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Market Analysis: May 03, 2002

posted on May 3, 2002


The grain markets finished the week mixed with the wheat market showing some minor strength, while corn prices drifted lower. For the week, wheat prices gained more than three cents, while corn prices were one to two cents lower.

Soybean futures were also pressured, with the nearby contracts down more than eight cents. Soybean meal closed $2.50 lower per ton.

Cotton futures closed $1.65 lower.

In livestock, fed cattle futures closed 65 cents lower. Feeder cattle finished $1.30 higher. The lean hog contract closed 75 cents lower.

In the financials, Comex gold gained 90-cents per ounce. The Euro gained 154 basis points against the dollar. And, the CRB Index finished the week nearly a point lower to close at 199.00.

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

Market Analysis: May 03, 2002

Pearson: ALL RIGHT. WELL, LET'S TALK ABOUT WHAT'S HAPPENING HERE. AGAIN, IT LOOKS LIKE AS FAR AS THE GRAINS ARE CONCERNED, THEY'VE ALREADY FIGURED WE'RE IN FOR A BIG CROP THE WAY THESE PRICES LOOK, TOMM. THIS IS UNIQUE THIS TIME OF THE YEAR.

Pfitzenmaier: YEAH, NORMALLY WE FACTOR IN TONS OF, YOU KNOW, WEATHER PREMIUM, FOR LACK OF A BETTER TERM.

Pearson: WELL, ANY PREMIUM AT THIS STAGE OF THE GAME.

Pfitzenmaier: YEAH, AND WE DON'T HAVE A WHOLE LOT -- OR WE HAVE LESS. TO SAY THAT DEPENDS ON WHAT YOU THINK ULTIMATELY THE BOTTOM IS. IF YOU THINK CORN HAS AN ULTIMATE BOTTOM OF 185 AND WE'RE AT 215, THEN YOU'VE GOT TO SAY THERE'S STILL 30 CENTS OF WEATHER PREMIUM IN THERE. SO THAT'S KIND OF A RELATIVE TERM DEPENDING ON WHERE YOU THINK THE MARKET IS GOING TO GO, BUT THERE'S NO QUESTION WE'VE BEATEN THINGS DOWN FAIRLY WELL, AS THERE'S NOT MUCH ON THE HORIZON TO MAKE IT GO BACK UP EXCEPT, I WOULD GUESS, SUMMER WEATHER.

Pearson: ALL RIGHT. WHAT'S YOUR STRATEGY AT THIS STAGE OF THE GAME, TOMM? IS THERE STILL MUCH FARMER HOLDING AT THIS POINT, OR HAVE WE MOVED A LOT OF THE CROP OFF THE FARM BY NOW?

Pfitzenmaier: WELL, THE ANSWER IS TWO-FOLD, DEPENDING ON OLD CROP OR NEW CROP. OLD CROP, THERE'S A LOT OF IT AROUND, ALL OF IT IN THE FARMERS' HANDS. IT'S SITTING THERE; THEY'RE WRINGING THEIR HANDS TRYING TO DECIDE WHAT TO DO WITH IT. I'M NOT EXACTLY SURE WHAT THEY'RE DOING, BUT THERE'S A LOT OF IT SITTING OUT THERE. THE BASIS IS RELATIVELY TIGHT, SO THEY'RE SAYING, "SELL IT TO US NOW. WE WANT IT." OBVIOUSLY, YOU'RE IN THE MIDDLE OF PLANTING, SO THERE'S NOT A LOT OF ABILITY FOR THE FARMER TO MOVE THE CROP IN THERE. I MEAN THAT'S PART OF THE REASON WHY IT'S TIGHT. SO IF YOU'VE GOT OLD-CROP CORN AND HAVE THE ABILITY AND THE TIME TO MOVE IT, IT'S PROBABLY NOT A BAD OPPORTUNITY TO GET THAT MOVED. NOW THE QUESTION BECOMES DO YOU WANT TO REOWN IT AFTER THAT. I PERSONALLY THINK THAT YOU MIGHT HAVE A CHANCE TO REOWN IT THIRTY DAYS DOWN THE ROAD FROM NOW, AFTER THE CROP GETS UP AND GOING. THEY GET THINGS KIND OF DEPRESSED, THAT MIGHT BE A GOOD TIME GOING INTO THAT SUMMER WEATHER CONCERN TIME PERIOD TO REOWN THAT FOR MAYBE A LITTLE BIT OF UP. BUT CERTAINLY YOU'RE GOING TO BENEFIT MORE OWNING THE FUTURES THAN THE CASH BECAUSE IF THAT UP COMES UP IN THE SUMMER, IT'S PROBABLY GOING TO BE A FUTURES THING, YOU'RE GOING TO WIDEN THE BASIS OUT, AND YOU'RE GOING TO SIT AND DO NOTHING ON THE CASH SIDE.

