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Market Analysis: Jan 24, 2003

posted on January 24, 2003


The grain markets finished the week on the upside as the trade continues to sort out the production outlook for 2003. For the week, wheat prices gained more than a penny. Corn prices were up three cents. Soybean futures gained 13-cents. Soybean meal gained $2.50 per ton. Cotton futures closed 32-cents lower.

In livestock, fed cattle futures were down 27-cents. Feeder cattle were down 77-cents. The lean hog contract gained 25-cents.

In the financials, COMEX gold gained $11.60 an ounce. The euro gained 152-basis points against the dollar. And, the CRB index finished the week more than three points higher to close at 242.50.

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

Market Analysis: Jan 24, 2003

Martin: THANK YOU, MARK.

Pearson: LET'S TALK ABOUT THE MARKETS THIS WEEK. NOW, WITH THIS COLD WEATHER AND THE LACK OF SNOW COVER, WE WOULD THINK THAT THAT WHEAT CROP WOULD REALLY BE FACING SOME SERIOUS STRESS OUT THERE.

Martin: WELL, I THINK IT CERTAINLY IS. AND OF COURSE, IT'S VERY DRY IN THE WESTERN PART OF KANSAS AND PARTS OF NEBRASKA, AND THE CROP IS VULNERABLE. BUT AT THIS TIME I DON'T KNOW AS IF THE MARKET IS REALLY PAYING ATTENTION AS CLOSELY AS WHAT A LOT OF THE SPECULATORS WOULD LIKE. HOWEVER, I DO THINK IT IS HELPING TO SOLIDIFY OR MAYBE BASE OUT THE MARKET. WE'VE GOTTEN THE FUTURES EXTREMELY OVERSOLD, BOTH IN KC AND IN CHICAGO WHEAT. GRANTED, PRICES BASIS MARCH CHICAGO WHEAT COULD GET DOWN TO $3, $3.02, $2.98, IT WOULD BE IN FAST ACTION IF IT DID IT AND IT WOULD COME RIGHT BACK OUT OF THERE. SO WHAT I WOULD SAY TO THE PRODUCER IS DON'T BE FRUSTRATED AT THIS POINT. DON'T BE DISCOURAGED IF PRICES DID SLIP BACK THERE. I DON'T THINK THEY WILL, BUT IF THEY THEY DID, DON'T GET DISCOURAGED. I THINK WE'RE LOOKING AT THE LOWS, AND I LOOK AT THIS COMING WEEK AS BEING A STRONGER WEEK. I THINK WHEAT IS GOING TO HEAD HIGHER, PROBABLY INTO APRIL.

Pearson: OKAY. NOT A POINT TO MAKE SALES RIGHT NOW.

Martin: NO. NOW IS THE TIME TO HANG ON. WHAT I FIND IS THERE'S A LOT OF DISCOURAGED PEOPLE OUT THERE, A LOT OF PRODUCERS THAT ARE DISAPPOINTED AND FRUSTRATED, MISSED THE MOVE, WISH THEY HADN'T HAVE. BUT NOW IS THE TIME NOT TO BE MAKING SALES. YOU'LL GET ANOTHER REPRIEVE. WE COULD EASILY SEE WHEAT RALLY 50 CENTS IN A VERY QUICK FASHION.

Pearson: ALL RIGHT. NOW, THE OTHER CONCERN FOLKS HAVE OUT THERE IS WHAT'S AHEAD FOR THE CORN MARKET. AND, YOU KNOW, THERE'S CERTAINLY SOME DISAPPOINTMENT THERE TOO.

