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Market Analysis: Apr 26, 2002

posted on April 26, 2002


The grain markets were a mixed bag this week as the trade continues to be concerned about big supplies and lethargic demand. For the week, wheat prices were down more than nine cents. Corn prices were down a penny. Soybean futures closed more than four cents lower. Soybean meal closed a dollar lower per ton. Cotton futures were down 95-cents.

In livestock, fed cattle futures gained $1.20. Feeder cattle closed 45-cents lower. The nearby lean hog contract finished sharply lower—more than six dollars.

In the financials, Comex gold gained more than nine dollars per ounce. The Euro closed a hundred basis points higher against the dollar. The CRB index finished the week more than four points higher to close at 199.80.

Here now to lend us her insight is one of our regular market analysts, Sue Martin. Welcome back.

Market Analysis: Apr 26, 2002

Martin: THANK YOU.

Pearson: SUE, I'VE GOT TO ASK YOU ABOUT THIS HOG MARKET FIRST BECAUSE THIS WAS SUCH A DRAMATIC DROP IN FUTURES. THE CASH MARKET HAS BEEN UNDER SOME PRESSURE FOR SOME TIME. IS THE FUTURES JUST CATCHING UP TO IT?

Martin: WELL, I THINK THE TWO ARE COMING TOGETHER, WHERE FUTURES ARE DROPPING AND CASH IS TRYING TO HOLD. BUT THE PROBLEM IS WE STILL HAVE A FAIR AMOUNT OF PORK AROUND. COOLERS ARE FULL OF PORK. YOU HAVE A LOT OF CANADIAN PORK COMING INTO THE COUNTRY. AND THEN EVEN THE PIG CROP REPORT -- THE MONTHLY PIG CROP REPORT THAT CAME OUT ON FRIDAY WAS SHOWING ANOTHER ONE-PERCENT INCREASE. SO THE ONLY THING THAT WAS EVEN FRIENDLY IN THAT REPORT WAS THAT MAYBE PIGS PER LITTER WAS DOWN JUST A TOUCH. SO WE'VE GOT PLENTY OF SUPPLY OF PORK AROUND. OUR KILL THIS WEEK WAS 1.923 MILLION HEAD. SO THAT'S A GAIN OVER A YEAR AGO OF OVER 4 PERCENT OR MORE. YOU'VE GOT COOLER SPACE TIGHT, BECAUSE WE HAVE A FAIR AMOUNT OF POULTRY IN COOLERS, AS WELL AS A LOT OF BEEF TOO. SO THE PROBLEM WITH HOGS IS I THINK WE'RE GOING TO SLIP LOWER. THIS IS NOT A NEW THING THAT WE'VE SEEN IN THE MONTH OF APRIL. WE'VE DONE THAT ABOUT 19, 20 TIMES OUT OF THE LAST 32 YEARS. SO THIS IS NOTHING NEW. IT FELT NEW BECAUSE WE HADN'T SEEN IT FOR THE LAST THREE OR FOUR. BUT I THINK WE'RE GOING TO SEE THE JUNE HOGS COME DOWN. MAY HOGS I THINK WILL GO TO 45.70. THAT'S ONLY ANOTHER 200-POINT LIMIT. BUT I THINK WITH TIME, WE'LL EVEN SEE JUNE HOGS SET NEW CONTRACT LOWS.

Pearson: THE BIG QUESTION ON HOGS THE FOURTH QUARTER, WHAT'S THAT SHAPING UP TO WITH THESE LARGER NUMBERS?

Martin: WELL, UNFORTUNATELY, AS WE GO TOWARD THE FOURTH QUARTER, WE'RE STILL LOOKING AT A FAIR AMOUNT OF HOG NUMBERS AS WE GET INTO THAT FOURTH QUARTER, MAYBE 2, MAYBE 3 PERCENT MORE HOGS, AND THEN YOU PUT THE CANADIAN HOGS ON TOP OF IT, IF THE DOLLAR DOESN'T DECLINE BY MUCH TO CHANGE THE SITUATION. WE NEED THE DOLLAR TO START DROPPING AGGRESSIVELY AGAINST THE CANADIAN DOLLAR, AND THAT MIGHT HELP THE CAUSE A LITTLE BIT TO SLOW THAT UP. BUT AT THE MOMENT THE OUTLOOK IS STILL THAT WE'RE GOING TO HAVE A FAIR AMOUNT OF PORK AROUND COME FOURTH QUARTER, SO THAT'S GOING TO END UP PROBABLY TAKING HOG PRICES STILL -- KEEPING THEM IN A LOW LEVEL AND, OF COURSE, SOME OF THE ANALYSTS ARE TALKING DOWN IN THE UPPER TEENS FOR HOG PRICES, CASH HOG PRICES. WELL, WE'LL SEE. A LOT CAN HAPPEN BETWEEN NOW AND THEN. IF DEMAND CRANKS UP, THAT'S ANOTHER THING TOO; WE NEED OUR DEMAND CRANKING UP ON EXPORTS. SO IF THAT WOULD HAPPEN, THAT WOULD HELP TO SOME DEGREE. BUT THEY'VE CERTAINLY BEEN BLOWING THE HORN ON THIS ONE FOR A WHILE. IN FACT, THAT'S HOW EVERYBODY MISSED THE APRIL BREAK, BECAUSE THEY WERE SO FOCUSED ON DEFERRED MONTHS.

