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Market Analysis: Sep 20, 2002

posted on September 20, 2002


The grain markets finished the week mixed with a bull market in wheat and a sell-off in corn. For the week, wheat prices were up more than seven cents. Corn prices were down more than 15-cents. Soybean prices were down about a penny. Soybean meal was down 40-cents per ton. Cotton futures were up 93-cents.

Live cattle futures were down 55-cents. Feeder cattle were up 55-cents. The lean hog contract gained $1.50.

In the financials, COMEX gold gained $5.20 per ounce. The Euro posted a four basis point loss against the dollar. The CRB index finished the week about a half-point lower to finish at 228.05.

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: Sep 20, 2002

Martin: THANK YOU, MARK.

Pearson: WHAT A VOLATILE WEEK IN THE WHEAT PITS. THE VOLATILITY IS DEFINITELY BACK IN CHICAGO. A LOT OF PEOPLE FEEL LIKE THIS IS A YEAR OVERDUE, THIS WHEAT RALLY. WHAT'S HAPPENING AND WHAT'S AHEAD AS FAR AS THESE WHEAT PRICES ARE CONCERNED?

Martin: WELL, FIRST OF ALL, THE RALLY WAS LED BY THE MINNEAPOLIS WHEAT, WHICH IS KIND OF AN OFFSHOOT OFF OF SPRING WHEAT HAVING A LOT OF PROBLEMS. AND OF COURSE, PROBLEMS IN CANADA; A DOCK STRIKE THERE SLOWED UP SHIPPING. IN FACT, IT'S CEASED ALL EXPORTS OF WHEAT GOING OUT OF THE COUNTRY. SO THAT'S BRINGING IMPORTERS TO THE U.S. AND BUYING U.S. WHEAT, AND THEY'RE TRYING SHORE UP THEIR NEEDS AS FAST AS THEY CAN. NOW, IN THE MEANTIME, WE'VE GOT COUNTRIES LIKE EGYPT WHO HAS BOUGHT WHEAT BUT IS NOW IMPORTING, PROBABLY FOR THE LAST FOUR WEEKS, RUSSIAN WHEAT THAT IS FEED-GRAIN QUALITY AND BRINGING IT INTO THE COUNTRY AND BLENDING IT TO MAKE THEIR BREAD CHEAPER TO THE CONSUMER. SO WE'RE GOING TO SEE MORE OF THAT, I THINK. SOFT WHEAT, CHICAGO WHEAT IS HAVING TROUBLE. IT'S COMPETING AGAINST FRENCH WHEAT, WHICH IS THE TOP -- FRANCE IS THE TOP EXPORTER FOR EUROPE. OF COURSE, THEY'RE VERY CHEAP IN THE WORLD MARKET RIGHT NOW, SO THEY'RE, LIKE, $30 A METRIC TON CHEAPER THAN WE ARE. SO THAT'S HURTING THE CHICAGO MARKET, SO IT'S THE FOLLOWER. HARD RED WINTER WHEAT IS ALSO IN VERY GOOD DEMAND, GOOD EXPORT. BUT THAT'S A MARKET WHERE WE'RE SEEING AN AVID SHIFT TOWARDS ACRES BEING PLANTED. SO DEPENDING ON HOW THE WEATHER TREATS US THROUGH THE WINTER AND AS WE TAKE THAT CROP OUT OF DORMANCY, THAT'S A MARKET THAT COULD TURN AROUND AND BITE US COMING BACK DOWN. SO AT SOME POINT, WE'LL PROBABLY SEE JULY WHEAT IN CHICAGO AND K.C. LOSE GROUND TO JULY CORN. BUT AT THE MOMENT I WOULDN'T DO THOSE SPREADS JUST YET. THOSE PROBABLY HAVE A LITTLE MORE ROOM ON THEM, BUT I'M RECOMMENDING TO PRODUCERS TAKE A LOOK, YOU'RE HALFWAY THROUGH YOUR CROP YEAR, IN FACT ENTERING INTO A NEW PLANTING SEASON. IF YOU'VE GOT ANY OLD CROP LEFT, TAKE A LOOK AT IT AND MAYBE BE WILLING TO GO AHEAD AND DO SOME MARKETING. THIS IS A GOOD PRICE, MUCH BETTER THAN YOU'VE BEEN ACCUSTOMED TO. AND IF YOU DON'T WANT TO DO THAT, THEN BE SURE TO PUT SOME PUTS UNDERNEATH YOU TO FLOOR YOUR PRICES.

