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Market Analysis: Mar 01, 2002

posted on March 1, 2002


The grain markets finished the week under pressure due to concerns about export demand. For the week, wheat prices closed more than a dime lower. Corn prices finished three to four cents lower. Soybean futures bucked the grain trend, posting gains of five to six cents. Soybean meal gained $4.60. Cotton futures were more than a dollar higher.

In livestock, fed cattle gained 15-cents. Feeder cattle closed 18-cents lower. The lean hog contract finished 47-cents higher.

In the financials, COMEX gold gained $5.20 per ounce. The Euro closed more than 100-basis points lower against the dollar. And, the CRB index finished the week more than two points higher to close at 194.45.

Robinson: THANK YOU, MARK. NICE TO BE HERE.

Pearson: LET'S TALK ABOUT SOME BAD NEWS FIRST. THAT'S THIS GRAIN COMPLEX. THE WHEAT MARKET IN PARTICULAR TOOK IT HARD THIS WEEK.

Robinson: YOU MADE MENTION OF IT AT THE OPENING, MARK. EXPORTS JUST CONTINUE TO LAG THE PACE NEEDED HERE TO ATTAIN USDA'S TARGET, SO I WOULD NOT BE SURPRISED TO SEE THEM LOWER THAT AGAIN, MARK, IN THE NEXT SUPPLY AND DEMAND REPORT. CROP PROSPECTS, WINTER CROP PROSPECTS PROBABLY HAVE IMPROVED HERE OF LATE, WITH SOME RAIN AND SOME SNOW COVER. SO WHILE SUPPLIES, OLD CROP AND THE PROSPECT OF NEW, ARE NOT PARTICULARLY LARGE BY HISTORICAL STANDARD, THEY ARE CLEARLY ADEQUATE TO MEET DEMAND, MARK. AND AS A RESULT OF THAT, PRICES CONTINUE TO LANGUISH. AS A MATTER OF FACT, FUTURES MADE NEW CONTRACT LOWS THROUGH THE WEEK. SO OLD-CROP WHEAT MEASURED BY MAY FUTURES 285 OR HIGHER, I'D SELL IT. NOW-CROP WHEAT 290 OR HIGHER, I'D DO THE SAME.

Pearson: THIS IS QUITE A PULLBACK OVER 30 CENTS HERE IN THE LAST MONTH.

Robinson: MARK, AND MY POINT LAST TIME WE VISITED WAS NOT ON TARGET. I WAS OF THE OPINION WITH THE PULLDOWN IN PRICE WE'D PROBABLY SEE AN INCREASE IN EXPORTS. WE DID NOT SEE THAT, SO I'VE HAD TO LOWER MY SALES TARGETS, AS MENTIONED HERE A MOMENT AGO.

Pearson: ALL RIGHT, NOW LET'S TALK ABOUT THE CORN MARKET. ANY OPTIMISM THERE? AGAIN SOME PRESSURE THIS WEEK.

Robinson: WELL, NOT NEAR-TERM WISE, CONTRACT -- FUTURES CONTRACTS MAKING NEW LIFE OF CONTRACT LOWS, MARK. AGAIN, CHINESE CANCELLATIONS NOT TERRIBLY SURPRISING BUT, AGAIN, BEARISH PSYCHOLOGICALLY TO ADD TO THE BEAR'S ARGUMENT AT PRESENT. THE RECENT OUTLOOK CONFERENCE IN WASHINGTON, USDA SUGGESTING ACREAGE WILL GROW ABOUT THREE MILLION ACRES THIS SPRING. SO THE COMBINATION OF ADEQUATE OLD-CROP STOCKS WITH THE PROSPECT OF BUILDING NEW OR PRODUCING LARGER NEW-CROP STOCKS, KEEPING THE MARKET ON THE DEFENSIVE. LIKELY TO REMAIN THERE UNLESS SOMETHING DEVELOPS IN THE FORM OF POOR WEATHER THIS SPRING OR THROUGH THE GROWING SEASON. OLD-CROP FUTURES MEASURED BY MAY, 215, PROBABLY AN AREA THAT'S GOING TO ATTRACT SOME NEW SALES. NEW-CROP CORN 235 TO -40, THE SAME.

