Iowa Public Television

 

Market Analysis: Jun 21, 2002

posted on June 21, 2002


The grain markets finished the week mixed with the onset of private crop estimates, and the afore-mentioned stronger euro. For the week, wheat prices were down seven cents. Corn futures closed a penny higher. Soybean futures finished down two cents. Soybean meal gained $1.70 per ton.

Cotton futures gained 41-cents per pound.

In livestock, fed cattle gained 87-cents. Feeder cattle gained $1.10. The lean hog contract finished $2.40 higher for the week.

In the financials, COMEX gold gained $5.50 per ounce. The euro gained whopping 550-basis points against the dollar. The CRB index finished the week three-quarters of a point higher to close at 205.25.

Here now to lend us their insight are two of our regular market analysts, Doug Hjort, and Walt Hackney. Welcome back.

DOUG, LET'S START ON THESE GRAINS HERE. IT LOOKS LIKE WE HAD KIND OF A RALLY GOING IN YOUR WHEAT MARKET, AND THEN WE JUST KIND OF PULLED THE PLUG ON IT THIS WEEK.

Hjort: WELL, I THINK HARVEST IS A BIG REASON FOR THAT. LOOKING AT PROBABLY THE BEST WEEK -- WEEKEND, RATHER, OF HARVEST THAT WE'VE HAD SO FAR. THE KANSAS CROP IS READY UP TO THE CENTRAL PART OF THE STATE, AND THERE'S GOING TO BE A LOT OF WHEAT CUT. SO I THINK THAT WAS WHY A GOOD SHARE OF THAT MARKET SET BACK SOME. ALSO, ON THE SOFT RED WINTER WHEAT, THERE WAS A CANCELLATION BACK ABOUT TEN DAYS AGO OF SOFT RED EXPORTS. AND THAT UNNERVED THAT MARKET JUST A LITTLE BIT. NOW, UNDERSTAND THE SOFT RED CROP IN THE CORN BELT AND THE DELTA AREAS PROBABLY ISN'T UP TO RECORD PERFORMANCE ON YIELDS BUT STILL A PRETTY GOOD ONE. THE REAL STRESS IS OUT ON THE HARD RED WINTER WHEAT CROP, AND THOSE YIELDS AS THE HARVEST -- OR THE HARVESTERS ARE ROLLING NOW, WERE FINDING YIELDS EVEN LOWER THAN WHAT THEY HAD EXPECTED, AND THEY WEREN'T LOOKING FOR ANY BUMPER CROP.

Pearson: OKAY. STRATEGY AT THIS POINT FOR A WHEAT GROWER?

Hjort: : WELL, ON THE NEW CROP, I WOULDN'T SELL ANYTHING RIGHT NOW, IF YOU'VE GOT SOME STORAGE FOR IT AND SO ON. I THINK WE'LL HAVE A PRETTY FAST TURNAROUND AFTER THE HARVEST PRESSURE IS OFF. REMEMBER, TOO, THEY'RE COMBINING THE BEST WHEAT THEY'VE GOT IN THE COUNTRY RIGHT NOW, WINTER WHEAT THAT IS. ONCE THEY GET UP INTO THE WESTERN AND THE NORTHWESTERN PARTS OF KANSAS INTO EASTERN COLORADO, THAT HARVEST IS GOING TO MOVE VERY, VERY FAST, BECAUSE A LOT OF ACRE IS ALREADY TAKEN OUT AND YIELDS ARE LOWER.

Pearson: ALL RIGHT. EVENTUALLY FEWER ACRES ON CORN. WHAT'S YOUR STRATEGY THERE?

