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Market Analysis: Mar 07, 2003

posted on March 7, 2003


The grain markets finished the week on the upside on continued concerns about what weather pattern will develop in the western grain belt. For the week, wheat prices were fractionally higher. Corn futures were seven to eight cents higher. Soybean futures were eleven to twelve cents lower. Soybean meal closed the week four dollars lower per ton. Cotton futures were $1.65 higher.

In livestock, fed cattle futures were down $1.15. Feeder cattle were down 28-cents. The lean hog contract finished $2.63 lower.

In the financials, COMEX gained sixty cents per ounce. The euro gained 213 basis points against the dollar. The CRB index finished the week more the two points higher to close at 244.05.

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

Market Analysis: Mar 07, 2003

Roach: THANKS, MARK.

Pearson: GOOD TO HAVE YOU WITH US. LET'S TALK A LITTLE BIT. WE TALKED EARLIER IN THE PROGRAM ABOUT SOME BUILDING DEMAND FOR CORN OUT THERE. WE HAD, A YEAR AGO, REDUCED SUPPLIES AND SOME BUILDING DEMAND FOR WHEAT. THE WHEAT MARKET HAS FALLEN OFF DRAMATICALLY, COME BACK A LITTLE BIT FROM THOSE LOWS. WHAT'S YOUR TAKE ON WHEAT AS WE GO FORWARD?

Roach: WELL, THE WHEAT MARKET IS STRUGGLING RIGHT NOW WITH LACK OF DEMAND, TOGETHER WITH A CROP THAT WE DON'T KNOW ABOUT IN THE FIELD. IN OTHER WORDS, WE HAVE TWO THINGS THAT ARE OFFSETTING EACH OTHER: THE POOR LEVEL OF DEMAND ON THE BEARISH SIDE; AND ON THE BULLISH SIDE, WORRY ABOUT THE DEVELOPING CROP. THIS WEEK WE GOT EXCITED. WE THOUGHT WE MIGHT GET SOME EGYPTIAN BUSINESS. THAT TURNED OUT -- THAT ACTUALLY WENT TO FRANCE AND AT CHEAPER MONEY, SO THAT REALLY BOTHERED EVERYBODY. THAT'S WHAT PUT THE LOWER TRADE AFTER THE EARLY STRENGTH THAT WE SAW ON WEDNESDAY AND WEDNESDAY NIGHT. ON THURSDAY, THEN, WE PUT THE MARKET IN TROUBLE, AND IN MORE TROUBLE TODAY WITH COMMODITY FUND SELLING.

Pearson: ALL RIGHT, AND YOU'RE RIGHT. THE CURRENT SITUATION REGARDING THE QUALITY OF THIS YEAR'S WINTER WHEAT CROP, THERE'S A LOT OF CONCERN THERE.

Roach: YEAH. I EXPECT THE MARKET TO MOVE WITHIN THE SAME TRADING RANGE WE'VE BEEN IN. NOW, WE CLOSED A LITTLE BIT BELOW THE LOW SIDE OF THAT TRADING RANGE ON WHEAT, BUT I THINK THAT WE'LL FIND SUPPORT AND FIND SOME RECOVERY, BECAUSE WE STILL HAVE A WAYS TO GO BEFORE WE CAN REALLY FEEL COMFORTABLE ABOUT THE GROWING CROP.

Pearson: STILL NOT IN ANY HURRY TO MAKE SALES?

Roach: NO, I DON'T THINK SO AT THESE PRICE LEVELS. WE HAD AN OPPORTUNITY HERE A COUPLE WEEKS AGO. THE MARKET GOT UP INTO AN OVERBOUGHT STAGE, BUT NOW WE'RE CLEAR DOWN ON THE BOTTOM SIDE OF IT. I THINK WE'LL HAVE A RECOVERY BACK.

Pearson: LET'S TALK ABOUT THIS CORN MARKET. OBVIOUSLY THERE HAS BEEN SOME GOOD DEMAND NEWS. WE'VE SEEN A LITTLE BIT OF IMPROVEMENT THIS WEEK IN CORN PRICES. CORN HAS BEEN KIND OF BELEAGUERED IN TERMS OF DEMAND. NOW MAYBE WE'RE PICKING THAT UP. WAS IT KIND OF BACK LOADED? MAYBE NOW WE'RE SEEING IT?

