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Market Analysis: Jun 07, 2002

posted on June 7, 2002


The grain markets finished the week on the soft side as the trade's concern about planting progress was relieved by sunshine and field work. For the week, wheat and corn prices were down more than seven cents.

Soybean futures were down one to nine cents, with the most pressure on the deferred contracts. Soybean meal close 70-cents lower per ton. Cotton futures backed of 32-cents from their recent gains.

In livestock, fed cattle futures gained 43-cents. Feeder cattle gained 48-cents. The lean hog contract gained a whopping $3.12.

In the financials, Comex gold closed the week $1.90 lower per ounce. The Euro gained 121-basis points against the dollar. The CRB index finished the week two-and-a-half points lower to close at 202.25.

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

Market Analysis: Jun 07, 2002 NOW, LET'S TALK ABOUT THIS. WE HAD A RUN GOING IN THE GRAINS, AND THEN WE KIND OF BACKED OFF THIS WEEK. WHEAT AND CORN BOTH DOWN, LUCKY SEVEN.

Robinson: WELL, I THINK CROP PROGRESS WAS A FACTOR, MARK, AND WILL BE DOCUMENTED BY THIS COMING MONDAY'S DATA. IN ADDITION TO THAT, AS YOU MENTIONED, WE HAD A PRETTY GOOD RUN IN THE FUTURES MARKET. BASIS LEVELS MOST EVERYWHERE HELD STEADY CONSISTENTLY THROUGHOUT THAT FUTURES RUN AND WE DID, IN FACT, BUY SOME CORN, MARK. AND SUBSEQUENTLY, I THINK THERE WAS SOME COMMERCIAL SHORT HEDGING PRESSURE IN THE MARKETPLACE, AS WELL AS SOME SPECULATIVE LONG LIQUIDATION. HAVING SAID THAT, HOWEVER, I WOULD BRING TO THE ATTENTION OF OUR GROUP THAT I PRACTICE THE ART OF BAR CHARTING. AND DURING THE MONTH OF MAY, AT LEAST IN MY OPINION, THERE WAS A VERY IMPRESSIVE WEEKLY ENTRY ON THE MONTHLY CONTINUATION CHART THAT OFTENTIMES INDICATES A NEAR-TERM BOTTOM. VERY SIMILAR FORMATION, MARK, TO THE ONE THAT WAS POSTED IN JANUARY IN BOTH THE SOYBEAN MEAL AND SOYBEAN FUTURES CONTRACT. LONG STORY SHORT, I THINK THERE'S SOME ADDITIONAL RECOVERY HERE IN FUTURES. I THINK IT WILL BEGIN POST NEXT WEDNESDAY'S USDA SUPPLY AND DEMAND IN WORLD PRODUCTION DATA, WHERE I EXPECT AND ANTICIPATE SOME ADJUSTMENTS, SOME POSITIVE ADJUSTMENTS IN U.S. AND GLOBAL NUMBERS. I THINK SEPTEMBER CORN FUTURES ARE IN POSITION HERE TO RECOVER TOWARDS 225 AND DECEMBER NEW CROP CORN FUTURES TOWARDS 235 WITHIN THE NEXT THREE OR FOUR WEEKS.

Pearson: ALL RIGHTY. NOW, VIRGIL, AT THIS STAGE OF THE GAME, WE NEVER KNOW WHAT MOTHER NATURE IS GOING TO THROW AT US. SO FAR IT'S BEEN KIND OF A MIXED DEBACLE OUT THERE AS FAR AS CORN PLANTING. WE'VE HAD A LOT OF RAIN OVER THE EASTERN CORN BELT. THE LATE PLANTING CERTAINLY NOT IDEAL CORN PLANTINGS AND SOMEWHAT DELAYED ON SOYBEANS. OF COURSE, WE RUN INTO HOT, DRY PROBLEMS THIS SUMMER, ALL BETS ARE OFF. WHAT DO YOU RECOMMEND FOR A PRUDENT PRODUCER TO BE DOING AT THIS STAGE OF THE GAME, IN TERMS OF GETTING WHEAT, CORN, AND BEANS MARKETED?

Robinson: OKAY. ARE WE TALKING NEW CROP?

Pearson: NEW CROP.

