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Market Analysis: Feb 22, 2002

posted on February 22, 2002


Pearson:THE GRAIN MARKETS FINISHED THE WEEK BARELY ON THE UPSIDE FOLLOWING SOME ENCOURAGING EXPORT NEWS. FOR THE WEEK, WHEAT PRICES GAINS A NICKEL. CORN PRICES WERE FRACTIONALLY HIGHER. SOYBEAN FUTURES GAINED THREE TO FOUR CENTS . SOYBEAN MEAL GAINED $2.30 PER TON. COTTON FUTURES WERE DOWN MORE THAN TWO DOLLARS. IN LIVESTOCK, FED CATTLE FUTURES CLOSED $1.58 LOWER. FEEDER CATTLE FUTURES CLOSED 90-CENTS LOWER. THE LEAN HOG CONTRACT GAINED 28-CENTS. IN THE FINANCIALS, COMEX GOLD CLOSED $5.20 LOWER PER OUNCE. THE EURO GAINED 32-BASIS POINTS AGAINST THE DOLLAR. AND, THE CRB INDEX FINISHED THE WEEK TWO TENTHS OF A POINT HIGHER TO CLOSE AT 191.70. HERE NOW TO LEND US HIS INSIGHT IS ONE OF OUR REGULAR MARKET ANALYSTS, DOUG HJORT. WELCOME BACK.

Market Analysis: Feb 22, 2002

Hjort: THANK YOU, MARK.

Pearson: WELL, LET'S TALK ABOUT THIS. WE HAD A LITTLE BIT OF A BOUNCE, IF YOU CAN CALL IT THAT, IN THE WHEAT MARKET. WE'VE BEEN TALKING FOR A LONG TIME ABOUT THIS SPARK, DOUG. YOU'VE HAD THESE MOMENTS WHERE YOU WERE CONVINCED THAT DEMAND WAS BETTER. IT WAS BETTER, WE GO UP A LITTLE WAYS, AND THE MARKET JUST CAN'T STAY THERE. WHAT'S AHEAD NOW FOR WHEAT? THERE'S GOT TO BE PROBLEMS DOWN THE PLAINS WITH THIS KIND OF A WINTER THAT WE'RE SEEING.

Hjort: WELL, THERE CERTAINLY IS. I'M TOLD BY SOME PRODUCERS, ESPECIALLY IN THE WEST CENTRAL PLAINS AND UP IN NORTH CENTRAL MONTANA, THAT THIS IS THE WORST CONDITION THEY'VE SEEN ON HARD RED WINTER WHEAT IN YEARS. AND YOU KNOW, WE'VE HAD THIS CONDITION BEFORE, YOU KNOW, WORRIED ABOUT THE CROP. OF COURSE, MARCH ISN'T HERE YET, AND THAT'S A MONTH THAT REALLY DOES MAKE OR BREAK THAT CROP OUT THERE, ESPECIALLY IN YEARS WHEN IT IS UNDER STRESS. YOU'RE RIGHT, WE HAD A RALLY, AS I THOUGHT WE MIGHT, BUT IT JUST COULDN'T BE HELD. PERHAPS IT RALLIED TOO QUICK, WENT TOO FAR TOO FAST OR WHATEVER, AND THE FUNDAMENTALS JUST DIDN'T FOLLOW IT ALONG OR SOMETHING. BUT NOW WE'VE GIVEN ALL THAT BACK, PLUS MAYBE ANOTHER NICKEL OR SO. THE MARKET -- THE SUPPLY/DEMAND BALANCES CONTINUE TO TIGHTEN, WILL AGAIN NEXT YEAR, ACCORDING TO THE DATA EARLIER ON THE SHOW HERE COMING FROM USDA THIS WEEK. BUT EVEN THERE, YOU KNOW, NOBODY IS INTERESTED IN RAISING THAT PRICE PROJECTION UNTIL SOMETHING DRAMATIC HAPPENS. AND THAT DRAMATIC I THINK HAS TO BE ABSOLUTE YIELD LOSS, ABSOLUTE LOWER PRODUCTION, BECAUSE THE DEMAND SIDE OF THE EQUATION -- WHEREAS WHEAT DEMAND AND GRAIN DEMAND WORLDWIDE IS GOOD, IT'S NOT EXCESSIVE, AND IT'S NOT THAT MUCH ABOVE LAST YEAR, FOR EXAMPLE, TO TAKE PRICES HIGHER JUST FOR DEMAND REASONS. MAYBE ON THE SOYBEANS OR THE CORN THAT COULD POSSIBLY DEVELOP, BUT NOT ON THE WHEAT. SO WE'VE GOT TO LOOK AT ABSOLUTE CONFIRMATION THAT WE'VE GOT SMALLER PRODUCTION BEFORE PRICES ARE GOING TO RALLY VERY MUCH.