Roach: WELL, WE'RE HOPING THAT THAT'S THE CASE. BUT THE OLD SAYING IS "ONE DAY DUTH NOT A TREND MAKE." AND THAT'S WHAT WE HAD; WE HAD ONE WEEK'S WORTH OF GOOD SALES. IT WAS THE BEST WEEK OF THE YEAR, 1.4 MILLION TONS, DOUBLE THE AMOUNT THAT PEOPLE EXPECTED TO SEE ON THE REPORT ON THURSDAY. REMEMBER THAT THE MAJORITY OF COARSE GRAIN AND FEED WHEAT IS PRODUCED IN THE NORTHERN HEMISPHERE AND HARVESTED A LONG TIME AGO. AND WE'VE SEEN VERY HEAVY COMPETITION COMING OUT OF REALLY ALL SECTORS OF THE NORTHERN HEMISPHERE, SMALLER SECTORS, AS WELL AS CHINA, AS PEOPLE WELL KNOW. BUT SOME OF THE SMALLER FORMER SOVIET UNION COUNTRIES AND SO FORTH HAVE REALLY BEATEN US IN THIS FEED MARKET. IT MAY WELL BE THAT THEY'RE NOW NEARING THE END OF THEIR EXPORTABLE SUPPLIES, THAT THEY'LL BE SENDING THEM OUT SPARINGLY. THERE'S TALK THAT THE CHINESE HAVE RUN OUT OF SURPLUS IN THE NORTHERN PART OF THE COUNTRY, AND SO IT MAY BE THAT WE'RE REALLY THE ONLY STORE IN TOWN. BUT WE CAN'T SAY THAT TODAY. IT'S STILL JUST ONE WEEK WORTH OF GOOD BUSINESS. THE GOOD NEWS WAS WHEN THE COMMODITY FUNDS SOLD THE MARKET, IT WAS THE EXPORTER THAT BOUGHT IT. AND THAT'S THE BEST KIND OF BUYER THAT WE COULD HOPE FOR, BECAUSE THAT CORN IS NOW GONE.

Pearson: OVER THE YEARS, JOHN, YOU'VE ALWAYS TALKED ABOUT APRIL, MAY, AND JUNE AS BEING YOUR TIMES TO SELL THE CORN CROP. I MEAN WE'RE GETTING CLOSE.

Roach: YEAH, WE CERTAINLY ARE. IN FACT, WE ACTUALLY HAD SOME SELLING OPPORTUNITIES IN FEBRUARY. WE HAD THE TECHNICALS GET UP TO A POINT THAT SIGNALED SOME SALES. I THINK THE MARKET, AFTER THAT BOTTOMING THAT OCCURRED HERE A WEEK AGO, I THINK THE MARKET IS SHOWING GOOD RESILIENCE. WE STILL HAVE TO GET THIS CROP PLANTED. THE PRICE OF NATURAL GAS HAS SPIKED THE PRICE OF ANHYDROUS, SO THERE MAY BE SOME CONCERN ABOUT JUST HOW MANY ACRES OF CORN WE'RE ACTUALLY GOING TO PLANT, AND WE CERTAINLY HAVE DRY CONDITIONS IN THE WESTERN HALF OF THE BELT. SO WE HAVE SOME REASONS FOR THE MARKET TO BE NERVOUS, AND THAT SHOULD GIVE US SOME FIRMNESS. WE ALSO HAVE ARGENTINA, ONE OF THE MAJOR COMPETITORS IN THE WORLD, USUALLY THE NUMBER TWO, OR RECENTLY THE NUMBER THREE EXPORTER IN THE WORLD, HAVING TROUBLES. THEIR FARMERS ARE NOT HAPPY, AND SO THEY'RE WITHHOLDING SOME OF THEIR SALES. SO WE MAY WELL HAVE DEMAND FLOW TO OUR CORN MARKET. I THINK WE CAN PUSH THE MARCH CORN UP INTO THE 250 AREA, MAYBE NOT QUITE BUT CLOSE TO 250. I THINK THAT WILL BE A TIME TO BE MAKING SOME SALES. SAME WAY WITH DECEMBER CORN; 250 DECEMBER CORN IS A GOOD PRICE. WE'RE GOING TO HAVE TO TAKE SOME OF THAT.

Pearson: OKAY. SO 250, YOU WANT TO START TO PULL THE TRIGGER ON NEW CROP CORN SALES.

Roach: EXACTLY.