Pearson: ALL RIGHT. NOW, YOU MENTIONED CORN. WHAT'S YOUR OUTLOOK NOW FOR CORN? THE USDA CROP REPORT IS OUT. WE KIND OF KNOW WHERE THINGS STAND. WHAT'S AHEAD?

Martin: WELL, I ALWAYS THOUGHT THAT OUR RESISTANCE ON CORN AROUND $2.95, $2.98 WAS FIRST TARGETED AREAS OF RESISTANCE. THEN IT WOULD GET UP AROUND $3.04, $3.07, $3.14. WELL, MARCH CORN GOT TO $3.01 AND A HALF. SO YOU PUT A THREE IN FRONT OF A CORN PRICE, AND I THINK PSYCHOLOGICALLY THAT WAS MORE THAN THE MARKET COULD HANDLE AT THIS TIME. YOU'VE HAD EIGHT MONTHS UP IN MARCH CORN. SEVEN MONTHS UP IN A CYCLICAL COUNT ON DECEMBER. AND BY THE TIME THE CROP REPORT CAME OUT, YOU HAD ANYBODY LONG THAT MARKET THAT WANTED TO BE THERE. SO NOW WE'RE HEARING WHAT THE YIELDS ARE COMING IN, IN SOME PLACES MAYBE A LITTLE BETTER THAN WHAT WAS EXPECTED. NEBRASKA YIELDS, FROM WHAT I HEAR, ARE DISAPPOINTING COMPARED TO WHAT THEY EXPECTED. ILLINOIS IS ALL OVER THE PLACE. SO I THINK THAT THE TRADE NOW IS LOOKING AT SEEING A MARKET THAT'S BREATHING AND, OF COURSE, COMING STRAIGHT DOWN, EVAPORATING. BUT TO DO THAT, WE CLOSED AT THE END OF AUGUST, MARCH CORN AT $2.70 AND A HALF AND DECEMBER AT $2.68 AND A HALF. SO WE FINALLY HAVE MET THOSE AREAS TO EVEN THINK ABOUT THAT WE COULD CLOSE THE MONTH LOWER AND RELIEVE ALL THIS UP MOVEMENT THAT WE'VE HAD SO THAT WE CAN RESOLIDIFY OURSELVES AND REASSERT ANOTHER MOVE UP IN TIME. WE'RE GETTING OUR HARVEST PRESSURE. IF WE DO NOT AT THE END OF SEPTEMBER CLOSE UNDER $2.70 AND A HALF ON MARCH CORN, THEN I THINK YOU LOOK FOR, AS A TRADER AND AS A PRODUCER, THAT THESE PRICES WILL EVOLVE LOWER IN THE MONTH OF OCTOBER AND THEY'LL TAKE OUT WHATEVER LOW WE HAVE HAD SINCE THE 20TH OF SEPTEMBER ON FORWARD TO THE END OF THE MONTH.

Pearson: OKAY. SO MAYBE SOME PRESSURE AHEAD FOR THE –

Martin: THAT'S RIGHT. I DON'T THINK WE'RE DONE YET. AND, OF COURSE, BEANS HAS THAT SAME SETUP AS WELL.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE BEANS. SOYBEAN MARKET, YOU KIND OF POINTED OUT REALLY IT'S TWO DIFFERENT THINGS COMPARED TO CORN. SOYBEANS MAY SEE THE ACTION LATER ON, DEPENDING ON WHAT HAPPENS DOWN IN SOUTH AMERICA. WHAT'S YOUR TAKE ON WHAT YOU'RE SEEING ON THAT STRATEGY?