Pearson: ALL RIGHT. SO MAYBE A FUTURES POSITION TO REOWN OLD-CROP SALES THAT YOU MAKE NOW.

Pfitzenmaier: SOMETIME IN JUNE. IN TERMS OF NEW CROP, I THINK ANY RALLY ON DECEMBER CORN UP ON IN THAT 224, 225 RANGE IS PROBABLY GOING TO BE A SELLING OPPORTUNITY. NOW, MAYBE WE'LL COME IN HERE NEXT WEEK, THEY'LL BE CONCERNED ABOUT PLANTING PROGRESS, ABOUT THE WEATHER PROGRESSING FURTHER INTO NEXT WEEK, AND THAT MIGHT GIVE US -- BE THE THING THAT GIVES US THAT UP. IF IT DOES, I THINK YOU HAVE TO VIEW IT AS A SELLING OPPORTUNITY. NOW MAYBE YOU DON'T LIKE SELLING THE FUTURES. MAYBE THAT MEANS BUYING A 220 OR 230 PUT, SELLING A CALL TO PAY FOR IT, SOME SORT OF STRATEGY LIKE THAT. BUT I THINK THAT WOULD DEFINITELY BE A SELLING OPPORTUNITY.

Pearson: WE'VE BEEN HEARING A MEAKER DOLLAR THIS WEEK. THE EURO HAS SHOWN SOME STRENGTH. WE TALKED ABOUT THE FACT THAT WE HAVEN'T SEEN MUCH EXPORT BUSINESS BECAUSE OF IT. DO YOU GO ALONG WITH THAT, OR ARE WE GOING TO START TO MAYBE SEE THAT PICK UP?

Pfitzenmaier: WELL, THEORETICALLY IT SHOULD PICK UP. YOU KNOW, YOU ALSO HAVE THE PROBLEM WHERE EVERYBODY SAYS, "GEE, THE DOLLAR IS HEADED THIS DIRECTION. MAYBE IF I WAIT A WEEK, IT'S GOING TO GET THAT MUCH BETTER." SO YOU TEND TO KIND OF WALK AROUND WHILE WAITING TO SEE IF IT DOESN'T GET BETTER. SO THAT IS A MIXED BLESSING, AND I GUESS I'M NOT SURE AT THIS POINT WHICH TACT THE BUYERS OF OUR PRODUCTS ARE GOING TO TAKE.

Pearson: OKAY. WHEAT AND BEANS... WHEAT, PLENTY OF IT AROUND APPARENTLY. A LITTLE BIT OF A BOUNCE THIS WEEK, NOT OVERLY SIGNIFICANT.

Pfitzenmaier: A LITTLE SHORT COVERING BOUNCE IS ALL. I MEAN WE'RE BASICALLY RIGHT ON SUPPORT LEVELS. WE TAKE THESE OUT AND WE'VE GOT PROBABLY ANOTHER 8 TO 10 CENTS DOWN IN WHEAT. ANY RALLY ON WHEAT, JULY WHEAT AT 2.85, UP IN THE $3 RANGE, YOU BETTER BE SELLING ALL YOUR WHEAT OUT BECAUSE THERE'S A LOT OF IT AROUND THE WORLD AND RALLIES ARE GOING TO BE VERY LIMITED.

Pearson: OVER ON THE SOYBEANS... AGAIN, A BIG CROP IN SOUTH AMERICA; A DECENT SIZED CROP, IT WOULD APPEAR TO BE, EN ROUTE IN THE U.S. WHAT'S AHEAD FOR BEANS AND WHAT'S YOUR STRATEGY THERE?

Pfitzenmaier: WELL, WE'VE HAD THIS RALLY UP UNTIL THE LAST WEEK OR SO, THIS RALLY, BECAUSE OF CONCERNS ABOUT ARGENTINE BEANS MOVING. WELL, YOU KNOW, THE ARGENTINE HARVEST IS PROGRESSING. THEY DON'T HAVE A LOT OF STORAGE ABILITY. THEY'VE GOT, GRANTED, FINANCIAL PROBLEMS IN THEIR COUNTRY. BUT THEY'VE ALSO GOT A PRODUCT TO SELL, AND I THINK THEY'RE GOING TO FIND A WAY TO GET IT SOLD. I THINK THE MARKET GRADUALLY CAME TO THAT CONCLUSION THIS WEEK, AND THAT'S GOING TO JUST CONTINUALLY KEEP PRESSURE ON THIS BEAN MARKET AS WE GO INTO THE SUMMER. CHINA WAS SNOOPING AROUND A LITTLE BIT AND THAT GOT PEOPLE A LITTLE BIT EXCITED, BUT THEY'RE SNOOPING AROUND FOR SOUTH AMERICAN BEANS. SO WE'RE GOING TO GRADUALLY LOSE SOME MARKET THERE. THAT'S NOT A BIG SURPRISE. IT ALWAYS HAPPENS THIS TIME OF THE YEAR, BUT IT'S GOING TO MAKE IT DIFFICULT FOR BEANS TO DO MUCH. NOW, THERE'S A LITTLE PERCEPTION THIS WEEK, TOO, THAT MAYBE IF WE HAD TROUBLE PLANTING THE CORN CROP, THERE WOULD BE SOME SWITCHING TO BEANS. THE FARM BILL IS SORT OF IN THE MIX THERE, BUT THAT LOOKS LIKE KIND OF A NEUTRAL. SO WE WERE IN A NICE LITTLE UPTREND, BROKE THROUGH THAT ON FRIDAY, CLOSED WELL UNDER IT. IT MAKES YOU LOOK -- IT LOOKS TO ME LIKE YOU'RE GOING TO SEE JULY GO DOWN AND TEST THAT 444 AREA, DOWN ABOUT 12 CENTS FROM HERE.

