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Market Analysis: Jul 12, 2002

posted on July 12, 2002


The grain markets finished the week mixed despite continued concern about crop development for this growing season. For the week, wheat prices were down more than three cents. Corn futures were down more than 15-cents.

Soybean futures gained six to seven cents. Soybean meal gained three dollars per ton.

Cotton futures were more than 250-points lower.

In livestock, fed cattle futures gained 73-cents. Feeder cattle gained $1.40. The lean hog contract finished the week 95-cents lower.

In the financials, Comex gold gained $4.60 per ounce. The Euro gained 175-basis points against the dollar. The CRB index finished the week more than two points higher to close at 211.80.

Here now to lend us his insight on these and other market trends is one of our regular market analysts, Wayne Newton. Welcome back.

Market Analysis: Jul 12, 2002

Pearson: WELL, WE HAD A LITTLE VOLATILITY IN THE GRAINS THIS WEEK. WE'VE GOT THAT OLD WEATHER MARKET THING GOING. AND A LOT OF PEOPLE ARE WONDERING, WITH THE RAINS IN THE WESTERN CORN BELT, MAYBE WE'VE KIND OF CALMED THE TRADE DOWN HERE FOR A WHILE AND MAYBE WE'VE SEEN WHAT WE'RE GOING TO SEE, AND THERE ARE OTHERS OUT THERE WHO ARE CONCERNED ABOUT THE BEANS. LET'S TALK FIRST ABOUT THIS WHEAT MARKET. WE SAW SOME DRAMATIC MOVES IN THOSE NEARBY CONTRACTS ON THE BOARD ON FRIDAY, BUT THOSE WERE ALSO CLOSING OUT POSITIONS TOO.

Newton: MARK, I THINK THAT THE POLITICS YOU MENTIONED EARLY IN THE SHOW IS PLAYING A BIG ROLE IN THE WHEAT MARKET. I REALLY THINK THAT THE WHEAT AT THIS LEVEL ABOVE $3 NEEDS TO BE LOOKED AT, PARTICULARLY IF THE PRODUCER NEEDS SOME CASH FLOW AT THIS POINT. IF NOT, STORE IT AND PERHAPS SELL SOME OF THE BACK MONTHS, MAYBE DECEMBER WHEAT. IT WOULD APPEAR TO ME THAT WE'VE COME UP 70 CENTS OFF THE LOWS IN THIS MARKET, AND THIS NEEDS TO BE REWARDED BY AT LEAST A PERCENT OF THE PRODUCTION BECAUSE, OBVIOUSLY, THIS HAS BEEN A HUGE RALLY AND IT'S BEEN -- IT'S PROBABLY BEEN THE BENEFACTOR OF THE CORN AND SOYBEAN PRICES BECAUSE OF THE WEATHER.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE CORN AND THE BEANS. CORN FIRST. A LOT OF CONCERN ABOUT THE DRY WEATHER, STRESS ON CROPS, IDEAS THAT WE NEED TO HAVE AN ALMOST PERFECT CORN CROP THIS YEAR BECAUSE DEMAND HAS BEEN GOOD. THEN WE HEAR ABOUT CHINA SELLING MORE CORN THAN WE THOUGHT MAYBE THE SECOND HALF OF THE YEAR. KIND OF CLEAR AWAY ALL THE SMOKE FOR ME, WAYNE. TELL ME WHAT WE SHOULD BE LOOKING AT.

Newton: WELL, MARK, I REALLY THINK THAT YOU HAVE TO TRADE AVERAGES. WITH THE STRENGTH THAT WE HAVE IN THE GENETICS IN THIS CROP AND THE ABILITY TO PUT IT IN GROUND IN GOOD SHAPE WITH GOOD FERTILITY, MOTHER NATURE DOESN'T LET US DOWN VERY OFTEN. SO I THINK THE PRODUCER CAN GET MAYBE OVERLY CONCERNED WITH DRY WEATHER AND PROBABLY AS THE RALLIES THAT ARE MEANT TO BE SOLD. IF WE GET 135-BUSHEL YIELD ON A 72-MILLION-ACRE HARVEST, WE'RE STILL LOOKING AT 9.7 BILLION BUSHELS PLUS A 1.6 BILLION CARRYOUT, AND WE'VE STILL GOT A LOT OF CORN AROUND. SO I REALLY THINK THAT WE'VE SEEN A RALLY THIS WEEK THAT GOT EXCITED BY THE EXTRA HEAT AND THAT SORT OF THING, PLUS THE LOWER DOLLAR THAT'S GOING TO CAUSE THE EXPORTS PROBABLY TO INCREASE. SO I REALLY THINK WE NEED TO REWARD THIS MARKET AS WELL. HOPEFULLY THE OLD CROP GOT PRETTY WELL CLEANED OUT HERE IN THE LAST TEN DAYS BECAUSE OF WHERE JULY WAS TRADING. BUT I REALLY THINK WITH DECEMBER AT THE 230, 240 LEVEL, IF THE PRODUCER DOESN'T HAVE ANYTHING SOLD AT THIS POINT, WE NEED TO TAKE A GOOD SERIOUS LOOK AT THAT. AND THOSE WHO DO HAVE SOME 10 OR 25 PERCENT OF THE NEW CROP SOLD, THEY PROBABLY OUGHT TO REWARD THIS MARKET AT THIS POINT WITH ANOTHER 25 PERCENT. IF THEY CAN HOLD IT TILL AFTER THE FIRST OF THE YEAR, I BELIEVE I'D USE THE MAY CONTRACT BECAUSE THERE'S VERY LITTLE CARRY BETWEEN MAY AND JULY INTO NEXT YEAR. SO I REALLY THINK THIS IS A SELLING OPPORTUNITY.

