROP

MAYBE IS AHEAD?

Hjort: WELL, THAT'S RIGHT. THERE'S SOME LOOK AT THAT. THEY'VE GOT A WEEK AGO, TEN DAYS AGO THEY GOT THE GOOD MOISTURE OUT THROUGH MOST OF KANSAS. BEST MOISTURE THEY'VE HAD IN A LONG TIME. NOT EVERYBODY GOT IT, OF COURSE, THROUGHOUT OKLAHOMA, TEXAS, AND SO ON. SOME OF THOSE AREAS ARE STARTING TO GET A LITTLE DRY NOW BUT, GENERALLY SPEAKING, THE HARD RED WINTER WHEAT CROP GOT A GREAT BOOST FROM THAT STORM. YOU LOOKED AT A LITTLE BIT LARGER WINTER WHEAT ACREAGE. MONDAY MORNING WE GET THE PROSPECTIVE PLANTING REPORT OUT. THAT WILL UPDATE SPRING PLANTED WHEAT AND, OF COURSE, CORN OR BEANS AND SORGHUM AND BARLEY AND ALL THE REST OF IT. BUT WE KNOW WHAT THE WINTER WHEAT ACREAGE IS ALREADY, HAVING BEEN PLANTED LAST FALL. THAT'S UP A LITTLE BIT. AND THEN IF WE CAN JUST BRING YIELDS UP TO SOMEWHAT OF A NORMAL LEVEL, WE CERTAINLY CAN OUTPRODUCE OUR DEMAND FOR WHEAT RIGHT NOW. DEMAND IS THE REAL PROBLEM. IT'S NOT THE SUPPLY. SUPPLIES ARE AT EXTREMELY LOW LEVELS, BUT DEMAND HAS JUST DWINDLED OFF.

Pearson: WELL, AS WE LOOK AHEAD, YOU MENTIONED THE REPORTS ON MONDAY. WE HAD THE PROSPECTIVE PLANTINGS AND THE QUARTERLY STOCKS UPDATE. AND OF COURSE, THE MARKET HAS BEEN TREADING SOME WATER,

AWAITING THAT KEY REPORT. ON THE EVE OF THAT REPORT,DOUG, THIS IS ALWAYS TOUGH, BUT WHAT DO YOU SEE ON THIS CORN VERSUS BEAN PLANTINGS.

Hjort: THE AVERAGE STRAIGHT GUESS IS UP ABOUT A MILLION AND A HALF ACRES ON THE CORN AND DOWN A LITTLE BIT OVER A MILLION ON THE BEANS. NOW, MOST TRADERS ON THE CORN ARE PRETTY TIGHTLY GROUPED. THAT MEANS THERE'S A LOT OF ROOM FOR SURPRISE, EITHER LOWER OR

HIGHER. I THINK SOME OF THE THINGS TO CONSIDER IS THIS DATA WAS GATHERED AROUND THE FIRST OF MARCH, AND IT COMES FROM FARMERS. FARMERS FILLED OUT THE CARDS. BUT AT THE END OF FEBRUARY, OUR ENERGY PRICES WERE JUST SKYROCKETING. NATURAL GAS PRICES TOOK ABOUT A WEEK WHERE THEY JUST SHOT UP DRAMATICALLY, CAME RIGHT BACK DOWN, BUT WERE STILL TWO TO THREE TIMES HIGHER THAN THEY WERE A YEAR AGO. SO HOW DOES HIGHER ENERGY PRICES AFFECT FARMERS' DECISIONS TO PLANT CORN VERSUS BEANS AND SO ON, FERTILIZER PRICES AND ALL THAT? ALSO, THAT UNCERTAINTY ABOUT ENERGY PRICES RIGHT ABOUT THAT TIME. IT THROWS A LOT OF UNCERTAINTY INTO THESE NUMBERS THAT WE MIGHT SEE MONDAY MORNING. I HAVE AN IDEA THAT'S WHY MOST OF THE TRADE IS GROUPED IN THAT VERY TIGHT RANGE. ACTUALLY FOR CORN AND SOYBEANS TOO. SOYBEANS -- ONE COMPANY CAME WITH A REAL LOWBALL NUMBER, MORE THAN A MILLION BELOW ANYBODY ELSE. IF IT SHOULD COME THERE, OBVIOUSLY, I'M VERY BULLISH TO BEANS, BUT MOST PEOPLE ARE LOOKING FOR A SMALL DECREASE IN THE BEAN CROP.

