Iowa Public Television

 

Market Analysis: Feb 21, 2003

posted on February 21, 2003


The grain markets finished the week on the downside due to continued concerns about worldwide supply and demand. For the week, wheat prices were more than a nickel lower. Corn prices were eight to nine cents lower. Soybean futures were fractionally mixed. Soybean meal closed $2.10 lower per ton. Cotton futures were $1.47 lower.

In livestock, fed cattle futures were $1.85 higher. Feeder cattle gained $1.40. The lean hog contract gained $1.47.

In the financials, COMEX gold closed a dime lower. The euro finished 16-basis points lower against the dollar. The CRB index finished the week more than two-and-a-half points lower to finish at 244.50.

Here now to lend us their insight are two of our regular market analysts, Walt Hackney and Sue Martin. Welcome back.

Market Analysis: Feb 21, 2003 WELCOME. LET'S START, SUE, WITH YOU. LET'S TALK ABOUT THIS GRAIN MARKET. LOOKING AT THIS WHEAT MARKET, WOW, WHAT A PULLBACK WE'VE HAD IN WHEAT. THEN WE HAD A NICE RALLY UP, AND THEN WE'RE PULLING BACK DOWN AGAIN. THE LAST GAS BEEN HERE?

Martin: NO, I THINK THAT IF IT'S THE LAST GAS, MAYBE ON THE DOWNSIDE, WE HOPE. I THINK THE MARKET IS KILLING TIME. WE'VE HAD SEVEN WEEKS UP IN A CYCLICAL COUNT THIS WEEK. WE TOOK OUT LAST WEEK'S HIGHS EVER SO SLIGHTLY, SO WE WERE DUE FOR SOME DOWN TIME OR A LOWER CLOSE. I THINK THIS IS VERY HEALTHY. FIFTY-DAY MOVING AVERAGES COME IN AROUND THAT $3.42 AREA, BASIS THE CHICAGO WHEAT. AND THEY'RE IN A DECLINING PHASE. THEY'RE LOWER WITH TIME. SO I THINK IT'S HEALTHY THAT THIS MARKET PULLS BACK. IT'S FEBRUARY. WE'RE WAITING TO GET INTO MARCH TO SEE JUST HOW MUCH MOISTURE THE WHEAT BELT GETS. AND OF COURSE, IF THEY CATCH MOISTURE, THEN THAT WILL PLAY HAVOC ON THE MARKET. BUT IT'S DRY. SO WITH THOSE AREAS BEING DRY, USUALLY AS YOU GET IN THROUGH THE MIDDLE OF MARCH, WHEAT STARTS COMING OUT OF DORMANCY. YOU GET IN TOWARDS APRIL, THEY START TALKING ANY COLD WEATHER, THAT MARKET IS GOING TO GET VERY PROLIFIC. THERE'S ALSO BEEN RUMORINGS OF CHINESE IMPORTATION OF WHEAT, THAT TYPE OF THING. I THINK THERE'S INTEREST OUT THERE. WE'VE HAD FEELERS EVEN TO OUR OFFICE FOR WHEAT BY CHINA, AND SO I THINK THAT WE'VE GOT SOME INTEREST IN THIS MARKET. IT'S JUST GOING TO BE A LITTLE TIME. I THINK IT'S VERY HEALTHY. I WOULD EXPECT THAT A PULLBACK THIS NEXT WEEK TAKING OUT THIS PAST WEEK'S LOWS WILL BE AN OPPORTUNITY TO BUY.

Pearson: OKAY. SO A TEMPORARY SITUATION IN WHEAT. KEEP SOME POWDER DRY. BETTER TIMES ARE COMING.

Martin: ABSOLUTELY. AND DON'T SELL CASH RIGHT HERE. I THINK IF YOU DIDN'T SELL IT THIS WEEK AND WITH THE THOUGHT YOU'RE REPLACING, THEN JUST SIT TIGHT AND CARRY THAT CASH. YOU SHOULD GET A CHANCE AGAIN IN APRIL TO MAY.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE CORN MARKET. AGAIN, A PULLBACK THERE THIS WEEK ON THE BOARD. WHAT'S AHEAD? WE'RE AROUND THAT $240 DECEMBER, $2.50 IN THAT AREA. IT WAS KIND OF A SALES OPPORTUNITY. DO YOU THINK WE'LL GET A CHANCE AT THAT AGAIN?