Pearson: LET'S TALK ABOUT THE IMPACT THAT HAS ON CORN, THE SISTER CROP. AS YOU LOOK AT WHAT'S AHEAD FOR THIS CORN MARKET, AGAIN, WE'VE SEEN A LITTLE FLURRY OF ACTIVITY. WE'RE APPROACHING MARCH 1. IT'S TYPICALLY A TIME WHEN A LOT OF CASH PRODUCTS ARE MOVING ANYWAY. TAKE US ON DOWN THE ROAD, DOUG. WHAT DO YOU SEE WITH CORN PRICE AND POTENTIAL ACREAGE?

Hjort: WELL, WITH CORN, WE HAVE SEEN, SINCE THE FIRST PART OF JANUARY, OUR EXPORT SALES HAVE BEEN MOVING ALONG VERY, VERY RAPIDLY. AND RIGHT NOW FOR THE NEXT MONTH OR SO, WE'RE COMPARING TO SOME VERY SMALL NUMBERS A YEAR AGO. NOW, THAT WILL CHANGE AS WE GET ON INTO THE SUMMER, BECAUSE LAST SUMMER WE SOLD CORN AT A VERY RAPID PACE FOR ABOUT TWO AND A HALF MONTHS. SO WE'VE GOT TO DO THE CATCH-UP AND GET ABOVE A YEAR-AGO PACE AND ABOVE USDA'S PROJECTION OF EXPORTS FOR THIS YEAR BEFORE WE CAN REALLY SEE THE CORN PRICE MOVING UP. EVEN THEN, I DON'T LOOK FOR ANY MAJOR RALLIES BECAUSE, YEAH, WE'RE DRAWING STOCKS DOWN A LITTLE BIT, BUT WE'RE STARTING FROM A HIGH ENOUGH LEVEL AND JUST BRINGING THEM DOWN A LITTLE BIT. SO THERE'S STILL GOING TO BE PLENTY OF CORN AROUND. AGAIN, KIND OF LIKE THE WHEAT. IF WE'RE GOING TO SEE ANY MAJOR PRICE RALLIES ON CORN, IT WOULD BE RELATED TO OUR NEW CROP COMING ON, PLANTING PROBLEMS IN THE SPRING OR WEATHER GROWING PROBLEMS DURING THE SEASON. SO WE'RE QUITE A WAYS OFF THERE. I WOULD SEE SOME SMALL RALLIES ON THE CORN TO COME ALONG HERE. BASIS LEVELS SEEM TO BE CONTINUING TO TIGHTEN A LITTLE BIT HERE AND THERE, NOW AND THEN. AND I THINK WE HAVE TO USE SOME VERY MINOR RALLIES A LONG WAY HERE NOW IN THE NEXT TWO OR THREE MONTHS TO MAKE SOME CORN SALES.

Pearson: SOYBEANS, RECORD CROP COMING OUT OF BRAZIL, IT SOUNDS LIKE. THAT'S GOT TO BE WEIGHING ON THIS MARKET.