Pearson: : JUST LOOKING AT IT WITH WHERE CORN IS ON THE BOARD, LOOKING OUT INTO DECEMBER AND WHERE NOVEMBER BEANS ARE, IT SEEMS LIKE THERE IS VIRTUALLY NO INCENTIVE TO PLANT BEANS.

Hjort: WELL, THAT'S RIGHT. AND YET WHEN YOU LOOK AT THE DEMAND SIDE OF THINGS, THEN THERE'S NOT MUCH HOPE FOR THE CORN, YOU SEE, EVEN THOUGH NEARBY -- NEW CROP CORN FUTURES ARE HIGHER THAN THE NEARBY IS AND NEW CROP SOYBEAN FUTURES ARE DRAMATICALLY LOWER THAN

THE SPOT IS. BUT THE DEMAND FOR BEANS STAYS IN THERE SO STRONG THAT IT'S JUST VERY SURPRISING. OUR BASIS LEVELS ARE VERY STRONG FOR BEANS. FUTURES PRICES RIGHT UP AGAINST THAT MAJOR RESISTANCE LEVEL AGAIN, THREATENING TO GO ON AND TAKE OUT CONTRACT HIGHS. I THINK FROM A PRICE OUTLOOK, AS YOU GO INTO A REPORT LIKE THIS, LOOK AT WHERE THE PRICES ARE. THE SOYBEANS ARE UP TOWARDS THE TOP

PRICE THEY'VE BEEN IN CONTRACT HISTORY. THE CORN AND THE WHEAT HAVE JUST BEEN PUTTING IN NEW CONTRACT LOWS. SO I THINK KEEP THAT IN MIND. SO YOU COULD PROBABLY ABSORB A NEGATIVE REPORT ON THE CORN AND THE WHEAT, AND IT WOULDN'T BE MORE BEARISH THAN WHAT IT ALREADY IS. YOU COULD ACCEPT A BULLISH SOYBEAN REPORT, AND YOU STILL MAY NOT BE ABLE TO PUSH ON THROUGH THOSE LEVELS. FROM A MARKETING STANDPOINT, I THINK ON THE SOYBEANS, IF WE DON'T PUSH

THROUGH THOSE CONTRACT HIGHS THIS TIME AROUND, I THINK THAT'S DEFINITELY A SELL OPTION AND PROBABLY FOR THE LONG TERM TOO. I DON'T WANT TO SELL ANY NEW CROP, OF COURSE, NOW, WITH THE PRICES DISCOUNTED WELL BELOW LOAN RATE OUT THERE. BUT I THINK YOU COULD SEE A VERY SHARP CORRECTION TO THE DOWNSIDE IF WE CAN'T TAKE OUT THOSE CONTRACT HIGHS ON THE BEANS.

Pearson: CLEAN OUT THE BINS ON THE BEANS ANYWAY.

Hjort: ON THE OLD CROP, YEAH, I THINK THAT'S WHAT YOU HAVE TO BE LOOKING AT HERE VERY SOON.

Pearson: ALL RIGHT. DOUG, LET'S TALK LIVESTOCK. THE FED-CATTLE MARKET HAD SOME RECOVERY, HAD SOME 80-CENT CATTLE AROUND THE MIDWEST THIS LAST WEEK. GOING FORWARD, WE'RE STARTING TO HEAD INTO THE BARBECUE SEASON. IT'S SPRINGTIME. ARE YOU FRIENDLY TO THESE CATTLE?