Martin: WELL, CORN HAS GIVEN US THAT JANUARY RALLY. BUT IT'S A DEAD-CAT BOUNCE. HOPEFULLY WE CAN GET MARCH FUTURES UP OVER 240 AND GET THEM BACK UP AROUND 240, 242, BUT THERE'S A LOT OF RESISTANCE THERE. I COULD VISUALIZE CORN. NORMALLY WE'LL RALLY SEASONALLY INTO ABOUT THE LAST WEEK OF JANUARY, THEN YOU GET YOUR FEBRUARY BREAK. IT WOULD NOT SURPRISE ME IF THAT OCCURS. I COULD SEE WHERE CORN COULD STEP BACK DOWN AND GO INTO A BASING ACTION AND KILL TIME. THEN, AS YOU GET INTO MARCH AND YOU'VE HAD YOUR LOWS PUT IN -- YOUR WINTER LOWS PUT IN AND WE COME INTO SPRING -- OF COURSE, WE'RE GOING TO BE TALKING ABOUT MORE ACRES. BUT USAGE IS AWFUL GOOD ON CORN TOO DOMESTICALLY. ETHANOL USAGE IS UP. WE LOOK AT THE FACT THAT YOU HAD LESS WHEAT AROUND, YOU KNOW, NOT ONLY IN THE U.S. BUT IN CANADA AND AUSTRALIA, SO THEREFORE WHEAT PRICED ITSELF OUT AS A FEED. COURSE GRAIN STOCKS ARE VERY TIGHT. SORGHUM STOCKS ARE VERY TIGHT. I LOOK AT THE FACT THAT WE PROBABLY HAD MORE CORN USAGE THAN WHAT THE USDA IS TELLING US, BUT THAT WILL COME DOWN THE ROAD IN DISAPPEARANCE. SO I LOOK AT THE MARKET, AND I THINK THAT WE'VE GOT A CORN MARKET THAT IS GOING TO PROBABLY NOT GIVE US EVERYTHING WE WANT. BUT COME INTO SPRING, IF WE'RE DRY, THIS CORN MARKET IS GOING TO PRICE IN SOME PREMIUM OF WEATHER. SO I WOULD LOOK FOR A RALLY INTO JUNE.

Pearson: ALL RIGHT. SO THE CORN MARKET, MAYBE SOMETHING STILL HEAD. THE OTHER $64,000 QUESTION -- OR IT MIGHT BE $6.4 BILLION QUESTION IS THIS SOYBEAN MARKET. A LOT IS HINGING ON WHAT'S HAPPENING DOWN IN SOUTH AMERICA. WHAT ARE YOUR SOURCES TELLING YOU?

Martin: WELL, FIRST OF ALL, THIS PAST WEEK WE HEARD FIRST THE NEWS OF A FIELD OF SOYBEAN -- ASIAN SOYBEAN RUST, AND THAT WAS IN THE NORTHERN PART OF THE COUNTRY. REMEMBER NOW, THIS RUST IS NOT EASY TO GET RID OF AND IT SPREADS VERY EASILY BY THE WIND. IT'S MY UNDERSTANDING IT TAKES A FUNGICIDE THAT HAS ZINC IN IT, WHICH I DON'T KNOW AS IF THEY EVEN HAVE TO GET RID OF IT. SO THIS IS SOMETHING THAT WE'RE GOING TO HEAR MORE OF AS WE GO DOWN. KEEP IN MIND THE NORTHERN AREAS WERE THE EARLIEST IN. IT WAS DRY EARLY SO THEY GOT PLANTED EARLY. SO WE'RE HEARING ABOUT THAT AREA FIRST. BUT THE CENTRAL AND SOUTHERN PARTS OF THE COUNTRY WILL SHOW UP HERE IN ANOTHER COUPLE OF WEEKS. IT HAPPENS AS THE BEANS START TO BLOOM, GO INTO THEIR REPRODUCTIVE STAGE, AND THEN THE PLANT SHUTS DOWN, AND IT CAN BE VERY QUICK AND VERY FAST. LAST YEAR THEY HAD 720,000 ACRES. I BET THERE WILL BE A LARGE AMOUNT OF COUNTRY THIS YEAR IN BRAZIL THAT WILL SEE THIS IN CENTRAL AND SOUTHERN BRAZIL. WE'RE ALSO SEEING SOME DRYNESS IN ARGENTINA AND SOUTHERN BRAZIL, KIND OF EBBING INTO RIO GRANDE DO SUL. THAT'S PROBABLY ANOTHER THING THAT'S GOING TO START TO ADD IN. THE MARKET HAD GOTTEN TOO CHEAP TOO FAST AFTER THE GOVERNMENT REPORT. THEY TOOK 41 CENTS OFF IN A WEEK. SO THEY HAD TO COME BACK A LITTLE BIT AND REALIGN THEMSELVES. WE'VE HAD TWO OUTSIDE RANGE MONTHS BACK TO BACK. IT'S BEEN VERY CHOPPY, VERY DIFFICULT. SO THIS NEXT WEEK IS REAL IMPORTANT AS TO HOW BEANS CLOSE. IF BEANS CLOSE HIGHER FOR THE MONTH, WHICH WOULD BE OVER 569, AND ESPECIALLY OVER 565 BUT PREFERABLY OVER 569, THAT WILL BE AN INDICATION YOU'RE CLOSING BACK IN YOUR UPPER THIRD ALMOST WITHIN 10 TO 15 CENTS OF THE HIGHS. THAT WOULD BE AN INDICATION YOU'LL PROBABLY RALLY MORE IN FEBRUARY INTO POSSIBLY EARLY MARCH. THAT WAS OUR ORIGINAL PLAN. THEN YOU GET A BREAK BACK IN APRIL AND MOVE HIGHER INTO JUNE. WHAT I REALLY KIND OF THINK WILL HAPPEN IS THAT WE WILL PRICE THIS MARKET TOO STRONGLY. JULY BEANS HAVE BEEN UP NINE DAYS IN A CYCLICAL COUNT. THEY'RE DUE FOR SOME DOWN TIME. I SUSPECT THAT PUT A HIGH IN HERE, PULL BACK THROUGH FEBRUARY INTO MAYBE MID, LATE MARCH. THEN WE PUT A LOW IN AND STILL RALLY INTO JUNE. I STILL THINK WE HAVE A GOOD CHANCE FOR $8 BEANS.