Pearson: OKAY. AND AT THIS STAGE OF THE GAME, MARKET STRATEGY-WISE, WOULD YOU WANT TO COVER YOURSELF A LITTLE BIT FOR THE FOURTH QUARTER?

Martin: I THINK YOU DO BUT I THINK YOU TRY TO GET A BOUNCE HERE. THIS MARKET IS SO FRUSTRATING RIGHT NOW, I THINK WE'RE GOING TO HAVE A LOWER LOW IN MAY. NOT MAYBE LOWER THAN THE APRIL CONTRACT LOW, BUT FOR THE JUNES AND THE MAYS, THEY'LL MAKE NEW-CONTRACT LOWS AS WE GET INTO THE MONTH OF MAY. ONCE WE GET IN TOWARDS JUNE, WE MIGHT GET A REBOUND. AND ON THAT REBOUND, I WOULD CERTAINLY TRY TO GET DEFERRED HOGS HEDGED. BUT, YOU KNOW, WHEN YOU LOOK AT JUNE HOGS, THEY GOT UP, I THINK, CLOSE TO $57. NOW WE'RE AROUND UNDER 54. THEY'RE GOING TO HEAD LOWER, SO I SUSPECT WE'RE GOING TO HAVE A HARD TIME GETTING THESE DEFERRED MONTHS HEDGED AT A VERY GOOD PRICE.

Pearson: ALL RIGHT. CATTLE TREND... YOU WERE GETTING A LITTLE BIT WORRIED ABOUT CATTLE A MONTH OR SO WHEN YOU WERE ON. DID YOU FORESEE THINGS GOING THIS FAR SOUTH?

Martin: WELL, I THOUGHT AT THE TIME I WAS ON, I THOUGHT WE'D SEE 65-CENT CASH TRADE BASIS THE JUNE FUTURES. WHAT SURPRISED ME WAS HOW FAST ALL THE PROJECTIONS CAME. WE JUST MOVED SO QUICKLY AND SWIFTLY. WE'VE HAD A $10 BREAK, YOU KNOW, IN THE CASH MARKET AND IN THE FUTURES. AND I THINK THAT WHAT WE'RE LOOKING AT IS, YOU KNOW, WE'VE HAD A $4 RALLY BACK UP NOW ON JUNE FAT CATTLE AND ABOUT 420 ON THE FEEDER CATTLE. SO EVERYBODY WANTS TO SAY, WELL, THIS IS THE BOTTOM. IT'S POSSIBLE BUT I DON'T BELIEVE IT IN MY HEART. WHAT I THINK WE'VE GOT GOING HERE IS A REACTION, AND IT'S GOING TO GIVE US A CHANCE TO DO SOME HEDGING FOR THE AUGUST CONTRACT. I THINK THAT YOU'VE GOT -- USUALLY AS YOU GO INTO MAY, CHOICE CUTOUT STARTS TO BOTTOM AND MOVE HIGHER AS YOU GO TOWARDS MEMORIAL DAY DEMAND. AND THE OTHER THING THAT WE'RE LOOKING AT IS THAT USUALLY WEIGHTS START TO BOTTOM OUT AROUND EARLY MAY, AND THEY START TO RALLY OR GAIN INTO FALL. WELL, THE PROBLEM IS OUR WEIGHTS -- IF YOU LOOK AT STEER WEIGHTS, THEY'RE RUNNING 33 POUNDS OVER A YEAR AGO. HEIFER WEIGHTS, 32 POUNDS OVER A YEAR AGO. COW CARCASS WEIGHTS, 7 POUNDS OVER A YEAR AGO. SO IF WE'RE GOING TO BOTTOM, WHAT LEVEL ARE WE GOING TO? AND THAT CONCERNS ME BECAUSE IT SAYS WE'RE GOING TO HAVE A FAIR AMOUNT OF BEEF COMING IN INTO SUMMER. AND THEN THE OTHER THING IS THAT AS YOU GO LOOK AT THE CATTLE-ON-FEED REPORT, THE LAST ONE, WELL, IT SHOWED THE HEAVIER WEIGHT FEEDERS STILL THE ONES THAT ARE BEING PLACED AND THE LIGHTWEIGHT ONES WERE DOWN 18 PERCENT. SO THAT SAYS WE'RE GOING TO HAVE A LOT OF CATTLE COMING AT US THROUGH JUNE INTO JULY. WE'RE GOING TO HAVE A FAIR AMOUNT OF BEEF AROUND. THAT TELLS YOU THIS CATTLE MARKET IS NOT GOING TO HEAL REAL FAST.

