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Market Analysis: Jun 14, 2002

posted on June 14, 2002


The grain markets finished the week on the upside following some bullish reports from the USDA. For the week, wheat prices gained more than 19-cents. Corn prices gained two to three cents.

Soybean futures were down five to ten-cents. Soybean meal closed $3.40 lower per ton. Cotton futures were down 16-cents.

In livestock, fed cattle futures gained $1.95. Feeder cattle gained $1.40. The lean hog contract closed $1.27 lower.

In the financials, COMEX gold closed $5.50 lower per ounce. The EURO finished 16-basis points higher against the dollar. The CRB index finished the week two-and-a-quarter points higher to finish the week at 202.25

Here now to lend us his insight is one of our regular market analysts, Tomm Pfitznemaier. Welcome back.

Market Analysis: Jun 14, 2002

Pfitzenmaier: THANKS, MARK.

Pearson: WELL, LET'S TALK ABOUT IT. ON THE UPSIDE, THE WHEAT MARKET -- FINALLY, YOU'VE BEEN TALKING ABOUT THIS POOR CROP THAT THEY'VE HAD FOR SOME TIME. A LITTLE BIT OF REACTION OUT OF CHICAGO.

Pfitzenmaier: YEAH, AS YOU ALLUDED TO EARLIER IN THE REPORTS, THAT HIGHEST -- PRICES ARE HIGHEST -- OUR LOWEST CROP WE'VE HAD SINCE 1978. I MEAN THAT'S PRETTY -- THAT'S GENERALLY CAUSE FOR CONCERN. WE'VE KIND OF KNOWN ABOUT THIS ALL WINTER LONG, MAYBE NOT TO THIS EXTENT BUT BEEN KIND OF WORRIED ABOUT IT. THE PROBLEM HAS BEEN IS THAT WE HAVEN'T BEEN ABLE TO SELL THE PRODUCT. I MEAN, IT'S KIND OF LIKE WHO CARES. WELL, NOW WE'RE STARTING TO HAVE A FEW REPORTS CREEPING OUT THAT MAYBE SOME OF THE OTHER COUNTRIES THAT WE THOUGHT WERE GOING TO HAVE GREAT CROPS AREN'T GOING TO HAVE QUITE THE CROP THEY THOUGHT THEY WERE GOING TO HAVE, SO THERE'S A LITTLE UPSIDE POTENTIAL HERE. WE'RE PROBABLY GOING TO CREEP UP TO THE TOP END OF THE TRADING RANGE, UP IN THAT 315 TO 320 AREA ON THE DECEMBER WHEAT. VERY DIFFICULT TO GET ABOVE THAT. WE'VE BASICALLY GOTTEN -- THE FUNDS HAVE GONE FROM SHORT TO MARKET TO FLAT NOW. SO IT WILL BE INTERESTING TO SEE IF WE CAN BUST UP ABOVE THAT OR THESE CONTINUING LAGGING DEMAND PROBLEMS. EXPORTS AGAIN THIS WEEK WEREN'T ALL THAT ROSY. WE NEED TO START SELLING THE STUFF OR NOBODY IS GOING TO CARE WHETHER THE CROP IS ALL THAT GREAT OR NOT. PLUS YOU'VE GOT HARVEST. WE'RE SORT OF IN THE MIDDLE OF HARVEST HERE. SO THAT'S PROBABLY GOING TO KEEP THINGS IN CHECK FOR A WEEK OR TWO.

Pearson: $3.15, THAT SURE LOOKED LIKE A SALE.

Pfitzenmaier: YEAH, IT SURE WOULD, ON THE DECEMBER CONTRACT I'M TALKING ABOUT THERE. I MEAN, YOU'RE SELLING RIGHT UP AGAINST RESISTANCE, AND IF YOU'RE GOING TO BE A SELLER, THAT'S THE PLACE TO DO IT IS AGAINST RESISTANCE.

Pearson: THIS CORN MARKET, ALSO A LITTLE BIT OF A BOUNCE THIS WEEK. AND AGAIN, YOU KNOW, FEWER ACRES, A LITTLE TIGHTENING, A LITTLE LESS CARRYOUT. BUT IS IT ENOUGH TO REALLY GIVE US A BIG MOVE IN CORN?

