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Market Analysis: Nov 22, 2002

posted on November 22, 2002


The grain and oilseed markets finished the week mixed with wheat prices pressured and corn prices showing some bounce. For the week, wheat prices were down 16-cents. Corn prices were four to five cents higher.

Soybean futures were gained eight to ten cents. Soybean meal gained $3.30 per ton.

Cotton futures closed $1.55 lower.

In livestock, fed cattle futures were $1.18 higher. Feeder cattle gained $1.15. The lean hog contract closed 60-cents lower.

In the financials, COMEX was unchanged. The euro was 114 basis points lower against the dollar. The CRB index finished the week more than three points higher to close at 230.25.

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

Market Analysis: Nov 22, 2002

Martin: THANK YOU, MARK.

Pearson: ALL RIGHT. WELL, LET'S GET RIGHT AFTER IT HERE. LET'S TALK WHEAT MARKET. WE'RE BACKING OFF SOME. WE'RE CERTAINLY BACK OFF UNDER $4, AROUND $3.73 IN CHICAGO. IT LOOKS LIKE SOME OF THE OTHER MARKETS, KANSAS CITY, MINNEAPOLIS HAVE BEEN HIT TOO. WHAT'S YOUR OUTLOOK NOW FOR WHEAT?

Martin: WELL, I THINK PART OF THE BREAK CAME WITH THE FACT THAT, FIRST OF ALL, WE WERE IMPORTING SOME WHEAT FROM FRANCE INTO THE SOUTHEAST PART OF THE COUNTRY. SECONDLY, YOU HAD OPTIONS EXPIRING THIS PAST WEEK ON FRIDAY. AND I THINK THAT, YOU KNOW, WHEN YOU GET CLOSE TO OPTION EXPIRATION, THE TRADERS GO AFTER ALL THE PREMIUM THAT THEY CAN GLEAN. AND I THINK THEY DID A GOOD JOB OF IT IN THE WHEAT MARKET, PULLING PREMIUM FROM THE PUTS, THE 350, 360 STRIKES, AND THEN ALSO FROM THE CALLS, THE 390, 4-, 410, 420S. SO ALL OF THOSE WENT WORTHLESS, AND THEY CERTAINLY GOT ALL THAT PREMIUM. NOW, I LOOK AT THE WHEAT MARKET. WE'VE BEEN OVERDUE PROBABLY FOR A CORRECTION ANYWAY, AND WE'RE CATCHING THAT. BUT I THINK WHEAT THIS NEXT WEEK IS GOING TO STABILIZE AND START TO GIVE US A RALLY. IT'S VERY OVERSOLD TECHNICALLY. WE'VE HAD AN INSIDE MONTH GOING HERE THIS MONTH OF NOVEMBER, AND THAT'S FOLLOWING A LOWER LOW THAT WE HAD IN OCTOBER. SO IF THE MARKET WAS SUPER WEAK THIS NEXT WEEK, YOU WOULD THINK IT WOULD BE MAKING LOWER LOWS. OF COURSE, THAT'S TAKING OUT 360. AND I'M NOT SURE WE'RE GOING TO GET THAT DONE. I THINK WE'RE GOING TO GIVE THIS MARKET ANOTHER RALLY.

Pearson: OKAY. NOW, HOW DOES THIS PRETEND FOR THE CORN MARKET? WHAT'S YOUR TAKE THERE AGAIN? WE HAD A LITTLE BIT OF A BOUNCE THERE THIS WEEK. THIS TAIL END OF THE HARVEST IS REALLY STILL OUT THERE CASH WISE.