Pearson: ALL RIGHT. LET'S GO OVER TO THE GRAIN MARKET. WE SAW, AGAIN, WHEAT PRICES SOFTENING UP AGAIN THIS WEEK. AGAIN, THERE'S CONCERNS ABOUT THE WINTER WHEAT CROP HERE IN THE U.S. BUT THERE'S SO MUCH WHEAT AVAILABLE WORDWIDE, IT DOESN'T SEEM TO BE HAVING MUCH OF AN IMPACT ON THE MARKETS. WHAT'S YOUR LOW PRICES AND POOR CROP.

Martin: WELL, I THINK EVERYBODY IS BUYING SO INTO THIS THAT WORLD SUPPLIES ARE SO BURDENSOME ON WHEAT THAT THEY'RE LOOKING PAST -- THEY'RE NOT LOOKING AT THE WHOLE PICTURE. U.S. SUPPLIES OR CARRY-OUTS ARE LOOKING, ON SOFT RED AND HARD RED WINTER WHEAT, AS DECLINING THIS YEAR. AND WHEN WE LOOK AT, YES, WE'VE GOT SOME PRODUCTION COMING OUT OF EUROPE AND AUSTRALIA THAT'S COMPETING A LITTLE BIT AND -- INDIA, OF COURSE, HAS WHEAT AS WELL, BUT IT'S SUCH POOR QUALITY -- MY CONTENTION IS THAT I THINK THERE'S SOMETHING BETTER HERE FOR WHEAT, BUT I JUST DON'T KNOW AS IF IT WERE REALLY READY FOR THAT TURN. IT MAY TAKE THE SEPTEMBER AND DECEMBER CONTRACTS TO BE THE GOOD ONES. BUT I WILL ALSO SAY THAT ON THE CHARTS, LIKE YEAR-IN/YEAR-OUT SEP. WHEAT AND YEAR-IN/YEAR-OUT DEC. WHEAT, THERE'S GAPS THAT WE'RE INTO THAT STILL COULD DECLINE ANOTHER 10 CENTS, 15 CENTS AND WE'LL HAVE THEM FULLY FILLED AND THEN WE'LL SEE WHERE WE'RE AT. MAYBE WE DO THAT THROUGH HARVEST AND THEN WE'RE ALL GOOD FOR THE LAST HALF OF THE YEAR. IT SEEMS LIKE THESE WHEAT TRADERS ONLY KNOW ONE FOUR-LETTER WORD, AND THAT'S "SELL, SELL, SELL." AND IT'S GETTING FRUSTRATING FOR THE PRODUCER, FRUSTRATING FOR THE HEDGER -- OR I SHOULD SAY THE PERSON THAT SOLD CASH MAYBE BOUGHT IT BACK OR IS ANTICIPATING PRICES IMPROVING AND THEY'RE VERY FRUSTRATED. BUT SHORT TERM WE'RE NEARING A LOW, MAYBE ANOTHER 7 CENTS DOWN IN THE JULY WHEAT. WE SHOULD BE CLOSE TO A LOW THAT GIVES US A NICE RALLY BACK, AND WE'LL SEE HOW GOOD THAT RALLY IS. BUT CERTAINLY THIS MARKET -- AND YOU'RE ALSO GOING INTO FIRST NOTICE DAY, TOO, NEXT WEEK. SO THAT'S PROBABLY WEIGHING IN ON THE MARKET RIGHT NOW.

Pearson: ALL RIGHT. AS LONG AS "SELL" IS THE ONLY FOUR-LETTER WORD THEY USE. SUE, WHAT ABOUT ON THE CORN FRONT AND ON THE SOYBEAN FRONT? WE KEEP HEARING ABOUT THIS GOOD SOYBEAN DEMAND. WE'VE GOT PROBLEMS WITH OUR COMPETITORS. WE TALKED ABOUT EARLIER IN THE SHOW ARGENTINA, SOUTH AMERICA. WHAT'S YOUR OUTLOOK NOW FOR THE BEANS?