Pearson: SOYBEAN MARKET DID HAVE A BOUNCE THIS WEEK. WHAT'S AHEAD FOR SOYBEANS? WE'VE GOT A BIG CROP COMING OUT OF SOUTH AMERICA.

Robinson: USAGE CONTINUES TO BE JUST SHORT OF PHENOMENAL HERE DOMESTICALLY, MARK. I DID SEE THIS WEEK THE JANUARY CENSUS BUREAU REPORT, A RECORD LARGE CRUSH, 155-MILLION-BUSHEL CRUSH THROUGH THE MONTH OF JANUARY. ALL-TIME LARGE. MEAL STOCKS WERE DRAWN DOWN DESPITE THAT INCREASE, MARK, IN CRUSH. SO SOME IMPRESSIVE DISAPPEARANCE AND IMPRESSIVE CONSUMPTION, YET PRICES CONTINUE TO LANGUISH BECAUSE OF THE THREAT OF LARGE SOUTHERN HEMISPHERE PRODUCTION. I DON'T SENSE THAT'S GOING TO CHANGE. ANY PROBLEM, HOWEVER, THIS SPRING, PLANTING HERE IN THE UNITED STATES OR GROWING, WHAT IS PERCEIVED AGAIN TO BE RECORD PRODUCTION, WOULD CLEARLY IMPROVE PRICE PROSPECTS AND DO SO ABRUPTLY. HAVING SAID THAT, MARK, I GUESS I THINK THE CASH MARKET WITH VIRTUALLY NO CARRY FROM SPOT VALUE TO DEFERRED IS SUGGESTING GO AHEAD AND PRICE INVENTORY HERE EVEN THOUGH THE PRICE IS NOT PARTICULARLY STRONG. IF YOU WANT TO SPECULATE ON PRICE, THERE ARE EASIER AND MORE ECONOMICAL WAYS TO DO THAT. ONE WOULD BE A FUTURES POSITION OR, TWO, AN OPTION POSITION OR A COMBINATION OF THOSE TWO.

Pearson: PROBABLY THE BEST STRATEGY FOR RIGHT NOW. NOW, FOR OUR VIEWERS DOWN IN THE COTTON BELT, DOLLAR GAIN ON THE MARCH COTTON. IS THERE SOME CONCERN THAT PEOPLE MAY SWITCH OUT OF COTTON -- PARTS OF THE NEW FARM BILL ACTUALLY BECOME LAW?

Robinson: DUE TO A CHANGE IN THE INSURANCE PROGRAM THAT EXISTED LAST YEAR, WE ARE ASSUMING A REDUCED ACREAGE THIS SPRING. AND AS A RESULT, MARK, THERE'S BEEN A VERY MODEST RECOVERY IN PRICE, A VERY LITTLE SHORT-COVERING THAT'S TAKEN PLACE. HOWEVER, THE SUPPLY SITUATION REMAINS QUITE ADEQUATE, IF NOT BURDENSOME, HERE IN THE UNITED STATES AND GLOBALLY. I DON'T SENSE THE FUTURES MARKET IS IN POSITION TO MAKE ANY KIND OF SIGNIFICANT RECOVERY. MAY FUTURES AROUND 37 TO 38 CENTS, MARK, I THINK THAT WILL ATTRACT NEW SELLING. DECEMBER FUTURES AROUND 41 CENTS, THE SAME.

Pearson: ALL RIGHT. LET'S TALK LIVESTOCK. FED CATTLE MARKET. NOW, THERE'S ONE, VIRGIL. THIS FED MARKET HAS BEEN HANGING RIGHT IN THERE. THE CASH SALES MAY NOT HAVE BEEN WHERE PEOPLE HAD HOPED THEY WOULD BE AT THIS STAGE OF THE GAME. WHAT'S YOUR OUTLOOK? WHERE ARE WE HEADED NOW?