Robinson: OKAY. I THINK AS WE ALLUDED TO THE LAST TIME WE VISITED, I'M KIND OF A PROPONENT OF MINIMUM PRICE, PARTICULARLY IN THE INITIAL PHASES OF A NEW CROP, AND CLEARLY THAT'S WHERE WE ARE. WE REALLY HAVEN'T A GOOD READ YET ON TOTAL PLANTED ACREAGE IN CORN OR IN SOYBEANS AND WHAT THEY MIGHT YIELD. SO HAVING SAID THAT, MARK, AGAIN, I THINK NEW CROP CORN FUTURES HAVE AN AWFULLY GOOD OPPORTUNITY TO TRADE BACK TOWARDS 235 OR HIGHER. AND I THINK NEW CROP SOYBEANS, THE NOVEMBER CONTRACT, RECENTLY TRADED NEAR 490, HAS PULLED BACK AS A FUNCTION OF PROFIT TAKING. PERHAPS IT ATTRACTED SOME NEW SELLING. I THINK, HOWEVER, IT'S IN POSITION, POST THIS UP-AND-COMING SUPPLY AND DEMAND AND WORLD PRODUCTION REPORT ON THE 12TH, TO AGAIN CHALLENGE THOSE RECENT HIGHS. PROBABLY SOMETHING AT MAYBE A FRACTION ABOVE $5 WHERE, AGAIN, I WOULD EMPLOY SOME TYPE OF MINIMUM PRICE CONTRACT EITHER AT THE LOCAL ELEVATOR OR PERHAPS BY ESTABLISHING A PUT POSITION ON THEIR OWN. I STILL LIKE THE PROSPECTS OF THE MARKET, GIVEN THE UNCERTAINTIES OF GROWTH HERE OVER THE NEXT SEVERAL WEEKS. WE'RE UNDERPINNED BY AWFULLY GOOD DEMAND, PARTICULARLY IN SOYBEANS. I THINK THAT WILL BE DOCUMENTED IN NEXT WEEK'S REPORT. REVISIONS DOWNWARD IN OLD CROP SUPPLY, PERHAPS MAYBE SOME ADJUSTMENTS EVEN IN NEW CROP ACREAGE. SO I LIKE THE PROSPECTS OF THE MARKET IMPROVING OVER THE COURSE OF THE NEXT FEW WEEKS.

Pearson: THE COTTON MARKET, AS I POINTED OUT, WAS DOWN A LITTLE BIT THIS WEEK. BUT WE'VE SEEN A RECOVERY THERE CERTAINLY FROM THE LOWS.

Robinson: YEAH, THERE'S PROBABLY SOME WEATHER MIXED INTO THAT RECOVERY, MARK. BUT AGAIN, IMPORTANTLY I THINK WE CAN NOTE THIS. U.S. AND WORLD FORECASTS ARE OF LOWER PRODUCTION, INCREASED CONSUMPTION, AND LOWER U.S. AND WORLD ENDING STOCKS. THAT'S THE BASIS BY WHICH THE MARKET I THINK WILL RECOVER, ALBEIT, FAIRLY MODESTLY OVER THE COURSE OF THE NEXT FEW WEEKS. I THINK THE SEPTEMBER COTTON FUTURES CONTRACTS IN POSITION TO TRADE BACK TOWARDS 43 OR HIGHER, AT WHICH POINT I THINK, MARK, AGAIN, THE IDEA OF MINIMUM PRICE COMES TO MIND, EITHER AT YOUR LOCAL ELEVATOR OR VENDOR OR ON YOUR OWN. I THINK DECEMBER COTTON FUTURES ARE IN POSITION TO RECOVER BACK TOWARDS $46 OR $47.

Pearson: LET'S TALK ABOUT THE LIVESTOCK SECTOR. WE'VE HAD SOME FAIRLY DREARY MARKETS UNDER THIS -- THE RED MEATS IN PARTICULAR, CATTLE AND HOGS, HERE THE LAST SIX WEEKS NOW. I WANT TO TALK ABOUT THE HOGS. LET'S FIRST TALK ABOUT THIS CATTLE MARKET. YOU GOT A LITTLE BIT BEARISH EARLIER THIS SPRING ON CATTLE IN THE OUTLOOK. AND YOU KNOW, HAVE WE BOTTOMED OUT, VIRGIL? ARE WE GOING TO STRENGTHEN FROM HERE?