Pfitzenmaier: PROBABLY NOT. THAT'S BIG QUESTION IS, NUMBER ONE, HOW MUCH ACREAGE REALLY WAS. I MEAN, THIS SUPPLY/DEMAND REPORT THAT CAME OUT WEDNESDAY HAD A LITTLE CAVEAT BESIDE IT THAT SAID THERE WAS NO SCIENTIFIC INPUT INTO THIS, SO BASICALLY THAT WAS A GUESS. AND THE YIELD THING WAS JUST A GUESS. SO WE NEED TO GET -- JUNE 28 IS GOING TO GIVE US NUMBERS THAT ACTUALLY HAVE SOME SCIENTIFIC INPUT WITH THEM, AND THEN WE'RE GOING TO JUST SEE HOW THE YIELD SHAPES UP, HOW MUCH THE CROP CAN CATCH UP. DEMAND HAS BEEN FAIRLY DECENT, SO THAT'S A FACTOR. THE PROBLEM -- YOU'VE GOT TWO PROBLEMS. ONE IS THE FARMER IS SITTING ON A BIG CROP, AND THAT TENDS TO KEEP THINGS IN CHECK. PLUS THERE'S A PERCEPTION THAT NEXT YEAR THE FARM PROGRAM IS GOING TO GENERATE ANOTHER BIG INCREASE IN ACREAGE FOR NEXT YEAR. SO IT WILL BE INTERESTING. WE SEEM TO BE IN A TRADING RANGE HERE ON DECEMBER CORN, A LOW OF 221, A HIGH OF 231. YOU SELL UP IN THE TOP END OF THAT, YOU COVER A LOW DOWN AT THE BOTTOM END AND WAIT AND SEE IF WEATHER SHAKES US ONE WAY OR THE OTHER OUT OF THAT RANGE. AND THAT'S PROBABLY NOT GOING TO HAPPEN UNTIL THE FOURTH OF JULY OR SO.

Pearson: I KEEP HEARING, OF COURSE, THERE'S STILL A LOT OF OLD CROP OUT THERE.

Pfitzenmaier: THERE'S LOTS OF OLD CROP. THE FARMER HELD ALL THROUGH THE WINTER. HE'S BEEN REWARDED FOR HAVING DONE SO TO SOME EXTENT HERE, BUT AT SOME POINT THAT'S GOING TO HAVE TO MOVE. THEY'RE PROBABLY NOT GOING TO GET TOO EXCITED ABOUT DOING THAT UNTIL THEY CAN LOOK OUT IN THE FIELD AND SAY, HEY, I'VE GOT A BIG CROP COMING ON. I'VE GOT TO MOVE THIS STUFF OUT. AND LIKE I SAID, WE'RE A WAYS AWAY FROM THAT. SO IT'S GOING TO BE -- BUT IT IS GOING TO KEEP THE OLD CROP MONTHS FAIRLY WELL IN CHECK, I WOULD GUESS.

Pearson: ALL RIGHT. NOW, SOYBEAN PRICES -- I WANT TO TALK ABOUT SOYBEANS ALSO. I WANT TO TALK ABOUT PRODUCT. MEAL TOOK A BIG HIT THIS WEEK, EVEN ON DAYS WHEN THE SOYBEAN PIT ITSELF WAS FAIRLY POSITIVE. WHAT'S AHEAD NOW FOR SOYBEANS?

Pfitzenmaier: IT WAS PRETTY WELL OVERDONE, AS WERE THE BEANS. THE FUNDS HAD A HUGE LONG POSITION. THEY NEEDED TO LIQUIDATE THAT SOME. YOU'VE GOT AN INTERESTING SITUATION WHERE YOU DID HAVE PROBABLY A HALF-MILLION-ACRE SWITCH FROM CORN TO BEANS, SO THAT DOESN'T HELP THE BEANS. AND YOU STILL HAVE THIS BIG SOUTH AMERICAN CROP THAT'S SITTING OUT THERE THAT REALLY HASN'T BEEN MOVING. WE'VE BEEN GETTING THE DEMAND, BUT THAT'S NOT GOING TO LAST FOREVER. THE OPPOSITE IS TRUE IN THE BEANS WHERE YOU'VE GOT THE FARMER HARDLY OWNING ANY BEANS. SO THEY HAVE TO KEEP BIDDING UP TO TRY AND GET THEIR HANDS ON THEM UNTIL THEY'RE CONFIDENT THEY'VE GOT ENOUGH COVERED TO MAKE IT INTO THE THREE OR FOUR MONTHS DOWN THE ROAD WHEN WE'RE GOING TO HAVE AMPLE SUPPLIES AVAILABLE BOTH FROM US AND PROBABLY FROM SOUTH AMERICA.