Martin: I THINK WE MAY. CORN IS -- IN MY BOOK, CORN IS THE SORRY SISTER, OR THE WEAK SISTER, THE WHIPPING POST. THEY'LL BUY BEANS AND SELL CORN. THEY'LL BUY WHEAT AND SELL CORN. THEY'LL PROBABLY BUY CATTLE AND SELL CORN. YOU KNOW, IT'S THE MARKET THAT -- THEY KNOW FARMERS ARE HOLDING A LOT OF IT. WE'RE GOING TOWARDS MARCH 1 TIME FRAME SEASONALLY, AND FARMERS ARE TRYING TO MOVE CORN WHILE THE ROADS ARE MORE FIRM BEFORE THE THAWING. AND SO I THINK THAT THEY KNEW THAT BASIS LEVELS SOFTENED A LITTLE BIT THIS PAST WEEK. I THINK THAT CORN, IT'S A LITTLE BIT OVERSOLD, SO I WOULD EXPECT A RALLY HERE IN THE EARLY PART OF NEXT WEEK. AND THEN I FEAR WE COULD STILL STEP BACK IN THE EARLY PART OF MARCH, AND THEN WE'LL SEE IF WE CAN PUT SOME LOWS IN. THE MONTH OF MARCH INTO APRIL WILL BE WHEN WE START TO REALLY THINK ABOUT WEATHER. THIS PAST WEEK, TWO WEEKS WHEN WE CAUGHT SOME MOISTURE, THAT SEEMED TO ABATE SOME OF THE TRADERS' FEARS ABOUT DRYNESS, BUT I THINK THOSE FEARS WILL COME BACK VERY QUICKLY IF MARCH MOISTURE AND INTO APRIL IS A LITTLE BIT LACKLUSTER FROM WHAT THEY EXPECT.

Pearson: ALL RIGHT. THAT'S A CONCERN OUT THERE IS THAT DRY WEATHER HAS BEEN AN UNDERCURRENT IN THIS MARKET. AND YOU'RE RIGHT; THEY DID SEE SOME MOISTURE IN THE WESTERN CORN BELT, WHICH -- AND NORTHERN ILLINOIS, FOR SOME REASON THEY'RE VERY CONCERNED ABOUT WEATHER WISE. WHAT ABOUT THE POSSIBILITY OF MORE BEANS AND A BIG CROP OUT OF SOUTH AMERICA AND SWITCHING OVER TO CORN -- MORE CORN ACRES?

Martin: WELL, I'LL TELL YOU WHAT. I THINK THAT TRADERS ARE BEARISH ARE NATURALLY BEARISH ON ONLY ONE THING, AND THAT HAPPENS TO BE SOUTH AMERICAN PRODUCTION. AND IT IS GROWING. BY USDA STANDARDS, IT'S GROWING. BUT THERE'S PROBLEMS THERE THAT NOT EVERYBODY SEEMS TO BE HEARING, OR THEY'RE IN DENIAL, AND IT IS THAT THERE'S ASIAN RUST FOUND IN ALMOST EVERY PROVINCE OR MAJOR SOYBEAN PRODUCING AREA. YOU'VE GOT FARMERS TRYING TO GET OUT OF THEIR FORWARD CONTRACTS. THEY SOLD UP TO 60 PERCENT OF THEIR CROP AHEAD LAST FALL. THEY'RE FINDING THEY MADE A MISTAKE AND THEY'RE WANTING OUT BECAUSE OF THE CURRENCY CHANGE. AND SO THEY'RE TRYING VERY HARD TO GET OUT FROM UNDER THOSE CONTRACTS, AND THEY'RE NOT SHIPPING BEANS. PLUS, IT'S BEEN RAINING IN CENTRAL BRAZIL, AND IT WAS SUPPOSED TO HAVE BEEN DRY THIS PAST WEEK. THAT'S PUT DELAYING HARVEST THERE AND THAT'S HOLDING UP THE LINEUP OF VESSELS AT THE PORTS. IN THE MEANTIME, YOU'VE GOT THIS GMO ISSUE FOR CERTIFICATION. AND SO THE GOVERNMENT IS HOLDING MEETINGS. AND IN THE MEANTIME IN RIO GRANDE DO SUL, WHERE WE ESTIMATE ABOUT 80 PERCENT OF THE BEANS ARE GMO, WE FIND THAT THE GOVERNMENT OR THE POLICE ARE GOING TO CONFISCATE ANY LOADS THAT COME INTO THE ELEVATORS THAT TEST POSITIVE FOR GMO.

Pearson: SO A LOT OF INSTABILITY DOWN THERE.

Martin: OH, VERY MUCH.

Pearson: ALL RIGHT. SO SOYBEAN PRICES REALLY NOT MUCH OF A MOVE THIS WEEK, JUST REALLY HOLDING ABOUT STEADY.