Pearson: ALL RIGHT. NOW, LET'S MOVE OVER TO THE SOYBEAN MARKET. LESS LUSTROUS WEEK OVER ON SOYBEANS. A LITTLE BIT OF PRESSURE THERE. THERE'S STILL A LOT OF CONCERN ABOUT SOUTH AMERICA AND HOW BIG THAT CROP IS GOING TO BE. THERE'S SOME CONTROVERSY OVER JUST WHAT THE SIZE OF THAT CROP IS GOING TO BE. AT THIS STAGE OF THE GAME, WHAT WOULD YOU TELL A SOYBEAN GROWER WHO'S HELD ONTO HIS BEANS SINCE LAST FALL?

Roach: WELL, THEY'VE BEEN HOLDING FOR SOME KIND OF OPTIMISTIC REASON THAT MAY COME TO PASS BUT, QUITE FRANKLY, THEY'RE BETTING A LITTLE BIT ON A LONG SHOT. THE SOUTH AMERICAN HARVEST IS GOING TO BE BETWEEN 90 AND 93 MILLION METRIC TONS. IT'S BIGGER THAN THE NORTH AMERICAN HARVEST WAS IN THE FALL. WE'RE GOING TO HAVE A LOT OF COMPETITION. THE CHINESE THIS WEEK CANCELED A COUPLE OF CARGOS, MAYBE MORE -- CARGOS OF SOYBEANS THAT THEY PURCHASED FROM THE UNITED STATES. THEY'RE GOING TO SHIFT THAT OVER TO BRAZIL. THERE'S SOME TALK AROUND THIS WEEK THAT THEY'RE ACTUALLY HAVING TROUBLE IN THEIR CRUSHING INDUSTRY, THAT THEY'RE LOADED UP RIGHT NOW ON MEAL AND THAT THERE'S NO CRUSHING MARGIN, SO THAT REALLY TAKES THE DEMAND DOWN FOR BEANS. SO WE'RE GOING THROUGH THAT STAGE IN A TRADING RANGE MARKET WHERE YOU HAVE ALL THE BAD NEWS COMING FORWARD. I THINK WE CAN MAYBE HAVE ONE MORE RUN BACK TO THE UPSIDE. I WOULDN'T WANT TO BE A SELLER OF BEANS HERE. I WOULD LOOK FOR SOME RECOVERY, BUT I THINK THAT OUR TIME OF HAVING AN UPWARD MARKET OPPORTUNITY IS FLEETING. I THINK WE HAVE MAYBE ONE MORE SHOT ON THE UPSIDE. AFTER THAT IT'S GOING TO TAKE SOMETHING MORE. IN ORDER TO MOVE TO SOME OF THE HIGHER PRICE LEVELS THAT SOME PEOPLE HAVE TALKED ABOUT, WE'RE GOING TO HAVE TO HAVE THE CHINESE BE LARGER IN THE MARKETPLACE THAN ANYBODY HAS THEM DIALED IN FOR OR WE'RE GOING TO HAVE TO HAVE A PROBLEM SOMEWHERE AS FAR AS PRODUCTION IS CONCERNED. SO I THINK THAT THE HIGHS WE SAW ON THE BEAN MARKET LAST WEEK ARE GOING TO BE AREAS WE'RE GOING TO NEED TO MAKE SALES.

Pearson: OKAY. NEXT RALLY YOU WANT TO DUMP BEANS, THROW OUT THE OLD CROP. ANY NEW CROP SALES OPPORTUNITIES AT ALL FOR BEANS?

Roach: NONE THAT I SEE. I THINK WHAT YOU DO WITH THE SOYBEAN MARKET IS JUST WATCH THE GOVERNMENT PROGRAM AND UTILIZE THE LOAN FOR CASH FLOW NEXT FALL RATHER THAN MAKE SALES AT THESE LEVELS.

Pearson: REAL QUICK, COTTON MARKET HAD A NICE SPIKE THIS WEEK.

Roach: COTTON MARKET HAD A NICE SPIKE. WE CLOSED AT A NEW HIGH FOR THIS PARTICULAR MOVE. WE THINK THAT THIS MARKET IS GETTING UP NEAR PEAK. SAME WAY WITH THE NEW CROP COTTON. THE 61-CENT AREA IS GOING TO BE A TOUGH AREA OF THE NEW CROP. WE THINK YOU NEED TO BE MAKING SALES.