Pearson: FROM A SALES STRATEGY STANDPOINT, TOMM, ON THE BEANS, WHAT DO YOU RECOMMEND?

Pfitzenmaier: NOVEMBER BEANS ARE PROBABLY IN A TRADING RANGE HERE WITH A LOW DOWN IN THE 460, HIGH UP IN THE 490 AREA. IF YOU GET UP IN THAT 490, APPROACHING $5, I THINK YOU HAVE TO BE A SELLER OF NOVEMBER BEANS. IF YOU'RE NOT COMFORTABLE WITH THAT, THEN I THINK YOU CAN GO OUT AND STEP IN AND BUY THE 480 PUT FOR, YOU KNOW, 20 TO 25 CENTS, SOMEWHERE IN THAT RANGE. AND THAT GIVES YOU A FAIRLY HIGH FLOOR AND THE ABILITY TO PARTICIPATE IF THE MARKET DOES GO ON HIGHER FOR SOME REASON.

Pearson: COTTON MARKET WAS A LITTLE BIT SOFTER THIS WEEK. AND OF COURSE, WE HAD A LOT OF COTTON ACRES.

Pfitzenmaier: YEAH. DECEMBER COTTON PROBABLY HAS AN UPWARD LIMIT OF 44.5 TO 45. YOU GET UP INTO THAT AREA, I THINK YOU HAVE TO BE A SELLER. THERE WERE SOME ACREAGE PICKUP. DEMAND HAS BEEN OKAY BUT NOT GREAT. WE'RE PROBABLY IN THAT TRADING RANGE OF THE 41, 42 AREA ON THE LOW SIDE; 45 ON THE HIGH SIDE. AND I DON'T SEE A LOT HAPPENING TO BREAK US OUT OF THAT RANGE.

Pearson: IT'S INTERESTING, THE GOVERNMENT FARM PROGRAMS AND THEIR IMPACT TO SEE WHAT HAPPENS DOWN THE ROAD. STILL SOME POTENTIAL TO MAKE SOME MONEY IN HERE IN BETWEEN.

Pfitzenmaier: OH, YEAH, ABSOLUTELY. AND I THINK YOU HAVE TO KEEP YOUR EYE OPEN FOR THOSE. AND I UNDERSTAND THAT IT'S DIFFICULT BECAUSE AT THE TIME YOU NEED TO BE MAKING SALE IS WHEN THE THING LOOKS LIKE IT'S THE MOST BULLISH AND IT'S PROBABLY GOING TO GO THE HIGHEST. AND IT'S A VERY DIFFICULT THING TO DO. I MEAN, WE TALKED ABOUT IT PRETTY CASUALLY HERE, BUT IT IS A DIFFICULT THING TO DO WHEN YOU'RE FACED WITH, YOU KNOW, THE PROSPECT OF THINGS GOING A LOT HIGHER ON YOU.

Pearson: YOU BET. LET'S TALK ABOUT AN AREA THAT HASN'T GONE A LOT HIGHER, AND THAT'S THE MEAT SECTOR, THIS CATTLE MARKET. AGAIN, EARLIER IN THE SHOW, WE TALKED ABOUT THE DRY WEATHER OUT IN THE WESTERN PART OF THE UNITED STATES, WESTERN PLAINS, TERRIBLE DROUGHT OUT THERE. A LOT OF CATTLE -- A LOT OF COWS MOVING. A LITTLE BIT ON THE SLUGGISH SIDE ON THE DEMAND FRONT. WHAT'S AHEAD FOR BEEF CATTLE?