Robinson: MARK, I'M NOT SURE THE IMMEDIATE FUTURE OF THE FED CATTLE MARKET IS VERY BRIGHT, ONLY BECAUSE OF THE LARGE PLACEMENTS EARLIER IN THE YEAR OF PARTICULARLY HEAVIER CATTLE. I THINK THAT SCHEDULE STILL REMAINS FAIRLY LARGE, OR AT LEAST THAT SLAUGHTER SCHEDULE REMAINS FAIRLY LARGE THROUGH JUNE, PROBABLY THROUGH MUCH, IF NOT ALL, OF JULY. I DON'T ANTICIPATE ANY SIGNIFICANT FED-CATTLE PRICE RECOVERY IN THAT PERIOD OF TIME. HOWEVER, MARK, IF GRAZING CONDITIONS AND FORAGE RECOVERY IMPROVES VERSUS THE LAST YEAR OR TWO, I CAN ENVISION SOME PRETTY SERIOUS HEIFER RETENTION OUT OF THIS YEAR'S CALF CROP IN AN EFFORT TO REBUILD THAT HERD, FEWER COWS BEING SLAUGHTERED, WHICH SHOULD MEAN SMALLER BEEF PRODUCTION PERHAPS BEGINNING LATE IN 2002 AND EXTENDING INTO 2003 AND 2004. I THINK THERE WILL BE A RECOVERY IN BEEF EXPORTS. WE'RE BEGINNING TO SEE SIGNS OF THAT NOW WITH MEXICO, WITH KOREA, AND I THINK, ALBEIT, SLOWLY WITH JAPAN. SO I LIKE THE PROSPECTS OF THE MARKET OVER THE COURSE OF THE LAST HALF OF 2002, 2003, AND 2004. I THINK WE CAN TRADE FED CATTLE BACK INTO THE $70 RANGE, MARK.

Pearson: ALL RIGHTY. WELL, THAT'S SOME GOOD NEWS FOR PRODUCERS OUT THERE. THIS HOG TREND HAS BEEN UNDER SOME PRESSURE. THERE'S STILL CONCERNS ABOUT THE FOURTH QUARTER. IT'S BEEN KIND OF HEARTENING THIS WEEK BECAUSE WE HAD A NICE RUNUP IN CASH HOGS. THE BOARD RESPONDED. WHAT'S AHEAD NOW FOR HOGS?

Robinson: WELL, IT LOOKS LIKE LIVE WEIGHTS HAVE PLATEAUED, MARK, WHICH IS KIND OF A SEASONAL EVENT. WE'L PROBABLY TREND LOWER HERE THE BALANCE OF THE SUMMER. I DON'T SENSE THAT THERE'S ANY CRITICAL SHORTAGE OF BUTCHER HOGS, BUT DEMAND, I THINK, IS BEGINNING TO IMPROVE. HERE AGAIN, EXPORTS ARE FORECAST TO IMPROVE IN 2003 VERSUS 2002, PROVIDED THE ECONOMY AS AFOREMENTIONED, JAPAN IN PARTICULAR, CONTINUE TO IMPROVE, MARK. THERE'S BEEN AN INCREASE IN BUSINESS WITH MEXICO, AS WELL AS WITH CANADA. SO DISAPPEARANCE IS ON THE RIGHT TRACK, I BELIEVE. I DON'T SENSE ANY SIGNIFICANT SHORTAGE OF SUPPLY. ALL OF THAT COMBINED APPEARS TO ME TO LOOK FORWARD TO A MID $30 MARKET THE BALANCE OF 2002, WELL INTO 2003.

Pearson: SOME OF THE CONCERN ABOUT THE FOURTH QUARTER DO YOU THINK HAS BEEN ALLEVIATED?

Robinson: TO SOME DEGREE, MARK. WE'RE STILL IMPORTING A LOT OF FEEDER PIGS OUT OF CANADA. SO THERE'S NO SHORTAGE OF SUPPLY. DON'T MISUNDERSTAND ME BUT I DO BELIEVE DEMAND IS IMPROVING.

Pearson: VERY GOOD. THANK YOU SO MUCH, VIRGIL. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET."

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

Tags: agriculture commodity prices markets news