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Market Analysis: Jan 03, 2003

posted on January 3, 2003


The grain markets finished the week on the downside following some disappointing sales news. For the week, wheat prices were down two-and-a-half cents. Corn prices were down more than three cents.

Soybean futures were more than 12-cents higher for the week. Soybean meal gained $4.60 per ton.

Cotton futures were down 13-cents.

In livestock, fed cattle futures were $2.13-higher. Feeder cattle gained $1.43. The lean hog contract closed 43-cents lower.

In the financials, COMEX gold gained $2.40 per ounce. The Euro lost 53-basis points against the dollar. The C-R-B index finished the week three and three-quarters points higher to finish at 204.50.

Here now to lend us her insight is Sue Martin. Sue, welcome back…

Market Analysis: Jan 03, 2003

Martin: THANK YOU, MARK.

Pearson: LET'S TALK A LITTLE BIT ABOUT WHAT HAPPENED THIS WEEK IN THE GRAIN MARKETS. THE END-OF-THE-YEAR TRADING KIND OF KICKED IN. IT LOOKED PRETTY THIN THERE IN CHICAGO.

Martin: WELL, IT WAS. IT WAS FAIRLY QUIET AT FIRST, AND THEN WE ENDED THE YEAR UP WITH A BANG. LET'S PUT IT THIS WAY: WE STARTED THE YEAR WITH A BANG. I THINK THAT WE HAVE A GRAIN MARKET THAT TRADERS CAME BACK AFTER THE NEW YEAR'S AND FELT VERY POSITIVE, HAD MORE OF A BETTER ATTITUDE ABOUT THINGS THAN THEY'D HAD TOWARDS THE END OF THE YEAR. YOU HAD FUNDS THROUGH THE MONTH OF DECEMBER DOWNSIZING POSITIONS TO KIND OF DRESS UP THEIR STATEMENTS AND THIS TYPE OF THING AND TAKE THEIR INCENTIVE FEES. AND YOU'VE SEEN LIQUIDATION IN STOCKS TOO. AND I THINK NOW THEY'VE COME BACK AND THEY WANTED TO REESTABLISH THOSE POSITIONS BACK, AND SO THEY BOUGHT THE BEANS VERY AGGRESSIVELY ON THE FIRST DAY BACK ON THURSDAY. THERE WAS EVEN SOME FUND BUYING NOTED -- HEAVILY FUND BUYING NOTED IN THE MIDAMERICAN BEAN CONTRACTS, WHICH WAS KIND OF A SURPRISE ON FRIDAY. WE FOUND THAT FUNDS HAD BOUGHT UP TO 5,000 CONTRACTS.

Pearson: IT MADE QUITE A DIFFERENCE GETTING OFF STARTED IN 2003. WILL IT SUSTAIN ITSELF?

Martin: WELL, THERE'S THE GOOD QUESTION, BECAUSE THERE ARE SOME WHO ARE NAYSAYERS THAT DON'T THINK IT WILL. I THINK IT WILL BUT WE NEED TO GET MOVING HERE FAIRLY SOON. WE DON'T WANT TO LABOR TOO LONG, OR THE MARKET IS GOING TO DISAPPOINT. AND I THINK THAT WE'VE HAD SOME PRODUCERS SELLING SOME CASH GRAIN HERE, MAYBE LIQUIDATING SOME LONG POSITIONS ON THE BOARD. THAT HELPS KEEP IT A LITTLE CLEAN. I THINK THE MARKET DID A GOOD JOB IGNORING NEGATIVE NEWS ON THURSDAY AND FRIDAY. AND SPARKS NUMBERS CAME OUT AND SHOWED AN INCREASE IN BEAN PRODUCTION, NOT ONLY IN BEANS BUT IN CORN AS WELL AND, OF COURSE, INCREASE IN ACRES ON WHEAT, WHICH WAS EXPECTED, AND DIDN'T SHOW AS MANY ACRES AS WHAT SOME OF THE TRADERS HAD EXPECTED IN WHEAT. SO I THINK THAT THE BEAN MARKET TO ME -- THE ONE THING WE'VE GOT TO REMEMBER IS STOCKS ARE TIGHT. AND THEN ON TOP OF IT, OUR DEMAND IS VERY GOOD. CHINA CONTINUES TO BE VERY INSATIABLE WHEN THEY COME TO THEIR NEED FOR CRUSHING. BEANS ARE HIGH PRICED IN CHINA, RUNNING BETWEEN $7.50, $8 A BUSHEL. BASIS LEVELS ARE QUITE HIGH ON PROTEIN OVER THERE, AND THEY'RE EXPANDING IN THE PORK PRODUCTION. SO THEIR APPETITE IS GROWING. THEN WE HAVE SOUTH AMERICA GROWING IN POULTRY AND PORK PRODUCTION AS WELL, AND CANADA IS GROWING. WE'RE STEPPING BACK A LITTLE BIT, BUT THAT MAY CHANGE BY THE END OF THE YEAR 2003. SO I THINK THE DEMAND FOR PROTEINS IS GOING TO BE GOOD. AND THEN, OF COURSE, WORLD DEMAND FOR VEG OIL IS HUGE. SO I THINK WE HAVE SOME POSITIVES HERE. AND THEN, OF COURSE, IF YOU PUT THE FROSTING ON THE CAKE AND YOU GET WEATHER PROBLEMS CONTINUING -- BRAZIL DIDN'T START OFF REAL EASY. WHILE THE WEATHER SEEMS NICE RIGHT NOW, THAT REMAINS TO BE SEEN BECAUSE IT SEEMS TO BE EBBING AND FLOWING AND THE RAINS AREN'T AS HEAVY AS WHAT THEY THOUGHT THEY WOULD BE. SO WHILE THERE'S FORECAST OF RAIN OVER THE NEXT FIVE DAYS, IF THOSE RAINS DON'T MATERIALIZE, YOU'RE NOW GETTING WELL INTO THE MONTH OF JANUARY, YOU'LL BE WELL INTO YOUR SECOND WEEK. TRADERS ARE GOING TO START TO TAKE A GOOD LOOK AT THAT. AND THEN, OF COURSE, AS THE BEAN PLANT GETS LARGER AND STARTS TO BLOOM, THAT'S WHEN THE RUSH SHOULD START TO SHOW UP IF IT'S GOING TO HAPPEN.