Hjort: WELL, ON THE CORN, WE STILL HAVE PLENTY OF OLD CROP CORN. SO WHEN I TALK ABOUT BULLISHNESS IN THE CORN MARKET OR ALL THE GRAINS, I'M TALKING INTO THE NEW YEAR. SO THIS YEAR YOU'VE GOT TO WORK ON GETTING RID OF ANY REMAINING OLD CROP CORN ON SOME RALLIES. ACREAGE IS THE BIG UNCERTAINTY RIGHT NOW ON CORN. USDA, OF COURSE, ON THEIR JUNE REPORT ARBITRARILY TOOK DOWN ACREAGE A MILLION ACRES. HAD NO SURVEY TO BACK THAT UP. BUT WE WILL HAVE, NEXT FRIDAY, ON THE 28TH, THE ACREAGE REPORT FROM USDA. AND THAT WILL GIVE US SOME PRETTY SOLID NUMBERS THAT WE'LL WORK WITH FOR SOME TIME. A LOT OF PEOPLE THINK IT MIGHT BE DOWN -- ACREAGE MIGHT BE DOWN A LITTLE BIT MORE THAN THAT, BUT NOW WE'RE GETTING INTO THE JULY/AUGUST PERIOD ON WEATHER. THAT'S THE REAL CRITICAL TIME. IT LOOKS LIKE WE WOULD HAVE A TOUGH TIME COMING UP TO VERY HIGH YIELDS ON CORN. BUT CERTAINLY AVERAGE YIELDS ARE STILL POSSIBLE NATIONWIDE. AND THAT WOULD PROVIDE ENOUGH CORN TO KEEP US FROM REALLY SHARP RALLIES AS WE GO INTO THE NEW YEAR. THE REAL BULLISHNESS NOT ONLY IS IN THE NEW YEAR BUT IT'S IN TOTAL WORLD GRAINS. OUR TOTAL WORLD GRAIN STOCKS ARE CURRENTLY PROJECTED TO BE DOWN AT A TIGHTER SUPPLY/DEMAND RELATIONSHIP A YEAR FROM THIS COMING FALL THAN THEY WERE AT THE END OF THE '95-'96 YEAR. NOW, WHETHER THEY TURN OUT TO BE THAT WAY OR NOT, I DON'T KNOW. BUT STOCKS OF TOTAL GRAINS ARE COMING DOWN SO RAPIDLY, HAVE BEEN OVER THE LAST THREE YEARS, THAT WE'RE DOWN AT A VERY TIGHT LEVEL, EVEN THOUGH WORLD YIELDS ARE PROJECTED TO BE RECORD HIGH.

Pearson: ALL RIGHTY. REAL QUICK, DOUG, ON THE SOYBEANS, WHAT'S YOUR TAKE THERE?

Hjort: WELL, THE SOYBEANS, JUST THE OPPOSITE ON NEW CROP ACREAGE. EVERYBODY IS EXPECTING AN INCREASE THERE. USDA SAID A HALF MILLION ACRES. MOST OTHERS SAY IT WILL BE MORE THAN THAT. ONCE AGAIN, NOW THAT'S JUST TURNED AROUND BECAUSE WE'VE GOT THIS EXTREMELY STRONG DEMAND FOR THE OLD CROP. ONE THING ABOUT NEW CROP, USDA HAS EXPORTS, IN THE COMING YEAR, WELL BELOW WHAT WE'RE EXPORTING THIS YEAR. I THINK THAT'S WAY TOO LOW. I THINK THAT WILL BE REVISED UP. JUST -- IT'S THE SAME HISTORY PATTERN THAT USDA HAS BEEN ON FOR THE LAST THREE YEARS... TOO LOW TO START WITH AND THEY HAVE TO CONSTANTLY BE BRINGING THAT DEMAND FACTOR UP. THAT WILL PROVIDE SUPPORT FOR SOYBEANS, BUT IT'S GOING TO BE A VERY SLOW GO.

Pearson: ALL RIGHT. LET'S TALK ABOUT WHAT'S BEEN A REAL SLOW GO, AND THAT'S BEEN THE MEAT SECTOR. WALT HACKNEY, THE CATTLE MARKET, BOY, THEY'RE TALKING THE CFTC AND TRYING TO GET SOME EXPLANATION OF WHAT'S BEEN HAPPENING WITH THE CATTLE FUTURES. THERE'S BEEN CONCERN ABOUT WHAT'S HAPPENING WITH THIS CASH MARKET. ARE WE BUILDING UP A BIG BUNCH OF CATTLE OUT HERE? WHAT'S YOUR OUTLOOK?