Martin: THAT'S RIGHT. AND I THINK THE ONE THING WE'RE SEEING IN THE CORN MARKET IS -- OF COURSE, WE'RE GOING TOWARDS FIRST NOTICE DAY THIS NEXT WEEK. FIRST NOTICE DAY IS ON FRIDAY, THE DAY AFTER THANKSGIVING. AS WE GRAVITATE TOWARDS THAT, WE'RE HEARING THAT ON WHEAT AND ON CORN THAT DELIVERY SHOULD BE VERY SMALL OR VERY TIGHT. SO IT BEHOOVES THE COMMERCIAL TO TRY TO BUY UP THE FRONT MONTHS. SO WE'RE GOING TO SEE THE DECEMBER CORN GAIN ON THE DEFERREDS, AND THEY'LL BUY UP THE FRONT MONTHS BECAUSE IT'S CHEAPER FOR THEM TO BUY AND TAKE DELIVERY, BECAUSE BETWEEN NOW AND MARCH IS ALL THAT LENGTH OF TIME THAT THEY CAN'T GET A HOLD OF CORN WITHOUT BIDDING CASH. YOU HAVE 70-CENT PREMIUM OVER FUTURES ON THE EAST AND THE WEST COAST, AND SO -- AND IOWA CASH BASIS IS VERY TIGHT AS WELL. THEN YOU'VE GOT, BEFORE TOO MUCH LONGER, IF IT GETS MUCH COLDER, WE'LL HAVE THE RIVERS FREEZE UP BECAUSE THEY'RE VERY LOW THIS YEAR. THE MISSISSIPPI AND THE ILLINOIS RIVERS ARE VERY LOW, SO THAT'S GOING TO BE BURDENSOME OR TROUBLESOME. AND THEN, OF COURSE, IF THEY TAKE DELIVERY OF CORN, IT RUNS ABOUT 10 TO 12 CENTS UNDER THE OTHER VALUES, SO IT'S CHEAPER FOR THEM TO TAKE DELIVERY AND TAKE IT TO THE GULF. I THINK THAT WHEN WE LOOK AT THIS CORN MARKET, WE'RE GOING TO TRY TO MOVE HIGHER. YOU DON'T HAVE MUCH IN THE WAY OF ALTERNATIVE FEEDS. GOING INTO CANADA, THERE'S GOOD DEMAND. THEY'RE BUYING CORN AND BRINGING IT IN. THE CANADIAN BARLEY CROP WAS DOWN. YOU'VE GOT FEED WHEAT NOT VERY AGGRESSIVE THERE, AND THEY'RE BUYING CORN. MINNESOTA WILL TAKE CARE OF THAT MARKET. THEN YOU'VE GOT MEXICO AT US EVERY WEEK AS WELL, AND THEN WE'VE GOT AUSTRALIA IMPORTING FEED WHEAT AS WELL TOO, AND CORN SORGHUM AND EVERYTHING LIKE THAT. SO THERE'S NOT MUCH IN THE WAY OF ALTERNATIVES, AND THAT'S CERTAINLY GOING TO HELP BRING THIS MARKET TO STAY AGGRESSIVE. IT MIGHT BE MORE OF A SPREAD MARKET WHERE THE FRONTS LEAD THE WAY, BUT I THINK WE'RE GOING TO HAVE A MARKET THAT TRIES TO PUSH A LITTLE BIT.

Pearson: YOU DON'T SEE ANY SERIOUS PULLBACK IN CORN?

Martin: I THINK YOU'VE HAD YOUR SERIOUS PULLBACK. IF WE TAKE DEC. CORN OFF THE BOARD WEAK, THAT'S A BAD SIGN FOR THE CORN MARKET. IT EXPIRES AROUND THE 14TH OF DECEMBER. IF THAT EXPIRES ON A SOFT NOTE, THAT'S TELLING YOU SOMETHING IS WRONG HERE. GRANTED, WE KNOW THAT WE'RE GOING TO HAVE LESS NUMBERS OF CATTLE, AND WE'RE LOOKING AT IT YEAR AHEAD LESS NUMBERS OF HOGS. BUT ALSO OUR ETHANOL USAGE IS EXPECTED TO BE PICKING UP AND WE HAVE LESS CORN AND WE'RE GOING TO BE EXPORTING. SO WE'RE NOT GOING TO PROBABLY GET AN AWFUL LOT OF THE BRAZILIAN DEMAND BECAUSE THEY DON'T WANT GMO, AND THAT'S WHAT WE HAVE A LOT OF. SO I THINK THAT WE'VE GOT A MARKET THAT WILL STILL HOLD TOGETHER AND PUSH. DOES IT MEAN WE HAVE NEW HIGHS? PROBABLY NOT. BUT IT SHOULD GIVE US A CORRECTIVE BOUNCE. THE OPTIONS WENT OFF RIGHT UNDER THE 250 STRIKES. THERE WAS A LOT OF OPEN INTEREST IN THOSE. AND I THINK THIS NEXT WEEK, YOU'LL SEE THE MARKET TRY TO PUSH OUT 250 AND START TO GRAB TOWARDS 260.