Robinson: WELL, I THINK THERE ARE TWO PARTS TO THAT OUTLOOK. THE NEAR TERM, WHICH I WOULD DESCRIBE FROM THIS POINT IN TIME INTO LATE SPRING EARLY SUMMER, MARK, WHERE I THINK RECORD HEAVY LARGE CATTLE REMAIN A PROBLEM. WE ARE GOING TO HAVE TO MOVE THROUGH THAT FED CATTLE SCHEDULE, ASSUMING ASSUMPTION -- OR CONSUMPTION REMAINS PRETTY SIGNIFICANT, AND I THINK THAT WILL BE THE CASE. BUT PRICE PROSPECTS HERE, I THINK, ARE MEASURED. I'M NOT AS OPTIMISTIC NEAR TERM AS I WAS A MONTH AGO, SIMPLY BECAUSE OF THESE LARGE HEAVY CATTLE, MARK. AND THERE WAS A BUILDUP OF STOCKS IN THE RECENT COLD STORAGE REPORT, SO WE HAVE AN INVENTORY WE HAVE TO WORK OUR WAY THROUGH. ONCE THAT'S COMPLETED, AND I THINK IT WILL BE LATE SPRING, EARLY SUMMER, THEN I THINK THE MARKET IS IN POSITION FOR SOME PRETTY SIGNIFICANT IMPROVEMENT, PARTICULARLY IF WEATHER CONDITIONS ARE NORMAL THIS SPRING AND GRAZING AND FORAGE CONDITIONS IMPROVE VERSUS THE LAST TWO OR THREE YEARS. I THINK THERE WILL BE A NOTICEABLE RETENTION OF HEIFERS TO REBUILD THE HERD, THUS REDUCING REPLACEMENT CATTLE. AND NUMBERS ON FEED SHOULD BE REDUCED PRETTY SIGNIFICANTLY, MARK. AND THE PROSPECT IN THE THIRD AND FOURTH QUARTER OF MID 70 TO UPPER $70 LIVE CATTLE, IN MY OPINION, IS VERY STRONG.

Pearson: ALL RIGHT. NOW, THIS HOG MARKET... AS WE LOOK AHEAD, THE LAST USDA REPORT THAT WE HAD MAYBE KIND OF GAVE A HINT THAT WE MIGHT SEE SOME REBUILDING GOING ON. WHAT'S YOUR TAKE NOW AS WE GO ON DOWN THE ROAD TO THE HOG BUSINESS?

Robinson: THAT'S LIKELY. I ALSO NOTED HERE OF LATE SOME REVISIONS IN CANADIAN STATISTICS. CANADA REVISED SOME OF THEIR HOG NUMBERS, MARK, FROM LAST YEAR, 2001, AS WELL AS PROJECTIONS FOR 2002. BOTTOM LINE IS IT APPEARS TO ME THEY ARE IN THE PROCESS OF EXPANDING THEIR HERD SIZE, GROWING THEIR PRODUCTION, WITH A THREAT, I THINK, TO INCREASED PORK PRODUCTION AND IMPORTS INTO THE UNITED STATES THE THIRD AND FOURTH QUARTER OF THIS YEAR. SO AGAIN, AS WE MENTIONED THE LAST TIME, THAT'S THE PERIOD OF TIME I'M MOST CONCERNED ABOUT FOR HOG PRODUCERS. AND I WOULD BE USING FUTURES MARKET VALUES AT THIS LEVEL, FRACTIONALLY HIGHER, TO PROTECT AGAINST LOWER CASH PRICES IN THIRD AND FOURTH QUARTER OF THIS YEAR.

Pearson: ALL RIGHT. VIRGIL, AS USUAL, APPRECIATE YOUR INSIGHTS. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BUT BEFORE WE GO, WE WANT TO REMIND YOU THAT THIS IS THE SEASON OF FESTIVAL FOR PBS STATIONS. IF YOU FIND VALUE IN PROGRAMS LIKE "MARKET TO MARKET," YOU MAY WANT TO INVEST IN YOUR LOCAL PUBLIC TELEVISION STATION. UNTIL NEXT WEEK, I'M MARK PEARSON. THANKS FOR WATCHING. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

Market Analysis: Mar 01, 2002 The grain markets finished the week under pressure due to concerns about export demand.

Tags: agriculture commodity prices markets news