Martin: WE HAVE A MARKET THAT'S KILLING TIME. I SUSPECT THAT WE'LL BE HIGHER AGAIN THIS NEXT WEEK. WE HAVE TIMING MONDAY/TUESDAY. THAT SHOULD BE A HIGH. THE MARKET PULLS BACK. EIGHTY-FIVE WAS YOUR HIGHS IN JANUARY FOR THE MARCH CONTRACT, AND I DON'T SEE THAT COMING OUT BY THE END OF NEXT WEEK. SO I THINK YOU HAVE AN INSIDE-UP MONTH IS WHAT WE'VE GOT. SO THAT'S FOLLOWING TWO OUTSIDE RANGE MONTHS. THAT TELLS YOU THIS MARKET IS IN TURMOIL. IT'S TRYING TO COME OUT. IT'S COILING. AND I THINK IN MARCH, PROBABLY THE BEST THING THAT COULD HAPPEN TO THE MARKET IS IF WE HAD SOME DOWNTIME IN PRICE, BECAUSE I'M VERY BULLISH, MARK, FOR APRIL, MAY, AND JUNE. YOU KNOW, I'M AN $8 GIRL AND I BELIEVE THESE BEANS ARE GOING TO BE ROLLING IN APRIL, MAY, AND JUNE.

Pearson: ALL RIGHTY, AN $8 GIRL. NOW, LET'S GO OVER TO WALTER HACKNEY. NOW, WALTER, YOU'RE AN $81 BOY. NOW, THESE FED CATTLE THIS WEEK LOOK PRETTY STRONG.

Hackney: I WAS AN $81 BOY TWO WEEKS AGO ON WEDNESDAY, MARK, BUT THE SOUTHWEST TOOK ALL MY THUNDER. AND WE ENDED UP HERE IN THE CORN BELT NOT SELLING CATTLE, AND THE BEST BID WE HAD WAS AROUND $77 OR $78. THAT WAS AN EXTREME DISAPPOINTMENT TO THE MIDWEST CATTLEMEN. IT WAS A REAL BOON TO THE SOUTHWEST CATTLEMEN. WE SLUMPED OFF LAST WEEK. WE COULDN'T GET OVER $1.22 IN THE MIDWEST FOR FAT CATTLE. AT THE SAME TIME THEY COME BACK THIS WEEK IN THE SOUTHWEST WITH 80. THERE ARE REPORTS OF $81 CATTLE. BUT HERE IN THE CORN BELT, MARK, $1.20 TO $1.22 CAUGHT THE MAJORITY OF THE CATTLE SOLD. A FEW PREMIUM CATTLE GOT BID OUT AT $1.24. THAT'S A LONG WAY FROM $80 OR $81 FAT CATTLE. IT'S AN EXTREME DISAPPOINTMENT. THERE'S AN INVENTORY, A LARGER SHOW LIST LOOKING INTO NEXT WEEK. THERE'S A BIG CHANCE THAT WITH ALL THE OPTIMISM THAT'S OUT THERE, WE MAY NOT MOVE THIS MIDWEST MARKET. THE SOUTHWEST HAD AN ENORMOUS SELLOFF, DID AN EXCELLENT JOB CLEANING THEIR SHOW LIST. THEY MAY BE THE ONES TO BENEFIT AGAIN NEXT WEEK. THE MIDWEST IS BUILDING SOME POUNDS EVEN THOUGH OUR AVERAGE CARCASS WEIGHT IS GOING DOWN TO SOME DEGREE. WE'RE STILL NOT OUT OF THE WOODS FOR BIG CATTLE; HOWEVER, HERE IN THE MIDWEST, WE'RE BUILDING POUNDS PRETTY RAPIDLY BECAUSE THE WEATHER HAS CONTRIBUTED. PERFORMANCE HAS BEEN EXCELLENT AND THESE CATTLE SITTING UNSOLD ARE REALLY GOING TO HAVE SOME PROBLEMS IF WE DON'T GET A MARKET MOVE UP HERE PRETTY SOON.

Pearson: ALL RIGHT. SO TAKE US OUT SIXTY DAYS HERE, WALTER. AS WE HEAD INTO SPRING WHEN WE TEND TO SOFTEN UP A LITTLE BIT, THIS FED MARKET IS GOING TO BE UNDER PRESSURE. WILL WE HOLD 70 OR BETTER?