Pearson: ALL RIGHT. QUICKLY OVER TO LIVESTOCK, TOMM. THE FED-CATTLE MARKET HAS BEEN A DISAPPOINTMENT THIS SPRING SO FAR. IS THAT GOING TO CHANGE?

Pfitzenmaier: WELL, WE'VE GOT TOTAL MEAT SUPPLY, RED AND ALL MEAT SUPPLIES THAT ARE JUST HUGE. LIKE YOU MENTIONED EARLIER IN THE REPORT, THIS STEEL TARIFF, THE RETALIATION FROM THE RUSSIANS. AND POULTRY BACKS POULTRY UP; THAT MAKES THAT CHEAP. PORK IS THE NEXT ONE IN LINE; IT'S CHEAP. NOBODY WANTS TO FEATURE BEEF; IT'S KIND OF VIEWED AS A PREMIUM PRODUCT AND IT'S NOT MOVING. YOU KNOW, THEN, OF COURSE, YOU GET THE PRODUCER DIGGING HIS HEELS IN, DOESN'T WANT TO SELL, WEIGHTS START GOING UP A LITTLE BIT. CATTLE DID REALLY WELL THIS WINTER ANYWAY, SO YOU'VE GOT SOME FAIRLY GOOD WEIGHTS ON THEM. YOU'VE GOT A PRODUCT THAT'S IN TROUBLE HERE. I THINK JUNE COULD RETEST THAT OLD LOW OF 59.50, PROBABLY NOT GO MUCH UNDER THAT. BUT CERTAINLY ANY RALLIES OF A DOLLAR OR TWO I THINK SHOULD BE SOLD.

Pearson: HOGS HAVE BEEN UNDER PRESSURE AS WELL. A LOT OF IT RELATES BACK TO WHAT YOU JUST TALKED ABOUT. BUT THERE ALSO SEEMS TO BE NOW THIS CREEPING CONCERN ABOUT THE FOURTH QUARTER. WHAT'S YOUR --

Pfitzenmaier: AND A LOT OF THAT IS ALREADY ANTICIPATED. THAT DECEMBER FUTURES CONTRACT IS ALREADY FAIRLY HEAVILY DISCOUNTED. I THINK NEAR TERM, YOU'VE GOT A CASH MARKET THAT'S WELL UNDER THE FUTURES; THE JUNE MARKET UP THERE IN THE MID 50S, WHICH MEANS WE'RE GOING TO HAVE TO HAVE EITHER A $7 RALLY IN THE CASH MARKET OR BREAK INTO JUNE'S. SO I THINK IF YOU GET ANY KIND OF A RALLY THERE, SELL IT. WHETHER YOU GO BACK TO YOUR POINT ABOUT THE FOURTH QUARTER, WHETHER YOU CAN GET EXCITED ABOUT SELLING DECEMBER HOGS IN THAT $42 TO $43 RANGE, IT WOULD BE HARD FOR ME TO DO. IF YOU WANT TO BUY A PUT AS SORT OF A DISASTER INSURANCE, YOU'RE BUYING A PUT WAY OUT IN TIME. IT'S GOING TO BE KIND OF EXPENSIVE, BUT IT WILL COVER YOU IN CASE OF A DISASTER. I GUESS AT THESE LEVELS, I WOULDN'T GET ALL THAT EXCITED ABOUT IT.

Pearson: ALL RIGHTY. TOM PFITZENMAIER, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, YOU CAN FIND ADDITIONAL ANALYSIS FROM TOMM ON OUR WEB SITE AT IPTV.ORG/MARKETTOMARKET. THAT'S IPTV.ORG/MARKETTOMARKET. SO JOIN US AGAIN NEXT WEEK WHEN WE EXAMINE A REGIONAL FARM LABOR MOVEMENT THAT IS WORKING TO GAIN THE SUPPORT OF CONSUMERS. UNTIL THEN, I'M MARK PEARSON. THANKS FOR WATCHING. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

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