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Market Analysis: Mar 15, 2002

posted on March 15, 2002


The nearby grain contracts enjoyed a modest spurt this week on some changing fundamentals. For the week, wheat prices were more than eleven cents higher. Nearby corn futures gained more than three cents. Soybean futures gained six to fourteen cents. Soybean meal gained $1.60. Cotton futures gained 87-cents.

In livestock, fed cattle futures closed $3.52 lower. Feeder cattle were down $2.35. the lean hog contract finished the week $3.37 cents lower.

In the financials, COMEX gold closed 20-cents lower per ounce. The Euro finished 90-basis points higher against the dollar. The CRB index finished the week three points higher to close at 202.50.

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

Market Analysis: Mar 15, 2002

Martin: THANK YOU, MARK.

Pearson: WELL, WHAT A DRAMATIC UPSWING IN CHICAGO THIS WEEK COMPARED TO WHAT WE'VE BEEN SEEING. YOU WERE TALKING ABOUT MAYBE SEEING A LITTLE BIT OF A RALLY THROUGH THE FIRST HALF OF MARCH. IS THIS ABOUT ALL WE'RE GOING TO GET?

Martin: WELL, I THINK WE'VE HAD -- IN THE SOYBEAN COMPLEX, WE'VE HAD ABOUT EIGHT WEEKS UP IN A CYCLICAL COUNT. IT WOULDN'T TAKE ANYTHING NEXT MONDAY TO TAKE OUT TODAY'S HIGHS, AND YOU'D HAVE NINE WEEKS. I THINK THE MARKET IS GETTING A LITTLE BIT OVERBOUGHT, ALTHOUGH OUR FIRST TARGET REALLY IS 489 1/4 BASIS THE MAY CONTRACT ON SOYBEANS. BUT WE'RE GETTING A LITTLE BIT OVERDONE TO WHERE A PULLBACK HERE WOULD NOT BE OUT OF LINE. BUT I DON'T THINK THIS IS THE HIGHS FOR THE YEAR.

Pearson: OKAY, SO SOME BETTER TIMES AHEAD. FOR THOSE FOLKS WHO TOOK THE LDP IN THE FALL AS RECOMMENDED AND NOW THEY HAVEN'T MOVED BEANS YET, IS THIS THE CHANCE TO GET THAT DONE?

Martin: I THINK I WOULD. I WOULD MOVE SOME OF THOSE BECAUSE I THINK THAT WE COULD HAVE A PULLBACK HERE AS WE GET INTO SPRING PLANTINGS. BUT CERTAINLY SPARKS'S ESTIMATES ON FRIDAY TALKING ABOUT LOWER BEAN ACRES THAN A YEAR AGO HELPS THE CAUSE, ALTHOUGH THERE'S A LOT OF TRADERS THAT DON'T AGREE WITH THAT, THAT STILL THINK WE'RE GOING TO PICK UP A FEW MORE BEAN ACRES THIS YEAR. BUT THE FACT THAT THERE IS THAT TALK OUT THERE CERTAINLY IS HELPING THE MARKET TOO UNDERNEATH.

Pearson: ALL RIGHT. CERTAINLY IT HELPED THE CORN AND WHEAT MARKETS AS WELL. WHEAT NEARBY DRAMATICALLY HIGHER.

Martin: WELL, IT CERTAINLY IS. AND, OF COURSE, WHEAT, I THINK, ONE, IT GOT A LITTLE BIT OVERSOLD. IT'S HAD A PRETTY GOOD SELLOFF. SO IT'S TIME TO HAVE A LITTLE CONSOLIDATION HERE FOR THE MARKET. AND THEN I THINK THAT, HERE AGAIN, EVEN THOSE THERE'S TALK OF PICKING UP A FEW ACRES, THE ESTIMATES BY SPARKS WERE JUST KIND OF HO-HUM, NOTHING SPECIAL. AND I THINK THAT WHEN WE LOOK AT THE WHEAT MARKET, THERE'S POTENTIAL THERE IN THAT MARKET TO STILL MOVE HIGHER. I LIKE WHEAT LONG TERM. I THINK IT'S A GOOD MARKET. I THINK THAT OVER THE LONG PULL, WHEAT HAS HIGHER PRICES TO GO. BUT FROM THIS 270 AREA TO 285, -86 AREA, THERE'S A LITTLE RESISTANCE IN THERE. BUT THEN WHEN YOU FALL BACK TO THE LOWER SIDE OF IT, THERE'S GOOD SUPPORT. IF WE COULD TAKE OUT 290, THAT WOULD BE A GOOD SIGN FOR THAT MARKET.