Hackney: WELL, THE CATTLE-ON-FEED REPORT TODAY WAS PRIMARILY A NEUTRAL REPORT. THERE'S SOME FACETS WITHIN IT THAT MIGHT BE CONSIDERED A LITTLE BIT BEARISH, BUT WE DON'T NEED ANY MORE BEARISH NEWS IN THE BEEF SECTOR. WE'VE CERTAINLY GOT ENOUGH AND HAVE DEVELOPED ENOUGH OF OUR OWN. AND AS WE SPEAK, WE WENT INTO THIS WEEK THINKING THAT 65 WAS A WORKABLE FIGURE. WE THOUGHT WE COULD CERTAINLY GET IT. WE FOUND OUT IN A HURRY THAT THE CAPTIVE SUPPLY THAT THE PACKERS HAD ON HAND THIS THIRD WEEK, IF YOU WILL, OF JUNE, PRETTY WELL WIPED OUT ANY OPTIMISM WE HAD FOR IN THAT MARKET. SO WE CLOSED OUT THE WEEK WITH PRIMARILY A STEADY MARKET ON BEEF CATTLE. WE'RE LOOKING AT 63. WE'RE LOOKING AT $1.02. SOME AREAS -- NEBRASKA SOLD SOME CATTLE AT $1.03. THE POINT BEING THOSE CATTLE ARE LOSING $75 TO $100 A HEAD. WE'VE GOT ALL-TIME HISTORIC PROFITS AT THE RETAIL SECTOR, AND WE'VE GOT ALL-TIME RECORD HIGH AT THE PACKER SECTOR OF PROFITS PER HEAD. IT'S THE PRODUCER GROUP THAT ARE IN ARREARS HERE ON THIS THING. WE'VE GOT PROBABLY MORE BEEF ON HAND THAN WE'RE ABLE TO GET A REAL RESPONSIBLE RISE TO THE CASH MARKET AS A RESULT. WE'VE GOT HEAVIER BEEF. AS I LOOK AT THE LAST TWO WEEKS, OUR CARCASS WEIGHTS HAVE GONE UP. THAT'S NOT A GOOD THING WHEN YOU'RE KILLING 135,000 CATTLE A DAY OR 131,000 OR BUMPING 700,000 HEAD A WEEK, BECAUSE OUR EXPORTS HAVE BEEN SO MINIMAL THAT WE'RE HAVING TO DESIGN A WAY TO CONSUME THAT BEEF DOMESTICALLY. SO THAT'S BEEN A PROBLEM, MARK. SO MY POINT I'M TRYING TO MAKE HERE IS THAT THE ODDS OF THE BEEF SECTOR GOING ANYWHERE, AS FAR AS CASH IS CONCERNED, IS PRETTY NOMINAL.

Pearson: ALL RIGHTY. NOT THE MOST POSITIVE OUTLOOK. I WANT TO TALK ABOUT THESE FEEDER CATTLE THIS FALL, BUT I ALSO NEED TO ASK YOU QUICKLY ABOUT THIS HOG MARKET, WALTER. WHAT'S YOUR TAKE THERE?

Hackney: WELL, I THINK IT'S RIGHT TO ASK. THE STORAGE REPORT TODAY ON BELLIES WAS VERY POSITIVE. IF WE'RE GOING TO SEE CONTINUED APPRECIATION IN THE MERC ON THE BELLIES, IT WILL COME AS A RESULT OF THIS REPORT TODAY. THE PORK IN STORAGE WAS BULLISH TODAY. THE POINT PROBABLY, THOUGH, IS WE'VE HAD A PRETTY DRAMATIC RAISE IN CASH THE LAST TWO OR THREE WEEKS. WE'VE PROBABLY TOPPED OUT THIS CASH MARKET FOR A WHILE. 41.5 CASH LIVE IS PROBABLY GOING TO DO US FOR A WHILE.

Pearson: OKAY. APPRECIATE YOUR PERSPECTIVE. DOUG HJORT, THANK YOU. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, DON'T FORGET TO VISIT OUR WEBSITE FOR EXTRA MARKET ANALYSIS. AND BE SURE TO JOIN US AGAIN NEXT WEEK AS WE TRACK TRADE LEGISLATION IN WHAT COULD BE THE BEGINNING OF A VOLATILE SUMMER MARKET. UNTIL THEN, I'M MARK PEARSON. THANKS FOR WATCHING. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

Market Analysis: Jun 21, 2002 Thanks Walt, Doug, Walt. That wraps up this edition of Market to Market. Don't forget to visit our website for extra market analysis. Join us again next week as we track trade legislation, and what could be the beginning of a volatile summer market. Until then, I'm Mark Pearson, thanks for watching, have a good week.


Tags: agriculture commodity prices markets news