Pearson: ALL RIGHT. LET'S MOVE OVER TO THE SOYBEANS. AGAIN, THE WEEK THAT WAS, WAS A LITTLE BIT POSITIVE. A GAIN IN CHICAGO. WHAT'S YOUR OUTLOOK NOW WITH SOYBEANS? AND, OF COURSE, ALL EYES SEEM TO BE ON SOUTH AMERICA ALREADY.

Martin: WELL, I'M GOING TO GIVE YOU THE BULL, MARK. I'M VERY FRIENDLY TO THE MARKET. THE BEAR SONG IS THE ACRES IN SOUTH AMERICA. THAT'S ABOUT ALL THEY'VE GOT TO TALK ABOUT. AND, YES, WE'RE GOING TO HAVE A LARGE AMOUNT OF ACRES IN BRAZIL. AND, OF COURSE, ARGENTINA, SOUTHERN BRAZIL, AND ARGENTINA, BECAUSE OF ALL THE RAIN, WE'RE GOING TO GET SOME CORN ACRES GOING TO BEANS. BUT THE THING THAT I FIND IS THAT ALREADY, YOU KNOW, NOBODY IS TALKING ABOUT IT, BUT THE RUST THRIVES ON -- THAT FUNGUS THRIVES ON WET, WARM CONDITIONS. THAT'S EXACTLY WHAT THEY HAVE IN THE SOUTHERN HALF OF THAT COUNTRY. AND THEY'RE ALREADY TALKING ABOUT SMALL BEANS DYING IN PARTS OF PARAGUAY AND PARANA. PARANA IS YOUR NUMBER TWO BEAN PRODUCING PROVINCE IN BRAZIL. AND THEN TO THE NORTH, THEY'RE TOO DRY. YOU'VE GOT MATA GROSSO, MATO GROSSO DO SUL, AND GOIAS, RUNNING VERY DRY. YES, THEY'VE CAUGHT SOME SHOWERS HERE ON THURSDAY AND EXPECTED TO MAYBE CATCH A FEW LIGHT SHOWERS THIS WEEKEND, BUT THE HEAT RETURNS THIS NEXT WEEK. I THINK THAT THE TRADE IS TRYING SO HARD TO PUMP UP THESE ACRES AND, YES, THEY'LL GET PLANTED. WE'VE GOT TO GET THAT CROP PLANTED. THAT'S PROBABLY WHAT KEEPS THIS MARKET SEESAWING BACK AND FORTH, AND YET WE'VE GOT CHINA IN OUR FACE CONSTANTLY WANTING TO BUY BEANS AND MEXICO AS WELL HERE AGAIN. EUROPE, THE E.U., IS COMING AT US. THEY WOULD LIKE A BREAK IN THE PRICE TO BUY, BUT IT'S JUST QUESTIONABLE HOW LONG THEY CAN REALLY WAIT IT OUT. I THINK THAT WE HAVE A MARKET THAT'S GOING TO BE WONDERFUL WITH DEMAND. ONCE WE GET THAT CROP PLANTED IN SOUTH AMERICA, WE'RE GOING TO PROVE -- YEAH, THEY CAN MAYBE THINK THEY'RE GOING TO HAVE A 49-MILLION METRIC TON CROP. I SUSPECT IF WE GET CLOSER TO 40, IT WOULD NOT SURPRISE ME.