Pearson: ALL RIGHT. LET'S TALK ABOUT YOUR OUTLOOK NOW FOR 2003, SUE. BASED UPON WHAT WE KNOW AND BASED UPON DECENT WEATHER HAPPENING IN BRAZIL AND THE REST OF SOUTH AMERICA, WHAT ARE YOUR TARGETS FOR SOYBEANS?

Martin: WELL, I THINK THAT, FIRST OF ALL, EVEN ON A TECHNICAL BASIS, WHEN YOU LOOK AT THE PRICES OF WHAT'S GOING ON, WE'VE BEEN IN A COIL, OR A PINNATE, FORMATION ON BEANS SINCE SEPTEMBER HIGHS. WE CAME OUT OF THOSE HERE AND BROKE THROUGH THEM AND CLOSED ABOVE THEM FOR ONE DAY HERE THIS PAST WEEK ON THURSDAY. SO NOW THE THING WILL BE, CAN WE PUSH PUSH ON. FUNDS ARE GETTING HEAVILY LONG AGAIN. THEY'RE UP AROUND, WE ESTIMATE, AROUND 55,000, MAYBE 56,000 CONTRACTS LONG, SO THAT'S GETTING UP THERE. BUT WHO'S TO SAY WHAT UP THERE IS ANYMORE WHEN MONEY STARTS COMING OUT OF THE STOCK MARKET AND LOOKING FOR ANOTHER HAVEN? I THINK BEANS IS THE BULL MARKET OF 2003. I THINK WHEAT AND CORN WILL BE ONLY SHORT-COVERING RALLIES. AND I THINK THAT WHEN I LOOK AT THE BEAN MARKET, THE CHARTS -- THE LONG-TERM CHARTS LOOK LIKE WE COULD VERY EASILY SEE A MOVE UP TO $6.50 AND VERY POSSIBLY 7.54 TO $8.

Pearson: ALL RIGHT. NOW, YOU MENTIONED CORN AND WHEAT KIND OF BACKFILLING AS WE GO THROUGH THE YEAR. PLENTY OF WHEAT WORLDWIDE. THERE DOESN'T SEEM TO BE -- WE MAY HAVE HAD OUR RALLY IN WHEAT FOR THE TIME BEING.