Pearson: OKAY. LET'S TALK ABOUT THE CORN MARKET, THEN, WHICH ALSO ROSE THIS WEEK. NEARBY, THE DEFERREDS WERE UNDER A LITTLE BIT OF PRESSURE.

Martin: WELL, THEY CERTAINLY WERE. THE NEARBY MARCH WENT OFF THE BOARD AND DID GAIN A LITTLE BIT THIS WEEK. BUT THE REST OF THEM LOST GROUND AS WE WENT IN -- IN FACT, DEC. CORN MADE NEW LOWS ON FRIDAY. AND WHAT THAT WAS FROM WAS THE FACT OF EXPECTATION OF MUCH MORE INCREASE IN CORN ACRES. AND OF COURSE, LACK OF DEMAND. WE'RE NOT EXPORTING MORE THAN WE DID A YEAR AGO, AND THAT'S WHEN YOU HAD A STARLINK ISSUE. SO WE'RE GOING TO HAVE TO SEE SOMETHING TO GIVE US A GOOD REASON WHY CORN SHOULD HAVE A REASON TO MOVE HIGHER. AND THEN THERE'S ANOTHER ISSUE THAT'S REALLY AFFECTING QUITE A FEW MARKETS. IT'S THE BAN ON POULTRY IMPORTS BY RUSSIA, THE EXPECTATION THAT IF THEY'RE OUR BIGGEST IMPORTER OF POULTRY, IT'S EXPECTED THAT IF YOU DON'T SEND THOSE CHICKENS AND TURKEYS OR WHATEVER OVER THERE, YOU'RE CERTAINLY NOT GOING TO BE FEEDING AS MANY HERE. AND THAT'S ALL LACK OF CORN.

Pearson: THAT'S RIGHT. THAT WILL SLOW THAT DEMAND DOWN PRETTY QUICK. ANYTHING WE SHOULD BE DOING ABOUT GETTING NEW CROP PRICED AT THIS POINT? IS THERE ANYTHING OUT THERE EVEN WORTH LOOKING AT?

Martin: WELL, I THINK WHAT I WOULD RECOMMEND IS TO GET PREPARED FOR THE SUMMER WEATHER SCARES THAT WE'LL PROBABLY HAVE. I WOULD RECOMMEND THIS PULLBACK THAT WE'RE GETTING -- AND WE COULD STILL DROP ANOTHER 8 TO 9, 10 CENTS IN THIS MARKET. I WOULD USE THOSE PULLBACKS IN HERE TO BE BUYING CALL OPTIONS, SEPTEMBER CALL OPTIONS. THE 220 AND 230 CALL OPTIONS, I WOULD BE BUYING THOSE. I MIGHT EVEN RECOMMEND BUYING THE JUNE -- OR THE JULY, I SHOULD SAY, 220S AS WELL. YOU CAN GET THOSE FAIRLY REASONABLE. BUT AS FAR AS SELLING ANYTHING NOW FOR NEW CROP, I'D WAIT IT OUT. IT'S GOTTEN AWAY FROM YOU. I WOULD WAIT FOR A WEATHER SCARE THIS SUMMER. YOU'LL GET THAT CHANCE. WE'RE GOING TO HAVE PROBABLY A GOOD OPPORTUNITY TO PLANT EARLY THIS YEAR. FARMERS CERTAINLY GOT A LOT OF ANHYDROUS ON LAST FALL. THEIR FIELDWORK IS DONE. THEY'VE HAD A GOOD WINTER TO GET THEIR EQUIPMENT IN LINE. THEY'RE READY TO GO. AND WE'VE GOT A SPRING THAT LOOKS LIKE IT'S GOING TO ALLOW US IN EARLY.

Pearson: IT LOOKS LIKE THE COTTON MARKET IS TRYING TO BUY SOME ACRES RIGHT NOW. A NICE MOVE THERE.

Martin: IT CERTAINLY IS. THE EXPECTATION IS THAT COTTON IS GOING TO LOSE ACRES THIS YEAR. AND, OF COURSE, IT'S GOING TO CORN AND THAT CERTAINLY HAS HELPED THE COTTON MARKET OUT A LITTLE BIT TO GAIN SOME STRENGTH BACK. AND I THINK COTTON IS VERY CHEAP, AND I COULD SEE WHERE COTTON COULD GAIN A LITTLE BIT MORE ON THE UPSIDE YET.

Pearson: LET'S TALK ABOUT LIVESTOCK, WHERE IT WAS A BAD WEEK OVERALL, SUE. THIS CATTLE MARKET, SMALLEST CALF CROP IN SIX YEARS. IT SEEMS LIKE EVERYTHING IS GOING IN THE RIGHT DIRECTION. WE'VE BEEN ADDING SOME WEIGHT, IT APPEARS, TO THESE CATTLE. IS THAT REALLY WHAT'S SLOWING US DOWN?