Pearson: YOU'VE BEEN FRIENDLY TO BEANS. YOU'VE BEEN FRIENDLY TO COTTON, AND THIS COTTON MARKET HAS BEEN QUITE A SURPRISE ON THE UPSIDE.

Martin: THE COTTON MARKET LOOKS TO ME LIKE IT'S PRICED AT THE MOMENT MAYBE A LITTLE BIT FAIRLY. THE 54- TO 55-CENT AREAS ON THE FUTURES SEEMS TO BE AN ECSTATIC POINT. SO WE COULD SEE A PULL BACK, MAYBE DOWN AROUND 50 CENTS. MAYBE THROUGHOUT THE YEAR, WE GET AS LOW AS 48, 47. BUT ULTIMATELY, WITH ANY WEATHER PROBLEMS, WE'RE LOOKING FOR MORE ACRES THIS YEAR IN COTTON. I WOULD NOT BE SURPRISED TO SEE 58- TO MAYBE 64-, 63-CENT COTTON ON THE BOARD.

Pearson: WE'RE GOING TO SHIFT GEARS A LITTLE BIT HERE AND TALK ABOUT WHAT'S HAPPENING ON THE LIVESTOCK FRONT. NOW, ANOTHER AREA YOU'VE BEEN FRIENDLY TO HAS BEEN THE CATTLE MARKET. NOW, A COUPLE WEEKS AGO WE SAW THE CASH CATTLE GET UP INTO 80 CENTS. WE HAD SOME NICE UPON-THE-RAIL PRICES. THEN WE BACKED OFF JUST A LITTLE BIT. YOU TALKED ABOUT THE FACT WE COULD PROBABLY SEE A BACK-OFF. MAYBE WE'D OVERDONE THINGS A LITTLE BIT. ARE WE GOING TO RETRACE WHERE WE WERE.