Pearson: ALL RIGHT. NOW, THE SOYBEANS... WE KEEP HEARING, AGAIN, FUNDAMENTALLY A TIGHTER SITUATION. A LONG WAY TO GO BEFORE THE CROP IS IN AND SO FORTH. SOME LATE PLANTED BEANS IN THE EASTERN CORN BELT. AGAIN, I GUESS WE GO BACK TO THAT AVERAGES DISCUSSION WITH BEANS?

Newton: I THINK SO. AND THE SIX- TO TEN-DAY FORECAST WAS PUT OUT BY LATE FRIDAY AFTERNOON WOULD SUGGEST THAT WE'RE NORMAL, AND ABOVE NORMAL PRECIPS IN IOWA AND NORMAL NORMAL IN MOST ALL THE REST OF THE UPPER MIDWEST. AS YOU WELL KNOW, THE BEANS ARE MADE IN AUGUST, SO I REALLY THINK THAT IT MAY NOT BE OUT OF LINE HERE TO SELL A FEW OF THOSE NOVEMBERS IN THAT 520 RANGE. THAT'S COME UP ABOUT 40 SOME CENTS FROM THE 460, IN THAT AREA. I BELIEVE I'D REWARD SOME OF THAT IN THE NOVEMBER BEANS. BUT WE'VE GOT A LOT OF BEANS YET TO COME OUT OF SOUTH AMERICA. AND THIS CROP HAS THE POTENTIAL THAT WENT IN, IN PRETTY DECENT SHAPE IN THE WESTERN CORN BELT. BEANS LOOK SHORT BUT THERE AGAIN, WE GOT EXCELLENT SEED AND THE ABILITY TO PRODUCE A BUMPER CROP, I THINK, STILL AT THIS STAGE.

Pearson: ALL RIGHT. YEAH, WE START TRACKING THAT DECEMBER COTTON, AND A BIG PULLBACK THIS WEEK ON COTTON ON THAT NEW CROP. BUT AGAIN, IT'S HAD A PRETTY GOOD RALLY.

Newton: YES, IT HAS, MARK. AND THERE'S RESISTANCE IN COTTON AT 62 CENTS ON THE WEEKLYS. I WAS IN WEST TEXAS HERE A COUPLE WEEKS AGO, AND A LOT OF THOSE FOLKS DOWN THERE THAT DOUBLE CROP AND COME BACK WITH -- BACK OF WHEAT WITH COTTON HAVE GONE TO PEANUTS IN SEVERAL COUNTIES DOWN THERE. SO WE MAY SEE SOME ACREAGE CHANGES AS PRODUCTION NUMBERS CONTINUE TO COME OUT. BUT I THINK THAT THE PRODUCER NEEDS TO TAKE A GOOD LOOK AT THIS MARKET BECAUSE IT'S COME BACK A LONG WAYS FROM THE LOW THIRTIES TO WHERE IT'S TRADING TONIGHT, I THINK, AT 47 CENTS. THEY NEED TO LOOK PROBABLY MORE SERIOUSLY AT A $62 RESISTANCE POINT.

Pearson: ALL RIGHT, START MAKING SOME SALES THERE. WHAT ABOUT -- WAYNE, LET'S TALK ABOUT LIVESTOCK. IT'S BEEN ANOTHER ONE OF THOSE WEEKS IN THE LIVESTOCK MARKET. YOU KNOW, CONCERN ABOUT THE GENERAL ECONOMY, CONCERN ABOUT THE CONTINUATION OF THE CHECKOFF. A LOT OF THINGS OVERHANGING THIS MARKET. WE DID SEEM TO MOVE A LOT OF BOXED BEEF.