Hjort: WELL, IT CERTAINLY DOES, BUT IT IS INTERESTING. WE HAVE RECORD WORLD PRODUCTION ON SOYBEANS. WE HAD A RECORD CROP HERE LAST YEAR, RECORD CROP OUT OF SOUTH AMERICA, AND YET WE'RE USING A FEW MORE BUSHELS OF SOYBEANS THAN WHAT WE RAISED. THIS DEMAND IS EXTRAORDINARY. AND AS LONG AS WE HAVE GOOD CROPS BOTH HERE AND IN SOUTH AMERICA, WE CAN RAISE -- WE'VE GOT A LARGE ENOUGH ACREAGE BASE, SO WE WILL RAISE AS MANY SOYBEANS AS WE NEED. AND WE DO HAVE A SMALL CUSHION TO FALL BACK ON, AN ENDING STOCK HERE IN RURAL TRADE, BUT THAT'S NOT VERY LARGE. THE USDA SAID NOW FOR A YEAR FROM THIS COMING FALL, OUR SOYBEAN ENDING STOCK WOULD BE 295 MILLION BUSHEL. IN THE LAST THREE YEARS, THEY'VE HAD THAT PROJECTION BETWEEN 495 AND 595, AND IT'S TURNING OUT TO BE MORE LIKE 250 TO 300, YOU SEE, INSTEAD OF THOSE BIG NUMBERS. SO DEMAND CONTINUES TO MOVE AHEAD FASTER AND STRONGER THAN WHAT THE ESTIMATES ARE EARLY IN THE YEAR, AND PRODUCTION USUALLY COMES IN JUST A LITTLE BIT DOWN. THAT'S HAPPENING IN SOUTH AMERICA TOO. THERE'S ACTUAL COMBINE RESULTS NOW OF YIELD IS 10 PERCENT LESS IN THAT EARLY CROP. SO MAYBE WE'LL SEE THESE NUMBERS COME DOWN JUST A LITTLE BIT. BUT YOU'RE RIGHT, THEY STILL WILL HAVE A RECORD CROP BECAUSE OF INCREASED ACREAGE.

Pearson: AND JUST REAL QUICK AGAIN, WE SAW COTTON DROP OFF $2 THIS WEEK. YOU KNOW, WE HAD A LITTLE BIT OF A HOPEFUL RALLY THERE UP TO THE 35, 36 AREA, NOW BACK TO 33. WHERE ARE WE HEADED THERE? THE USDA WAS VERY -- I DON'T WANT TO SAY NEGATIVE, BUT CERTAINLY LOOKING FOR A FLAT OUTLOOK.

Hjort: YEAH, JUST LACKLUSTER ON IT AGAIN. I WOULD THINK THAT COTTON PRODUCERS HAVE THEIR EYE ON THIS FARM BILL MORE THAN ANYTHING ELSE RIGHT NOW. AND THAT -- DEPENDING ON WHAT COMES OUT OF THAT, ESPECIALLY ON PAYMENT LIMITATIONS, THAT MAY TELL HOW MANY ACRES ARE PLANTED TO COTTON THIS SPRING.

Pearson: ABSOLUTELY. LET'S TALK ABOUT LIVESTOCK, DOUG. YOU'VE BEEN FRIENDLY TO THIS CATTLE MARKET, LONG-TERM FRIENDLY. WE BACKED OFF SOME THIS WEEK. THAT KIND OF SHOOK PEOPLE UP A LITTLE BIT. ARE WE GOING TO BE OKAY? IS THIS CATTLE MARKET GOING TO PICK BACK UP?