Hackney: YES, WE'LL CERTAINLY HOLD 70 OR BETTER. THE ANTICIPATION AMONG SOME OF THE MORE BULLISH ENTITIES IS WE COULD HAVE 70 -- OR COULD HAVE $82, -3, -4 FAT CATTLE GOING INTO MAY AND JUNE. I'M NOT ONE TO SUBSCRIBE TO THAT, AS WE SPEAK ANYWAY. I THINK THAT IF WE CAN, IN FACT, MOVE THIS FAT MARKET TO 80 AND HOLD IT, WE'LL BE EXTREMELY FORTUNATE. WE CAN MAKE MONEY AT 80. AND A CATTLE PRODUCER WOULD BE WILLING TO SELL IN THAT RANGE. THIS BUSINESS OF BACKING THESE CATTLE OFF IN THE CORN BELT $4 AND $5 COMPARED TO THE SOUTHWEST, HOWEVER, IS GOING TO PUT A DAMPER ON THAT BECAUSE OF THE WEIGHT WE'RE GOING TO PUT ON UNSOLD CATTLE.

Pearson: ALL RIGHT. I WANT TO QUICKLY TALK ABOUT WHAT'S AHEAD WITH THIS HOG MARKET. WE'VE REDUCED THE HERD. WHAT'S AHEAD, WALT? ARE WE GOING TO BE ABLE TO HOLD THESE PRICES?

Hackney: I BELIEVE WE'LL APPRECIATE THESE PRICES. I THINK THAT POTENTIAL ON SOME OF THE DEFERREDS, JULY AND FURTHER, I THINK THE POTENTIAL OF $40 HOGS OR POSSIBLY A LITTLE BETTER CASH HOGS, LIVE WEIGHT BID I THINK IS THERE. I THINK THE OPPORTUNITY MAY BE THERE FOR SOME APPRECIATION IN THE PORK COMPLEX THIS SUMMER.

Pearson: ALL RIGHT. SUE, WE'VE GOT ABOUT A MINUTE HERE. CATTLE, ARE YOU AS FRIENDLY AS WALT?

Martin: WELL, I THINK THAT WHEN I LOOK AT THE APRIL FUTURES, I LIKE BUYING APRIL CATTLE ON BREAKS. I'M NOT SURE WE'RE DONE WITH THE PULLBACK IN THEM, AND BUT I LIKE THEM. WHEN I LOOK AT FEEDER CATTLE, I'M MORE POSITIVE TO FEEDERS. I THINK THERE IS THE MARKET. REMEMBER, IT STARTED BREAKING FROM ABOUT THE 8TH OF DECEMBER, AND IT LED THE WAY UP THROUGH THE FALL AND LED THE WAY DOWN. I THINK THAT THIS FEEDER CATTLE MARKET IS GOING TO BE GOOD. AND, OF COURSE, ANY HINT OF OPTIMISM WITH MOISTURE IS GOING TO SEND THAT MARKET RUNNING.

Pearson: ALL RIGHT. WALTER, WHAT ARE YOU SEEING OUT THERE ON THESE FEEDERS?

Hackney: OUR FEEDER CATTLE FOR THE FIRST TIME IN MANY MONTHS, POSSIBLY YEARS, IS IN A POSITION WHERE YOU CAN PHYSICALLY OWN FEEDLOT REPLACEMENT CATTLE, YEARLING TIGHT WEIGHT. WE CAN OWN THEM AT A HEDGABLE LEVEL. WE CAN OWN THEM AT A BREAK-EVEN POSITION OR POSSIBLY A LITTLE BIT BLACK. WE HAVEN'T SEEN THAT OPPORTUNITY FOR A YEAR OR MAYBE TWO. AND THESE PRODUCERS THAT ARE, IN FACT, BUYING THESE CATTLE ARE PROBABLY DOING ONE OF THE REAL SMART THINGS THAT THEY'VE DONE FOR A YEAR OR TWO, AND THAT'S TO GET THESE CATTLE BOUGHT AND ON FEED.

Pearson: ALL RIGHT. WELL, HEY, I WANT TO SAY A BIG THANKS TO SUE AND TO WALT. THAT'S GOING TO WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, YOU CAN HEAR MORE OF WALT AND SUE'S THOUGHTS BY TURNING TO THE "MARKET PLUS" SECTION ON OUR WEB SITE. JUST CLICK THAT AND YOU CAN HEAR MORE OF THEIR COMMENTS. SO JOIN US AGAIN NEXT WEEK WHEN WE EXAMINE HOW EFFORTS TO BUY LOCAL ARE CHANGING RURAL ECONOMIES. UNTIL THEN, I'M MARK PEARSON. THANKS FOR WATCHING AND HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA


Tags: agriculture commodity prices genetic engineering markets news