Hjort: WELL, I'M FRIENDLY BUT NOT MUCH HIGHER PRICE. FRIENDLY ON CATTLE AROUND $80, I THINK, IS TRYING TO HOLD IT AT $80. AND I THINK WE CAN DO THAT FOR PROBABLY ANOTHER MONTH OR SO. WE WILL START TO SELL OFF A LITTLE BIT AS WE GO ON INTO THE SPRINGTIME, DEEPER INTO THE SPRING. BUT THE DEMAND FOR BEEF IS GOOD, AND I THINK IT SHOULD HOLD IN HERE. PROBABLY ADVICE HERE IS BE SURE YOU KEEP YOUR MARKETING CURRENT. IF YOUR CATTLE ARE DONE, IF THEY'RE

NICELY FINISHED, JUST GET THEM SOLD ON THESE PRICES, $79,80, $81. I WOULDN'T TRY TO HOLD OUT FOR ANOTHER DOLLAR THE NEXT WEEK. PRICES HAVE BEEN QUITE VOLATILE. THEY'VE BEEN CHOPPING AROUND A LOT, SO JUST TAKE ADVANTAGE OF IT. KEEP THE WEIGHTS DOWN. THE WEIGHTS ARE OFF THE PEAKS THAT WE SAW EARLIER IN THE WINTER, AND THAT'S ONE REASON THAT WE'VE GOT THE $80 CATTLE RIGHT NOW.

Pearson: OKAY. KEEP CURRENT HEDGING OPPORTUNITIES AT THIS STAGE OF THE GAME?

Hjort: NO. I DON'T SEE ANY HEDGING OPPORTUNITIES ON THE CATTLE BECAUSE THE DISTANT CONTRACTS ARE ALREADY TOO MUCH DISCOUNTED.

Pearson: ALL RIGHT. LET'S TALK ABOUT HOGS. WE'RE HEADING INTO

SPRINGTIME. POSITIVE HOGS AND PIGS REPORT. SOME PEOPLE ARE KIND OF DISCOUNTING THESE HOGS AND PIGS NUMBERS BECAUSE WE'VE SEEN SLAUGHTER, AT LEAST IN THE FIRST OF MARCH, HELD UP PRETTY HIGH.

Hjort: : AND ON THE HOGS AND PIGS REPORT OUT FRIDAY AFTERNOON, THE HEAVYWEIGHT GROUP WAS JUST OVER 100 PERCENT OF A YEAR AGO. WELL, THAT CONFIRMS WHY OUR SLAUGHTER HAS BEEN WHERE IT HAS BEEN.

THOSE NUMBERS WERE AS OF THE FIRST MARCH, YOU SEE. SO WE'VE GONE ALMOST A MONTH NOW INTO THOSE NUMBERS. THEY'RE BASICALLY GONE. NOW, THE NEXT THREE WEIGHT CLASSES SHOW A 2-PERCENT REDUCTION. WELL, THE PREVIOUS REPORT SHOWED THAT TOO, AND IT DIDN'T HAPPEN. BUT AT LEAST THERE'S SOME LIGHT OUT THERE AT THE END OF THAT

TUNNEL. THE FARROWING INTENTIONS FOR THE SUMMER -- SPRING AND SUMMER, DOWN 2 PERCENT AS WELL -- 3 PERCENT, I THINK IT WAS. SO EVEN IF YOU'RE GETTING A FEW MORE PIGS PER LITTER, PRODUCTION IS STILL GOING TO BE LOWER THROUGHOUT THE WINTER THAN WHAT IT WAS THIS PAST WINTER.

Pearson: SO BETTER NEWS FOR PRICE.

Hjort: YEP.

Pearson: ALL RIGHT. DOUG HJORT: , THAT WILL WRAP UP THIS

EDITION OF "MARKET TO MARKET." NOW, YOU CAN HEAR MORE OF

DOUG'S THOUGHTS BY CLICKING ON THE MARKET PLUS ICON ON OUR

WEB SITE. UNTIL NEXT WEEK,I'M MARK PEARSON: . HAVE

A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA.

Market Analysis: Mar 28, 2003 Thanks Doug. That wraps up this edition of Market to Market. You can hear more of Doug's thoughts by clicking on the market plus icon on our website. Until next week, I'm Mark Pearson, have a good week.


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