Martin: WELL, I THINK THAT WHEN WE LOOK AT FEBRUARY FUTURES, WE'VE GOT TO REMEMBER THAT THEY'VE BEEN UP NINE MONTHS IN A CYCLICAL COUNT. SO THAT MARKET IS OVERDONE. AND IF AT THE END OF JANUARY HERE WE CLOSE UNDER 79.62, WE WILL BE CORRECTING THAT A LITTLE BIT BECAUSE WE'LL BE CLOSING LOWER FOR THE MONTH. AND I THINK THAT WHEN FEBRUARY FUTURES GOT UP TO 82 CENTS AND THE CASH HIT 80 CENTS, THAT WAS PSYCHOLOGICAL FOR ONE THING. AND WE ALSO HAD MOVED THE BOXED BEEF VERY QUICKLY AND, ALSO, THERE HAD ONLY BEEN TWO TIMES THAT WE HAD 82.30 AND 82.57 FOR HIGHS ON FEBRUARY FUTURES. SO THE MARKET WAS A LITTLE HIGH TOO QUICKLY, AND I THINK IT NEEDED TO HAVE SOME PULLBACK. BASIS HAS BEEN NARROWING. THAT'S PART OF IT. THERE'S A LOT OF BEEF IN COLD STORAGE. THAT'S CONCERNING. AND THEN YOU HAVE THE AVIAN FLU PROBLEM GOING ON WITH POULTRY OUT OF CALIFORNIA AND NEVADA, WHERE WE'RE SEEING CANCELLATIONS OR BANNING OF POULTRY IMPORTS INTO CANADA AND MEXICO FROM THOSE REGIONS. WE DON'T NEED TO SEE ANY MORE OF THAT, BECAUSE IF WE DO, THAT'S GOING TO BE BACKING UP POULTRY IN THE COOLERS. REMEMBER A YEAR AGO, WE WENT THROUGH THIS. AND WE DON'T WANT TO SEE THAT BECAUSE BEEF IS A LITTLE HIGH PRICED COMPARED TO PORK AND POULTRY. BUT ALL IN ALL, WEIGHTS ARE DROPPING AND WE'VE GOT LESS NUMBERS COMING AS WE MOVE INTO THE APRIL TIME FRAME. SO I THINK LATE MARCH TO APRIL IS GOING TO BE GOOD.

Pearson: WELL, THAT'S SOME GOOD NEWS OUT THERE FOR CATTLE PRODUCERS. SOME FOLKS WHO WERE LONG AWAITING SOME POSITIVE NEWS HAS BEEN PORK PRODUCERS. 2002 WILL NOT GO DOWN AS A GREAT HERE FOR THE HOG BUSINESS. 2001, IT WOULD SEEM, BASED ON THAT DECEMBER USDA HOGS AND PIGS REPORT, THAT WE WERE STARTING TO POINT THE RIGHT WAY IN TERMS OF SUPPLY. TAKE US ON THROUGH 2003, SUE. WHAT DO YOU SEE HAPPENING?

Martin: WELL, I THINK THAT AS WE GO THROUGH THE YEAR OF 2003, WE'RE GOING TO HAVE LESS NUMBERS OF HOGS, OF COURSE, COMING. CANADA IS GOING TO STILL INCREASE IN NUMBERS. SO IS SOUTH AMERICA AND SO IS CHINA. SO THERE IS GROWTH AROUND US IN OTHER COUNTRIES BUT WE'RE GOING TO DECREASE A LITTLE BIT. AS WE GET THROUGH THE YEAR OF 2003, IF PRICES CAN GET A LITTLE BETTER, THEN WE'RE GOING TO START TO SEE AN EXPANSION GO AGAIN. I THINK WE HAVE A HOG MARKET THAT'S GOING TO PULL BACK DOWN AROUND 47.80 ON THE BOARD BASIS FEBRUARY HOGS. BUT THAT MIGHT BE ABOUT ENOUGH AND THEN WE TRY TO COME BACK UP AGAIN. ALL IN ALL, WHENEVER IN THE PAST ANYWAY, IF IT'S ANYWAY INDICATION FOR THE FUTURE, IN THE PAST WHENEVER HOG PRICES HAVE BEEN COUNTERCYCLICAL OR COUNTERSEASONAL THROUGH THE FALL IN THROUGH DECEMBER MAKING HIGHER HIGHS, THEY HAVE A TENDENCY TO HAVE A DOWNWARD PATTERN INTO JUNE. THEY DON'T HAVE TO BE STRAIGHT DOWN, BUT THEY CAN BE CHOPPY AND IRREGULAR. AND THE RALLIES AREN'T AS NICE AS WE REALLY WOULD LIKE TO SEE.

Pearson: OKAY. WITH THAT IN MIND, HEDGE OPPORTUNITIES AT THIS STAGE OF THE GAME FOR A PORK PRODUCER?

Pearson: I THINK AT THIS STAGE, I WOULD WAIT. WE'VE HAD SOME NICE CORRECTION. I THINK YOU'RE GOING TO GET A CHANCE FOR ANOTHER RALLY HERE.

Pearson: VERY GOOD. SUE MARTIN, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, YOU CAN HEAR SOME MORE OF SUE'S THOUGHTS BY TURNING TO THE "MARKET PLUS" SECTION OF OUR WEB SITE. Until next week, I'm Mark Pearson. Thanks for watching. Have a good week.


Tags: agriculture commodity prices markets news sorghum