Newton: YEAH, MUCH LOWER PRICES, MARK. I THINK WE DROPPED THE BOXES BY $5 HERE IN THE LAST WEEK OR TEN DAYS. THAT'S MOVED THE PRODUCT AND THAT'S GOOD. THAT MEANS THE PUBLIC WILL STILL TAKE IT OFF THE SHELF IF WE GET THE PRICE WITHIN THEIR BUDGET. BUT WE MAY BE TURNING THE CORNER, I THINK, IN THE LIVESTOCK. WE SHOULD START TO SEE THE NUMBERS DROP BELOW 700,000 HARVESTED PER WEEK. AND THAT WILL HELP IF THE DEMAND STAYS STRONG AND THE ECONOMY STAYS WELL. BUT THIS HAS BEEN A REAL SICK ONE, $62 TO $64 CATTLE. THERE'S A LOT OF RED INK WITH THAT, BUT I THINK WE'RE ABOUT TO TURN THE CORNER. I THINK WE'RE SEEING SOME STRENGTH IN THAT MARKET. FEEDERS HAD A NICE RUNUP HERE A DAY OR TWO AGO, AND I THINK THERE'S SOME BUYING OPPORTUNITIES. I KNOW AS LOW AS THE EQUITY IS IN THE CATTLE INDUSTRY, THAT'S GOING TO BE A TOUGH PILL TO SWALLOW, WITH THE WAY THE LAST 18 MONTHS HAVE TREATED THE PRODUCERS, BUT I THINK THERE'S STILL SOME OPPORTUNITY OUT IN FRONT OF US. AND WE'LL PROBABLY SEE BECAUSE -- IF THE WEATHER DOESN'T AFFECT IT TOO MUCH AND WE DON'T GET A BIG COW HARVEST THIS FALL AND THE YEARLINGS DON'T COME EARLY AND THE CALVES DON'T GO INTO THE FEEDLOT EARLY, WE COULD HAVE SOME REALLY GOOD MARKETS IN 2003.

Pearson: I DON'T KNOW, WAYNE, THAT'S AN AWFUL LOT OF IFs.

Newton: AN AWFUL LOT OF IFs.

Pearson: JUST REAL QUICK, YOU MENTIONED THIS FEEDER MARKET. ARE YOU BUYING THESE? ARE YOU STEPPING UP AND TAKING DELIVERIES FROM THESE CALVES?

Newton: WELL, WE BOUGHT SOME YEARLINGS THIS WEEK WEIGHING 8.75 FOR 76, READING AND WRITING KIND OF CATTLE, AND THOSE THINGS WILL PENCIL IN ABOUT A $20 PROFIT TO THE PRODUCER BASED ON THE DECEMBER MARKET WHERE IT'S AT. FEEDER CATTLE, HUGE SALES JUST PRE THE HOLIDAY, A LOT OF CATTLE POd, OR SCRATCHED, ON THAT MARKET. AND I KNOW THOSE PRODUCERS DON'T WANT TO SELL THESE CATTLE IN THE HIGH 70S FOR FALL DELIVERY. BUT I THINK THE FEEDLOTS NEED TO LOOK AT THOSE OPPORTUNITIES.

Pearson: ABSOLUTELY. REAL QUICK, WAYNE, THE HOG PICTURE SOFTENED JUST A LITTLE BIT THIS WEEK. WHAT'S YOUR OUTLOOK?

Newton: THERE'S SOME EVIDENCE THAT THE SOW SLAUGHTER IS PICKING UP, WHICH WOULD SUGGEST MAYBE A REDUCTION IN THE HERD. AND I REALLY THINK THAT THE FOURTH QUARTER, PROBABLY IF THE DECEMBER CAN TRADE BACK UP TO 41, I BELIEVE I'D BE A SELLER.

Pearson: OKAY. SO MAYBE LOOK AT SOME OPPORTUNITIES DOWN THE ROAD THERE, MAYBE GET A LITTLE BIT AGGRESSIVE JUST IN CASE WE HAVE A PROBLEM. WAYNE NEWTON, THANK YOU SO MUCH. AS USUAL, WE APPRECIATE IT. IF YOU'D LIKE TO HEAR ADDITIONAL MARKET PROSPECTS FROM WAYNE, BE SURE TO VISIT OUR WEB SITE AT IPTV.ORG/MARKETTOMARKET. THAT WRAPS UP THIS EDITION OF "MARKET TO MARKET." BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE'LL EXAMINE ONE COMPANY'S EFFORTS TO KEEP PACE WITH THE BOOMING DEMAND FOR ORGANIC FROZEN FOOD. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

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