Martin: WELL, I'M VERY FRIENDLY BEANS ON THE LONG TERM. IN FACT, I AM SO FRIENDLY TO THE BEAN MARKET THAT IF I HAD TO PICK, AS A FARMER, SOMETHING TO SELL FOR CASH FLOW, I WOULD SELL CORN AND THEN I WOULD STORE MY BEANS. IF YOU FEEL YOU STILL NEED MORE MONEY FOR CASH FLOW, GO AHEAD AND SELL YOUR BEANS, BECAUSE THERE IS NO CARRY HARDLY IN THAT MARKET AND YOU CAN COME BACK AND BUY ON THE BOARD AND BUY OTHER CALL OPTIONS OR FUTURES AND RETAIN OWNERSHIP THAT WAY. BUT OTHERWISE, I WOULD RECOMMEND TAKING THE LOAN OUT ON BEANS, HANGING ONTO THEM, BECAUSE I THINK THERE'S A MUCH BETTER YEAR COMING AHEAD. THAT WOULD BE SIMILAR TO WHAT WE'VE SEEN IN WHEAT. THE ONE THING YOU'VE GOT TO LOOK BACK ON CORN IS THERE WAS AN OLD CROP BEHIND THIS NEW CROP COMING ON. SO WHILE WE TALK ABOUT A TIGHT CARRYOUT OF 700 MILLION BUSHELS OR LESS, WE DO HAVE AN OLD CROP THAT WE'VE DEALT WITH, SO WE'RE NOT TOTALLY TIGHT. IT'S NEXT YEAR THAT I THINK WE'RE GOING TO LOOK AT. IF THE WEATHER TREATS US BADLY, WITH MORE CORN ACRES AGAIN NEXT YEAR, THEN YOU'RE GOING TO HAVE A MARKET THAT COULD START TO RATION. IN THE BEANS, CONVERSELY YOU HAVE NO CROP BEHIND THIS NEW CROP COMING. IT'S GONE. SO WHEN YOU LOOK AT AS TIGHT AS OUR CARRYOUTS ARE, THE CRUSH STILL VERY RAMPANT, CHINA, A HUGE BUYER IN THE WORLD MARKET, NOT ONLY FROM THE U.S. BUT FROM SOUTH AMERICA, OBVIOUSLY THEY'RE SAYING THEY THINK THESE PRICES ARE CHEAP. IT'S NOT JUST A GMO ISSUE AND GETTING THEIR BEANS INTO THEIR COUNTRY BY DECEMBER 20; THEY'RE SAYING THEY THINK THESE PRICES ARE WORTHY. NOW, DOES THAT MEAN BEAN PRICES CAN'T SELL OFF A LITTLE BIT HERE? NO. WE'VE BEEN SEVEN MONTHS UP IN NOVEMBER BEANS. I THINK MARCH BEANS MIGHT HAVE BEEN UP EIGHT MONTHS IN A CYCLICAL COUNT. WE'RE DUE FOR SOME DOWN TIME HERE TOO, BUT I DON'T THINK IT'S A MAJOR DOWN TIME. $5.45 TO $5.38 IS PROBABLY AN AREA THAT WE'LL SEE NOVEMBER BEANS TRADE OFF TO IN OCTOBER.

Pearson: ALL RIGHT. LET'S MOVE OVER TO LIVESTOCK. FED-CATTLE MARKET, WE'VE SEEN SOME IMPROVEMENTS. WE'VE ALSO -- WE WERE TALKING ABOUT THE HOGS HAVE BEEN UP. CERTAINLY SEEN SOME IMPROVEMENT THERE, CASH AND FUTURES. WHAT'S AHEAD IN THE NEXT QUARTER? WE'RE GETTING PAST SEPTEMBER NOW. WE'RE LOOKING FURTHER OUT. ARE THINGS STARTING TO BRIGHTEN A LITTLE BIT ON THIS CATTLE FRONT?