Hjort: I THINK WE CAN BUT THERE'S A COUPLE THINGS THAT HAVE TO HAPPEN. NUMBER ONE, THE DRESSED BEEF PRICE RALLIED $11 A HUNDREDWEIGHT, UP TO $120 A HUNDREDWEIGHT, OR SOMETHING LIKE THAT, FOR THE CHOICE. THAT WAS SO HIGH THAT THE RETAILER BACKED OFF THIS WEEK -- LATE LAST WEEK AND THIS WEEK BECAUSE, IF THEY WERE GOING TO CONTINUE TO PAY THAT PRICE FOR ANY EXTENDED PERIOD OF TIME, THEY WOULD HAVE TO RAISE THEIR COUNTER PRICE, BENCH MARK PRICE ON BEEF. THEY DIDN'T WANT TO DO THAT. SO THEY BACKED OFF FROM BUYING. DRESSED BEEF VALUES THIS WEEK DROPPED OFF HARD. THE SECOND THING IS THESE CARCASS WEIGHTS. WE'RE STILL RUNNING 30 POUNDS OVER LAST YEAR. UNTIL WE START PULLING THOSE WEIGHTS DOWN, WE'RE NOT GOING TO TAKE PRICES UP MUCH ABOVE THIS LOW 70 AREA. BY APRIL WE SHOULD BE UP IN THE $75 AREA, BUT I DON'T THINK WE CAN UNLESS WE START WHITTLING AWAY ON THESE WEIGHTS.

Pearson: WE HAVE ABOUT THIRTY SECONDS, DOUG. I DID WANT TO ASK YOU ABOUT THE HOG MARKET. WHAT DO YOU SEE THERE? A LITTLE EXPANSION MAYBE OCCURRING IN THAT HOG MARKET?

Hjort: WELL, IT LOOKS THAT WAY. THE MONTHLY HOGS AND PIGS REPORT FRIDAY SHOWS A PRETTY SUBSTANTIAL 3.5-PERCENT GAIN, OR SOMETHING LIKE THAT, OR MORE PIGS BORN IN JANUARY. THE HOG MARKET I THINK IS ALL RIGHT, BUT IT'S JUST GOING TO BE A VERY UP AND DOWN SORT OF THING FOR SOME TIME, POINTING MORE SIDEWAYS THAN ANYTHING, THOUGH.

Pearson: DOUG HJORT, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BEFORE WE GO, WE'D LIKE TO TAKE A FEW MOMENTS TO UNVEIL FOR YOU THE NEW "MARKET TO MARKET" WEB SITE. NOW, IF YOU VALUE THE NEWS AND ANALYSIS YOU RECEIVE ON THESE BROADCASTS EACH WEEK, YOU'LL WANT TO BE SURE TO VISIT US ON THE INTERNET AS WELL. HERE ARE THE DETAILS. YOU CAN FINE THE SITE AT MARKETTOMARKET.ORG. ALL OF THE BROADCAST MAINSTAYS ARE THERE, INCLUDING RELEVANT NEWS REPORTING, FEATURE STORIES, AND MARKET ANALYSIS. REMEMBER SEEING A STORY THAT PIQUED YOUR INTEREST? YOU'LL FIND THE INFORMATION YOU SEEK IN OUR ARCHIVE AT MARKETTOMARKET.ORG. IF YOU MISSED THE COMMENTS BY ONE OF OUR RESPECTED MARKET ANALYSTS OR SIMPLY WANT TO LISTEN AGAIN, STREAMING AUDIO OF THE COMMODITIES ANALYSIS IS AVAILABLE USING REAL PLAYER. AS AN ADDED BONUS, THE "MARKET TO MARKET" WEB SITE IS OFFERING MARKET PLUS, A WEB SITE EXCLUSIVE. MARKET PLUS WILL PROVIDE EXTRA INSIGHT FROM OUR GUESTS, BEYOND THE SOUND MARKET ANALYSIS YOU'VE COME TO EXPECT FROM OUR BROADCAST. AND BEFORE YOU LEAVE THE WEB SITE, BE SURE TO SIGN UP FOR THE "MARKET TO MARKET" E-MAIL UPDATE. YOU'LL RECEIVE A WEEKLY HEADS UP ON TOPICS BEING DISCUSSED ON THE UPCOMING PROGRAM. FIND IT ALL AT MARKETTOMARKET.ORG. THERE YOU HAVE IT, "MARKET TO MARKET," YOUR FULL-SERVICE PROVIDER OF NEWS AND ANALYSIS FOR RURAL AMERICA. JOIN US AGAIN NEXT WEEK WHEN WE'LL EXAMINE THE NEXT PHASE OF FARM BILL DELIBERATIONS. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA


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