Martin: WELL, I THINK WE'VE HAD THE BULL MOVE IN WHEAT. NOW THE THING IS WE'RE GETTING THIS CORRECTION. THERE'S STARTING TO BE A LITTLE MORE TALK ABOUT DRYNESS IN KANSAS AND THAT TYPE OF THING, AND THE DROUGHT EXPANDING IN SOME AREAS THROUGH SOUTHERN IOWA, MISSOURI, THAT TYPE OF THING. BUT WHEN YOU LOOK AT THE WHEAT MARKET, TECHNICALLY WE HAVE TIME INDICATORS THAT WE WATCH. AND OUR WEEKLY TIME INDICATORS AS WE ENDED THE WEEK THIS WEEK ON MARCH CHICAGO WHEAT WAS 1.3 PERCENT, AND THAT IS VERY LOW. THAT INDICATOR -- LET'S PUT IT THIS WAY, NEVER SAY NEVER, BUT I'VE NEVER SEEN IT TOUCH ZERO. SO THAT INDICATOR, WHEN WE COME IN HERE MONDAY MORNING, WILL PROBABLY BE AT 1 PERCENT TO MAYBE 9/10 PERCENT. THAT'S GETTING VERY OVERDONE. THE CHARTS LOOK LIKE WE'RE TRYING TO PUT IN A LOW HERE. WE MAY GET A LITTLE THICK IN HERE, BUT 3.15 TO MAYBE 3.18. WE'VE BEEN AS LOW AS 3.20. THAT'S AN AREA WHERE THERE SHOULD BE SUPPORT ON THE MARCH CHICAGO WHEAT. I THINK WE HAVE A SHORT COVERING RALLY COMING.

Pearson: ALL RIGHT. THE CORN MARKET, THERE SEEMS TO BE A LOT OF FARM HOLDING OF CORN THIS YEAR. WHAT'S YOUR ADVICE TO THOSE FOLKS?

Martin: WELL, THERE CERTAINLY IS. AND I GUESS I WILL SAY THIS: CORN -- MARCH CORN FUTURES HAS BEEN DOWN TO THE 2.34 AREA SEVERAL TIMES HERE THIS WEEK. WE'VE TESTED THE OLD LOWS THAT WE HAD. THE TIMING INDICATOR THAT I MENTIONED ON WHEAT, THE SAME INDICATOR ON WEEKLY DATA IS AT 1.2 PERCENT. MONDAY MORNING IT WILL PROBABLY BE UNDER 1 PERCENT, VERY LOW AND OVERDONE. I THINK THAT WHEN I LOOK AT THE CORN MARKET, IT'S NOT UNCOMMON TO SEE CORN RALLY IN THE MONTH OF JANUARY AND THEN ROLL OVER AND SELL OFF AS YOU GO TOWARD THE FIRST OF MARCH. THE CORN MARKET, I THINK, CAN HAVE A BOUNCE HERE. WE'RE GETTING SOME POOR EXPORT SALES NUMBERS ON ALL GRAINS, BUT THAT'S TO BE EXPECTED FOR THE TWO WEEKS OF HOLIDAYS THAT WE'RE GOING TO HAVE, SO NEXT WEEK'S NUMBERS ARE GOING TO BE POOR AS WELL. SO WE JUST HAVE TO ACCEPT THAT AND IGNORE THAT. I THINK THAT THE CORN MARKET IS GOING TO BOUNCE. YOU MIGHT DRIFT DOWN TO AROUND THE 200 WEEK MOVING AVERAGE OF ABOUT 230, BUT BEYOND THAT I THINK WE'VE GOT GOOD SUPPORT HERE IN THE CORN MARKET. I LOOK FOR A SHORT COVERING RALLY.

Pearson: ALL RIGHT. THAT MAY BE A PLACE TO MAKE SOME SALES.

Martin: ABSOLUTELY. I DON'T THINK WE'RE GOING TO SEE THE OPPORTUNITY TO LDP IN ANY GRAIN, SO THAT TELLS ME WE'RE SOMEWHAT LIMITED. BUT I DO THINK YOU'LL WANT TO USE THOSE RALLIES BECAUSE I DON'T THINK THEY'RE LONG LIVED IN CORN.

Pearson: LET'S TALK ABOUT THAT CATTLE MARKET, OVER $80. YOU WERE TALKING ABOUT THAT THE LAST TIME YOU WERE ON THE SHOW THAT WE WOULD SEE THAT, AND IT SHOULD BE A PLACE TO MAYBE START MAKING SOME HEDGE SALES.

Martin: ABSOLUTELY. 80.40 TO 81 HERE IS CERTAINLY AN AREA THAT I HAD AS A BENCHMARK THAT WOULD REALLY KIND OF STALL THE MOVE. I THINK THAT THE PACKERS ARE WANTING CATTLE. DEMAND SEEMS TO BE GOOD. EXPORTS COMPARED FOR LIKE THE MONTH OF DECEMBER COMPARED TO A YEAR AGO AT THE SAME TIME, UP 7 PERCENT, SO THAT'S GOOD. PACKERS ARE WANTING CATTLE. WEIGHTS ARE DROPPING A LITTLE BIT. SO THERE ARE SOME POSITIVES HERE, BUT THE MARKET IS GETTING PRETTY RICH. AND THEN WHEN YOU LOOK AT THE APRIL CONTRACT AND WE'RE SUPPOSED TO TIGHTEN NUMBERS AS WE GO THROUGH THE WINTER, WINTER HAS BEEN VERY MILD, WEIGHT GAINS ARE COMING EASY, SO CATTLE ARE STAYING CLEAN, THEY'RE MOVING. BUT I THINK THAT KEEP THE CATTLE MOVED AND USE THESE RALLIES TO MAYBE DO SOME MARKETING, HEDGE OFF A LITTLE BIT ON SOME OF YOUR NUMBERS THAT YOU NEED TO DO. THE APRIL CONTRACT PROBABLY WILL GO TO 81.60.