Martin: WELL, I THINK THERE ARE SOME THINGS BRIGHTENING. FIRST OF ALL, WE'RE COMING IN WITH A BASIS CHANGE WHERE THE BASIS WAS ABNORMALLY WIDE. IN FACT, I THINK THE LAST TIME I WAS ON THE AIR, I TALKED ABOUT IT SHOULD BE ABOUT $1.50. AND WE GOT VERY WIDE FOR, LIKE, ACCORDING TO THE TEN-YEAR AVERAGE, AND THAT IS NARROWING. LUCKILY, IT DID IT IN FAVOR OF THE PRODUCER, WHEREBY WE'VE SEEN THE CASH GET STRONGER AND THE FUTURES KIND OF DO NOTHING. THAT WAS THE BEST WAY. I WOULD HAVE RATHER SEEN IT THAT WAY THAN TO SEEN FUTURES COME DOWN TO MEET UP WITH CASH. AND, OF COURSE, PACKERS WERE A LITTLE SHORT BOUGHT. ANOTHER THING THAT'S HELPING WITH THE PACKER BEING MORE WILLING TO BID UP FOR CATTLE IS THE FACT THAT HIDE AND OFFAL IS AHEAD OF THE FIVE-YEAR AVERAGE FOR A CHANGE AND ALSO WELL AHEAD OF A YEAR AGO. SO WE'RE FINALLY GETTING PAST ALL THE HOOF-AND-MOUTH AND BSE TALK AND THE FEARS OF IT IN EUROPE AND IN THE U.S. AND SO THIS IS PUTTING PEOPLE BACK TO WHERE THEY'RE EATING BEEF OR EXPORTING BEEF, ALTHOUGH OUR COLD STORAGE REPORT TODAY WAS A LITTLE DISAPPOINTING, SHOWING A FAIR AMOUNT OF BEEF IN STORAGE. WE ALSO HAD A CATTLE-ON-FEED REPORT SHOWING THAT WE HAD MARKETINGS MAYBE NOT AS GOOD. BUT I THINK WE HAVE TO REMEMBER THAT WE PROBABLY MARKETED THE BEST NUMBER OF AVAILABLE CATTLE PERCENTAGE WISE THAN WHAT WE HAVE SINCE AUGUST OF 1996. THAT YEAR WAS A LITTLE BIT HIGHER THAN WHERE WE WERE THIS AUGUST. BUT STILL, SINCE THAT TIME, IT'S THE RECORD. WHEN WE LOOK AT CARCASS WEIGHTS, CARCASS WEIGHTS DECLINED FOR THE FIRST TIME IN HISTORY FOR THE LAST HALF OF AUGUST TO THE 6TH OF SEPTEMBER. SO I THINK WE'VE GOT SOME POSITIVES HERE. WE COULD SELL OFF MAYBE INTO OCTOBER 3 FOR A CORRECTION, BUT I THINK CATTLE LOOK GOOD.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE HOGS. NOW, WE SEE DEFINITE IMPROVEMENT THERE. MAYBE -- YOU TALKED ABOUT THE FACT THAT MAYBE WE'RE GOING TO SEE THIS HOG MARKET BOTTOM EARLIER THAN EXPECTED. THAT SEEMS TO BE WHAT HAS HAPPENED, SUE.

Martin: WELL, I THINK IT HAS. AND I LIKE THE HOG MARKET. ONE, PORK IN COLD STORAGE TOOK A DIP FROM THE JULY TIME FRAME, SO IT SHOWS WE'RE USING IT EVEN THOUGH WE'RE KILLING MORE HOGS. SECONDLY, I THINK THAT YOU'VE GOT THE USDA, OF COURSE, ANNOUNCING THAT THEY'RE BUYING PORK FOR THE SCHOOL LUNCH PROGRAMS. BUT THERE'S ANOTHER ISSUE. WE HAVE GUARDSMEN BEING CALLED UP TO SECURE OUR COUNTRY. THESE ARE MEN THAT THEY'RE GOING TO FEED THREE MEALS A DAY WITH MEAT. AND PORK IS GOING TO BE THE BACON AND THE SAUSAGE-TYPE THING, HAMS. THEN ALSO, PORK ROASTS AND THAT TYPE OF THING, ALONG WITH POULTRY. BUT CERTAINLY, THAT'S HELPING TAKE UP SOME SLACK THAT WE WOULDN'T HAVE HAD OTHERWISE.

Pearson: ALL RIGHT. SO SOME DEMAND IS SHOWING UP THERE. WE'RE SEEING IT'S A STRONGER MARKET. SUE, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." IF YOU WANT TO HEAR MORE OF SUE'S INSIGHT INTO THIS WEEK'S MARKETS, BE SURE TO VISIT THE "MARKET PLUS" PAGE OF THE "MARKET TO MARKET" WEBSITE. BE SURE TO JOIN US NEXT WEEK WHEN WE'LL UPDATE THE HARVEST PROGRESS AND TRACK DROUGHT RELIEF EFFORTS FROM WASHINGTON. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA.


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