Pearson: THAT IS THE BULL STORY ON THE SOYBEANS. SO YOU'RE GOING TO WATCH IT THIS WINTER. YOU'RE NOT CONVINCED AT ALL THAT CROP IS GOING TO BE THERE. YOU'RE RIGHT. I MEAN WE ALWAYS HEAR ABOUT, WELL, IT'S DRY IN BRAZIL. THAT'S ALWAYS BEEN GOOD FOR THEM. THE WET BRAZIL IS THE PROBLEM.

Martin: THE WET BRAZIL IS THE PROBLEM, BUT THE DRIER SIDE IN THE NORTH IS HAVING PROBLEMS TOO BECAUSE THEY'RE WAY TOO DRY, AND THEY NEED TO BE FED WITH SOME RAIN. SO IT'S KIND OF LIKE -- AND IT'S SUCH A BIG COUNTRY THAT YOU DON'T HAVE THE WHOLE COUNTRY IN THE SAME SITUATION AT THE SAME TIME. I THINK THAT ONE THING WE'VE GOT TO KEEP IN MIND, CHINA IS BUYING A LOT OF BEANS. THEY WANT IT FOR THE OIL. YOU HAVE CHINA WITH A GROWTH RATE OF 112 PERCENT. THE U.S. IS NOT LIKE THAT, BUT WE'RE A LITTLE BETTER THAN EUROPE. WE'RE GOING TO HAVE A BETTER MARKET THAN PEOPLE BELIEVE. IT'S JUST GOING TO TAKE A LITTLE TIME HERE TO GET THROUGH DECEMBER, AND THEN WE SHOULD START UP. MARCH SHOULD BE A GOOD MONTH.

Pearson: ALL RIGHT. REAL QUICK, SUE, THE COTTON MARKET. WE'RE HEARING WE'RE BEHIND ON HARVEST, BUT YET THE MARKET SOFTENED UP.

Martin: WELL, IT CERTAINLY HAS BUT IT'S A MARKET -- ALL THESE MARKETS ARE KIND OF FOLLOWING THE SAME PATTERN. AND WE MADE HIGHER HIGHS AFTER HAVING HAD A GOOD BREAK, AND NOW WE'RE SETTING BACK AGAIN. BUT AGAIN THIS MARKET LOOKS LIKE IT'S GETTING READY TO RALLY THIS NEXT WEEK. THE ONE THING I NOTICED WAS, JUMPING BACK TO BEANS, IS THAT OF THE LAST 33 YEARS, 28 OF THEM WE CLOSED HIGHER ON THE DAY BEFORE THANKSGIVING.

Pearson: OKAY. WE'LL BE WATCHING FOR THAT. SUE, WHAT ABOUT -- I WAS GOING TO TALK -- LET'S MOVE OVER TO LIVESTOCK. OF COURSE, IT'S TURKEY TIME IN THE LIVESTOCK BUSINESS, SO TYPICALLY IT'S NOT A GREAT TIME FOR RED MEATS. DO YOU WE LOOK FORWARD, THOUGH, IN SOME OF THOSE DEFERRED CONTRACTS ON CATTLE? THEY LOOK FAIRLY ATTRACTIVE. ARE THESE HEDGING OPPORTUNITIES?