Pfitzenmaier: SHORT-TERM, NOT MUCH. I THINK IN THE NEXT THREE OR FOUR WEEKS PROBABLY THROUGH THE THIRD QUARTER, YOU'RE GOING TO HAVE A TOUGH TIME GETTING THAT CATTLE MARKET, AND THAT 63 TO 64 RANGE IS PROBABLY GOING TO HOLD IT. I THINK AFTER THAT, YOU'RE GOING TO SEE THE NUMBERS LIGHTEN UP, AND YOU'RE PROBABLY GOING TO MOVE UP AND PROBABLY UP INTO THE LOW 70S. ONE OF THE THINGS YOU MENTIONED EARLIER IN THE REPORT HERE TONIGHT WAS THE SLUGGISH ECONOMY AND THE EFFECT THAT'S GOING TO HAVE, AND I THINK WE'RE STILL SUFFERING THAT A BIT IN THE ENTIRE MEAT COMPLEX. YOU HAD THE STEEL DEAL THAT'S BACKED UP THE POULTRY, HALTED SALES, SLOWED THEM UP CERTAINLY ON EXPORTS TO RUSSIA. THAT BACKS UP POULTRY, IT BACKS UP PORK, AND BACKS UP INTO THE BEEF. BEEF IS PERCEIVED AS A FAIRLY HIGH-END -- YOU KNOW, IF YOU'RE GOING TO GO LIVE IT UP, YOU GO HAVE A STEAK. AND THE ECONOMY BEING A LITTLE UNCERTAIN AND PEOPLE CAUTIOUS HAS CERTAINLY HURT THE DEMAND SIDE ON THE BEEF. AND YOU'VE GOT TO -- AND THAT'S THE HIGH PARTS OF THE CUT, YOU KNOW, THAT'S NOT MOVING, AND THAT'S WHAT SUPPORTS THAT HIGH CARCASS VALUE.

Pearson: SO, IT'S GOING TO BE A STRUGGLE HERE IN THE SHORT TERM. AND YOU MENTIONED THE OTHER FACTOR, WHICH IS PORK, AND THERE'S PLENTY OF THAT AVAILABLE. AND WE HAD A LITTLE BIT OF AN UPSWING HERE, AND NOW WE'RE HEARING TALKS ABOUT, YOU KNOW, MAYBE CONTINUED PRESSURE. WHAT'S YOUR OUTLOOK ON HOGS?

Pfitzenmaier: OH, I THINK THE PRESSURE IS GOING TO BE BACK. GRANTED WE DID HAVE A LITTLE UPSURGE THIS WEEK. THE JUNE CONTRACT WENT OFF THE BOARD THIS WEEK, SO WE KIND OF GOT THAT OUT OF THE WAY AND HOW THAT'S GOING TO SETTLE WITH THE INDEX. NOW THE JULY -- NOW, JULY MAYBE HAS A CHANCE TO RUN UP IN THAT 51, 52 AREA. I THINK IT'S GOING TO BE VERY DIFFICULT TO GO BEYOND THAT. IT'S GOT TO GET ABOVE 50 FIRST. AND I THINK YOU GET UP IN THAT AREA, YOU'D HAVE TO LOOK AT BEING A SELLER OF SOME SORT ON THE JULY CONTRACT.

Pearson: OKAY. SO IT'S PROBABLY, IN TERMS OF HEDGING OPPORTUNITY, PROBABLY YOUR BEST.

Pfitzenmaier: RIGHT.

Pearson: ABOUT TEN SECONDS, TOMM. THIS FOURTH QUARTER, COULD THIS GET UGLY?

Pfitzenmaier: UGLINESS HAS ALREADY BEEN FACTORED INTO THAT MARKET. AND I HAVE A GENERAL PHILOSOPHY THAT WHEN THE WHOLE WORLD IS WORRYING ABOUT SOMETHING, IT'S PROBABLY THE ONE THING THAT'S NOT GOING TO BE -- NEED TO BE WORRIED ABOUT.

Pearson: TALK OUR WAY OUT OF IT BEFORE IT HAPPENS.

Pfitzenmaier: RIGHT.

Pearson: TOMM, THANKS SO MUCH. TOMM PFITZENMAIER, THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, BE SURE TO JOIN US AGAIN NEXT WEEK, WHEN WE EXAMINE A PROMISING ENTERPRISE TO ADD VALUE ON THE FARM. UNTIL THEN, I'M MARK PEARSON. THANKS FOR WATCHING. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

Tags: agriculture commodity prices markets news USDA