Pearson: REAL QUICK, OVER ON THE LIVESTOCK. WE'RE FALLING BACK SOME OF THIS FED CATTLE MARKET. LAST TIME YOU WERE ON, YOU WERE CONCERNED. WE WERE UP AROUND 81 CENTS. IT LOOKED GOOD. THEN YOU SAID, WELL, WE COULD HAVE SOME PROBLEMS AHEAD. ARE WE IN THOSE PROBLEMS NOW OR ARE WE GOING TO WORK THROUGH THEM?

Roach: WE'RE IN THOSE PROBLEMS NOW. WE'RE HAVING TROUBLE MOVING THE BEEF THROUGH AT THESE KIND OF PRICE LEVELS. ON THE TOTAL MEAT PRODUCTION FOR THE YEAR, WE'RE DOWN 8/10 OF A PERCENT FROM A YEAR AGO. AND WE'VE HAD PRICES HIGHER BUT WE'VE HAD THEM CONSIDERABLY HIGHER. AND WE THINK THE MARKET IS GOING TO STRUGGLE HERE. WE COULD SEE SOME FURTHER RECOVERY, BUT WE DON'T THINK THE MARKET IS GOING TO GO ANYWHERE. WE THINK THE HIGHS ARE IN, AND WE THINK THE MARKET IS GOING TO STRUGGLE.

Pearson: HEDGE OPPORTUNITIES AT THIS STAGE OF THE GAME?

Roach: TAKE $1, $1.50 RALLY IN THE CATTLE MARKET AND START PUTTING YOUR HEDGES ON AGAIN.

Pearson: ALL RIGHT. LET'S TALK, FINALLY, THIS HOG MARKET. WHAT'S AHEAD? LAST YEAR -- WE'VE HAD SO MANY DISASTERS YEARS IN THIS HOG BUSINESS. LOOK AT THIS CASH-HOG MARKET; MORE PRESSURE AGAIN HERE THIS WEEK. AS YOU GO FORWARD, WHAT'S YOUR THINKING, JOHN?

Roach: I THINK THE HOG MARKET NEEDS TO BE BOUGHT, QUITE FRANKLY. I THINK THE MARKET IS COMING OUT OF THE WINTER BLAHS. WE'VE HAD BIG PRODUCTION NUMBERS. WE HAVE SMALLER PRODUCTION NUMBERS OUT AHEAD. I THINK THAT THE HOG MARKET WILL MOVE HIGHER AS WE MOVE INTO THE SPRING OF THE YEAR. SO I'M A PATIENT SELLER ON THE HOG MARKET, THINKING WE'LL HAVE BETTER OPPORTUNITIES.

Pearson: AND AS YOU LOOK AHEAD, JOHN, AGAIN BARRING A PROBLEM, ARE YOU COVERING ANY FEED NEEDS AT THIS STAGE OF THE GAME?

Roach: WELL, I THINK ON PULLBACKS IN THE CORN MARKET, YOU'VE GOT TO KEEP SOME COVERAGE ON. IT'S GOING TO BE DIFFICULT IN PARTICULAR AREAS TO ACTUALLY BUY CASH CORN. SO I THINK YOU HAVE TO BUY IT WHEN IT BECOMES AVAILABLE AND ANTICIPATE A FIRM MARKET IN MANY AREAS ALL THE WAY ON THROUGH INTO THIS NEXT SUMMER. FARMERS HAVE PUT A TREMENDOUS AMOUNT OF CORN ON THEIR LOAN, AND IT'S NOT GOING TO COME OUT QUICKLY. SO I THINK THAT THE CORN MARKET IS GOING TO BE FIRM MOVING THROUGH THIS NEXT THREE- TO FOUR-MONTH PERIOD.

Pearson: JOHN ROACH, WE APPRECIATE YOUR COMMENTS, AS USUAL. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, YOU CAN HEAR MORE OF JOHN'S THOUGHTS BY CLICKING ON THE "MARKET PLUS" ICON ON OUR WEB SITE. YOU CAN ALSO PERPETUATE PROGRAMS LIKE "MARKET TO MARKET" BY INVESTING IN YOUR LOCAL PUBLIC TELEVISION STATION. IF YOU VALUE WHAT YOU FIND ON PUBLIC TELEVISION, REMEMBER WHO FINANCES IT: YOU, THE VIEWER. INVEST IN WHAT YOU VALUE. UNTIL NEXT WEEK, I'M MARK PEARSON. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

Tags: agriculture commodity prices markets news