Pearson: ALL RIGHT. LET'S TALK THE HOG MARKET. QUARTERLY HOGS AND PIGS REPORT OUT, PRETTY MUCH IN LINE. BUT, BOY, IT LOOKS LIKE FUTURES TOOK AN AWFUL HIT.

Martin: WELL, I THINK THE HOG MARKET HAD BEEN SO DRESSED UP. YOU KNOW, WE HAD GOOD DEMAND ON THE PRODUCT. WE'VE HAD -- THE FUNDS HAD BEEN HEAVILY LONG. AND I THINK THAT WAS A MARKET THAT, WHEN THEY GOT THAT NUMBER OUT, THEY, WITH LIGHT VOLUME, WAS ABLE TO REALLY HIT THE MARKET HARD. NOW IT'S COME BACK THE LAST TWO TRADING DAYS. I THINK HOGS ARE GOING TO BE VERY CHOPPY. REMEMBER, WE RALLIED COUNTERSEASONAL ALL THROUGH THE FALL MAKING HIGHER HIGHS RIGHT INTO DECEMBER. BUT TENDENCY OF YEARS LIKE THAT IS THAT YOU WILL HAVE SOFTNESS OR A DOWN TREND INTO JUNE -- MAY OR JUNE. BUT I THINK WE'RE GOING TO HAVE SOME REAL CHOPPY TIMES HERE. AND OF COURSE, AS OF JANUARY 1, THE TARIFFS WERE TO BE DROPPING OUT OF MEXICO ON PORK AND POULTRY. WE'RE GOING TO SEE PORK GOING SOUTH. DEMAND FOR BACON IS AWFULLY GOOD, SO BELLIES -- THE BELLY MARKET SHOULD BE A GOOD MARKET AND HAVE SOME STRENGTH HERE THAT WILL HELP THE HOG MARKET OUT. HAMS WILL BE WHAT WE'LL PROBABLY SEND SOUTH TO MEXICO. SO THERE ARE SOME PLUSES HERE, SO I THINK YOU DON'T HAVE A MARKET THAT'S JUST GOING TO FALL APART, I THINK YOU HAVE A MARKET THAT'S GOING TO STILL TRY TO MOVE HIGHER BUT IT'S GOING TO BE VERY CHOPPY AND MAYBE HAVE A DIFFICULT TIME COMPARED TO WHAT WE'VE SEEN IN THE LAST THREE MONTHS.

Pearson: ALL RIGHT. SUE, ABOUT THIRTY SECONDS LEFT. WE WERE TALKING EARLIER ABOUT MAYBE SOME STRENGTH OR SHORT COVERING RALLY IN CORN. BEAN MEAL WENT MORE THAN A $4 JUMP THIS WEEK. DO YOU WANT TO LOCK IN ANY FEED NEEDS IF YOU'RE A LIVESTOCK PRODUCER OUT THERE?

Martin: IF I WAS A LIVESTOCK PRODUCER, I WOULD PROBABLY LOCK IN SOME CORN BECAUSE WE'RE VERY DRY GOING IN TOWARDS THE LAST PART OF OUR WINTER. I THINK THAT I WOULD PROBABLY LOCK IN SOME CORN BECAUSE OF THESE TIME INDICATORS BEING SO LOW. ON BEANS, I THINK WITH BEAN MEAL, I'D PROBABLY LOCK IN A LITTLE BIT, BUT I DON'T THINK YOU HAVE TO BE AS AGGRESSIVE.

Martin: SUE, VERY MUCH, WE APPRECIATE IT. THANK YOU VERY MUCH, SUE. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." FOR ADDITIONAL ANALYSIS FROM SUE, BE SURE TO VISIT THE "MARKET PLUS" PAGE ON OUR "MARKET TO MARKET" WEB SITE. UNTIL NEXT WEEK, I'M MARK PEARSON. THANKS FOR WATCHING. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

Tags: agriculture commodity prices markets news