Martin: WELL, PART OF IT IS THE WEIGHT. WE'RE INTO SOME TIGHT NUMBERS HERE NOW FOR THE PACKER, BUT YET THE WEIGHTS ARE THERE TO HELP COMPENSATE FOR THAT TONNAGE. IN THE MEANTIME, YOU'VE GONE FOR A BASIS CHANGE, SO CASH IS NOW LEADING THE FUTURES. AND REMEMBER, FUTURES LED US UP. I'M AFRAID FUTURES ARE GOING TO LEAD THE CASH DOWN. IF I WAS A PRODUCER, ANYTHING THAT'S CLOSE TO READY, I'D BE GETTING THOSE CATTLE GONE. THIS MARKET HAS GOT A PROBLEM. AND HERE AGAIN, THOSE POULTRY BANS BY RUSSIA IS AFFECTING THE CATTLE MARKET, AS WELL AS HOGS. AND WHEN WE LOOK AT THE CATTLE MARKET, EVEN THOUGH THE CUTOUT GAINED THIS WEEK OVERALL -- YOU KNOW, THE RETAILER MAY HAVE FINISHED HIS BUYING HERE AND MAY SLOW DOWN TOO.

Pearson: WE MAY BE WAITING FOR THE GRILLING SEASON TO GET THIS THING GOING AGAIN.

Martin: WELL, IT APPEARS THAT WE WILL BE. I THINK WHEN WE LOOK AT THIS CATTLE MARKET, THE FACT THAT THE CUTOUT HAS GAINED HERE NICELY HAS HELPED THE PACKER, AND HE'S GOT SOME ROOM NOW TO BE ABLE TO BID. BUT I'M AFRAID THERE'S JUST SO MANY HEAVYWEIGHT CATTLE AND THE CATTLE-ON-FEED REPORT CAME OUT, SHOWED PLACEMENTS AT 115 PERCENT. WELL, YOU KNOW, YES, A YEAR AGO WE PLACED VERY FEW IN THE CATTLE IN THE MONTH OF FEBRUARY, AND FEBRUARY IS NOT NORMALLY A GOOD MONTH ANYWAY FOR PLACEMENTS. SO WE'RE NOT TALKING ABOUT A LOT OF NUMBERS, AND A LOT OF PEOPLE EXPECTED IT. BUT THE PROBLEM IS THAT WHEN YOU'RE TALKING ABOUT COMPETITION WITH CHEAP POULTRY AND YOU'VE GOT CHEAPER PORK, CATTLE IS GOING TO HAVE ITS SHARE OF PROBLEMS DOWN THE ROAD. I WOULD BE MARKETING CATTLE.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE HOGS. WHAT ARE YOU GOING TO DO THERE?

Martin: WELL, HERE AGAIN, IT'S A DEMAND THING AND THE PRODUCT IS POOR. AND I THINK IT REALLY TOOK EVERYBODY BY SURPRISE THAT THE HOG MARKET WOULD GIVE IN AS EASILY AS IT HAS THIS YEAR, WHEN YOU HAD AN EARLY EASTER. HAMS ARE NOT MOVING WELL AND WE JUST HAVE A VERY POOR DEMAND SITUATION RIGHT NOW ON PORK. THERE HAS BEEN RUMORS THAT MAYBE THE RETAILER IS GOING TO START TO FEATURE PORK OVER BEEF, SO THAT'S A PLUS. BUT APRIL FUTURES GOT DOWN TO UNDER 55 CENTS TODAY. I FEAR THERE'S 52, 55, AN OBJECTIVE ON THE APRIL FUTURES. AND I'M -- THE WAY THIS MARKET IS MOVING IS LIKE A FREIGHT TRAIN. I'M AFRAID WE'RE HEADED STRAIGHT FOR THAT TARGET. IF WE GET THERE IN STRAIGHT FASHION, THE MARKET SHOULD -- IF ANYONE HEDGES ON, THEY SHOULD BE PULLING THEM BECAUSE WE'RE GOING TO GET A GOOD REACTION. I THINK WE'VE GOT AN OLD-FASHIONED MARKET ON OUR HANDS HERE. THIS IS A MARKET THAT WE'RE BREAKING DOWN INTO APRIL, PROBABLY THE VERY LATTER PART OF MARCH, THAT TYPE OF THING. AND THEN WE'RE GOING TO RALLY IN APRIL. BUT HOGS SHOULD BE HEDGED ON ANY LIFT.

Pearson: GOOD POINT. SUE MARTIN, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." UNTIL NEXT WEEK, I'M MARK PEARSON. THANKS FOR WATCHING. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

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