Martin: WELL, THEY CERTAINLY ARE ATTRACTIVE. DO I WANT TO HEDGE THEM? NO. BUT I WILL SAY THIS: I THINK THAT WE HAVE TO BE VERY CAREFUL HERE. WE'VE GOT A BASIS THAT HAS JUMPED AGGRESSIVELY THIS PAST WEEK OR SO, AND WE'VE GOT CUTOUT -- THAT JUMPED $12. WE HAVEN'T SEEN THAT SINCE MARCH 27. $72 CASH TRADE THIS PAST WEEK. WE HAVEN'T SEEN THAT SINCE APRIL. BUT MARKET HAS PUT A LOT ON AWFULLY QUICKLY. IT WAS HELPED WITH SOME PLANT CLOSINGS IN CANADA AND ALSO IN THE U.S., AND IT SLOWED DOWN IMPORTS OF BEEF INTO THE U.S. SO I THINK WHAT WE'RE GOING TO HAVE HERE IS A MARKET -- WE'RE LOOKING AT LOWER BEEF PRODUCTION DOWN THE ROAD, BUT OUR BASIS IS EXTREMELY WIDE RIGHT NOW WHICH MEANS, IF IT DOESN'T CHANGE AND DROP BACK TO WITHIN ABOUT A DOLLAR OF CASH, FUTURES -- EITHER CASH COMING HIGHER OR FUTURES COMING DOWN, YOU'RE GOING TO HAVE HEAVY DELIVERIES ON THE DECEMBER CONTRACT. AND SO I THINK THAT WHEN I LOOK AT THE FEEDER CATTLE, MY WEEKLY DATA IS UP TO -- OUR TIME INDICATOR IS UP TO $99.4 PERCENT. COME MONDAY MORNING WHEN WE OPEN UP, IT WILL PROBABLY BE UP AROUND 99.5 OR -6. THAT'S WAY OVERDONE. IT SAYS BE CAREFUL HERE AT THESE KIND OF LEVELS CHASING THE MARKET.

Pearson: ALL RIGHT. LET'S GO OVER TO THE HOG MARKET. CERTAINLY THERE'S BEEN A LOT OF FRUSTRATION THERE FOR PORK PRODUCERS. YOU TALKED ABOUT THE MARKET DROPPING EARLY. YOU DROPPED EARLY -- PRICE MAYBE A DOUBLE HIT LOWER. HAVE WE HAD THAT NOW OR IS THE HOG MARKET GOING TO START TO RECOVER?

Martin: I THINK WE'LL SEE HOGS TRY TO RECOVER. THE MARKETS LOOK GOOD TECHNICALLY. THE ONE THING THAT -- IT SEEMS LIKE WE PLAY TAG IN THE MEATS. THESE TRADERS LOVE TO SPREAD, AND WHEN YOU HAVE GOOD HOT ITEMS GOING OR NEWS -- INFORMATION GOING IN THE CATTLE, THEY BUY CATTLE AND SELL HOGS. AND THEN THEY TURN AROUND AND WHEN THAT ONE RUNS OUT, THEN THEY RUN OVER AND DO THE OTHER. SO THEY'RE PLAYING TAG BACK AND FORTH. I THINK YOU HAVE A HOG MARKET THAT'S STILL GOING TO MOVE HIGHER. THE HOGS ARE NOTHING TO WRITE HOME ABOUT; THEY'RE JUST BREAK-EVEN FOR A LOT OF LARGE PRODUCERS. SO I THINK WE HAVE A MARKET THAT WILL STILL GO HIGHER. THE BELLY MARKET BOTHERS ME A LITTLE BIT. HERE AGAIN, JUST LIKE FEEDER CATTLE, EXTREMELY OVERDONE ON WEEKLY DATA, BUT THE LONG TERM LOOKS BRIGHT. I THINK THAT WE COULD HAVE SOME TIME KILLING HERE AND PULLBACK. BUT IF YOU GET FUTURES DONE AROUND 42.90 TO 43.50, THEY SHOULD HOLD.

Pearson: VERY GOOD. SUE MARTIN, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." IF YOU'D LIKE TO HEAR ADDITIONAL ANALYSIS FROM SUE, BE SURE TO DIAL UP THE "MARKET PLUS" PAGE ON OUR "MARKET TO MARKET" WEBSITE. UNTIL NEXT WEEK, I'M MARK PEARSON WISHING YOU A SAFE AND HAPPY THANKSGIVING.

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