Martin: WELL, FIRST OF ALL, AS YOU NOTED EARLY IN THE SHOW THAT BEANS DID CLOSE DOWN THIS WEEK OVER 4 CENTS. YOU MADE A HIGHER HIGH THIS WEEK FOR THE MOVE. APRIL IS THE FIFTH MONTH UP IN A CYCLICAL ACCOUNT, SO WE'RE PUSHING THE ENVELOPE A LITTLE BIT. AND YOU CLOSE THIS WEEK LOWER, SO WHAT ARE YOU GOING TO DO NEXT WEEK? TAKE OUT THIS WEEK'S LOWS OR THIS WEEK'S HIGHS? I SUSPECT IT'S GOING TO BE THIS WEEK'S LOWS. NOW, ON TUESDAY, YOUR LAST DAY OF THE MONTH, DO WE CLOSE HIGHER THAN WE DID AT THE END OF MARCH AFTER WE'VE MADE A HIGHER HIGH THIS MONTH, EVEN THOUGH IT WAS ONLY A HALF A CENT? LAST MONTH WE CLOSED AT 480.5. I SUSPECT YOU'RE GOING TO HAVE RESISTANCE ALL WEEK AROUND 476 TO 479 BASIS THE JULY SOYBEANS. SO I THINK WE'RE GOING IN FOR A SELL-OFF IN THIS MARKET. WE'VE ALREADY HAD PART OF IT. I WILL SAY THIS: TIMINGS ARE SHOWING THAT WE'RE IN THE PHASE OF TURNING THIS BEAN MARKET TO A MORE POSITIVE MODE, BUT I THINK WE'RE GOING IN FOR A SELL-OFF FIRST BEFORE WE GET BETTER.

Pearson: AND THE CORN MARKET QUICKLY.

Martin: WELL, I'VE NOT BEEN A PROPONENT OF CORN FOR SOME TIME. I ALWAYS FELT THAT IT WAS GOING TO BE THE TAIL-ENDER OF EVERYTHING. I THINK THAT CORN DOES HAVE THE POTENTIAL TO LOWER CARRY-OUTS THIS YEAR, BUT THE ONE THING WE'VE GOT TO REMEMBER IS WE'RE IN SPRING. THE DELTA IS HAVING PROBLEMS GETTING PLANTING DONE. PARTS OF ILLINOIS AND INDIANA AND OHIO ARE WET. BUT IF YOU LOOK AT THIS YEAR COMPARED TO LAST YEAR, WE'RE NOT AS WET AS WE WERE A YEAR AGO. AND IOWA IS MAKING GREAT STRIDES THIS YEAR GETTING CROPS IN WHERE THEY DIDN'T LAST YEAR. SO I'M NOT A PROPONENT OF THINKING THAT WE HAVE TO RALLY BECAUSE OF WEATHER. I THINK WHETHER IS A NONISSUE AT THIS TIME. IF WE'RE GOING TO SEIZE WEATHER -- HAVE A WEATHER RALLY, IT'S GOING TO BE ON HOT, DRY WEATHER, MORE SO AS WE GET INTO JULY. I THINK THAT WE'VE GOT A CROP THAT WE'RE LOOKING AT THAT'S GOING TO BE BIGGER ON ACRES LIKE THE USDA PREDICTED, SO WE'RE JUST GOING TO HAVE TO DEAL WITH THIS MARKET. I THINK WE'VE GOT A MARKET THAT'S GOING FLAT TO SIDEWAYS HERE FOR A LITTLE BIT AND THEN I WORRY THAT WE MAY STILL EVOLVE A LITTLE LOWER BEFORE WE TURN THIS THING AROUND, ESPECIALLY IF THE BEAN MARKET IS NOT ANY GOOD IN THE NEAR TERM.

Pearson: SO AT THIS STAGE OF THE GAME, CORN AND SOYBEANS, WE'RE IN A HOLDING PATTERN.

Martin: I THINK WE'RE IN A HOLDING PATTERN TO A LITTLE LOWER, ESPECIALLY ON SOYBEANS. I THINK WE'RE GOING TO SELL THIS MARKET OFF IN TOWARDS MAY 17.

Pearson: ALL RIGHTY. SUE MARTIN, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, YOU CAN FIND ADDITIONAL ANALYSIS FROM SUE ON OUR WEB SITE AT IPTV.ORG/MARKETTOMARKET. JOIN US AGAIN NEXT WEEK WHEN WE LOOK AT A SMALL COMMUNITY OF 1,500 THAT IS TAKING CONTROL OF ITS OWN DESTINY AND CONTINUES TO THRIVE, DESPITE THE ODDS AGAINST SMALL RURAL TOWNS. UNTIL THEN, THANKS FOR WATCHING. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

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