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Market Analysis: Feb 15, 2002

posted on February 15, 2002


The grain markets continue to focus on world demand and potential production. For the week, wheat prices were down more than six cents. Corn prices were fractionally unchanged. The soybean market gained more than eight cents. Soybean meal gained $1.10 per ton. Cotton futures were down $2.69.

In livestock, fed cattle futures closed the week 32-cents lower. Feeder cattle finished $1.35 lower. The lean hog contract closed the week $2.82 lower.

In the financials, COMEX gold posted a $5.10 per ounce loss. The Euro finished 3 basis points lower against the dollar. And, the CRB index closed a quarter point lower to finish at 191.50.

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

Market Analysis: Feb 15, 2002 SUE, HOW ARE YOU DOING?

Martin: GREAT, MARK.

Pearson: ALL RIGHT. WELL, LET'S TALK ABOUT THIS THING. WHEAT DOWN, BEANS UP. LET'S THAT TALK WHEAT FIRST. WHEAT MARKET UNDER SOME PRESSURE HERE AGAIN. IT ONLY SEEMED LIKE YESTERDAY WE WERE ABOVE $3, AND NOW WE'RE BACK IN THAT $2.70 RANGE IN CHICAGO. WHAT'S AHEAD?

Martin: WELL, I THINK THAT THE WHEAT MARKET IS ABOUT CLOSE TO ITS LOWS. I DO THINK WE HAVE A LITTLE BIT LOWER TO GO THIS NEXT WEEK. I LOOK FOR THE MARCH CHICAGO WHEAT TO GET DOWN TO ABOUT 267.5 TO 268, -69, SOMEWHERE IN THERE. I LOOK FOR THE MAY CONTRACT TO GET TO 277.5. NOW, THAT SHOULD BE LIKE A BRICK WALL. THAT SHOULD STOP THAT MARKET'S DECLINE. ALSO, THAT WOULD COINCIDE WITH THE DOUBLE LOW ON THE CONTRACT LOWS WITH THE MAY CONTRACT OR FUTURES. I THINK AT THAT POINT, THEN THE MARKET IS GOING TO TURN AROUND AND START TO GIVE US A NICE RALLY IN THE WHEAT. WHEAT, BACK IN DECEMBER WHEN IT BROKE OUT ON THE WEEKLY CHARTS AND WENT UP AND TOOK OUT ALL THE HIGHS BACK TO 1998, SHOWED ITS HAND. IT TIPPED ITS HAND. BUT EVERYBODY WAS ON IT TOO QUICKLY, AND EVERYBODY GOT HIPED UP ABOUT IT. AND, OF COURSE, WE'RE INTO THIS TIMING WHERE THE MARKET NORMALLY HAS TROUBLE IN THE MONTH OF FEBRUARY, SO WE'RE DOING THAT AND EVERYBODY IS GETTING DISILLUSIONED. I THINK THAT WILL CHANGE. BUT IN THE FRONT OF US, AS WE GO THROUGH THIS NEXT WEEK, I WOULD LOOK FOR A LITTLE MORE WEAKNESS.

Pearson: ALL RIGHT, AGAIN, NOT A SALES OPPORTUNITY IN HERE.

Martin: NO, I WOULD NOT SELL AT THIS TIME. TRY TO HANG ON HERE. THERE'S SOMETHING BETTER COMING.

Pearson: ALL RIGHT. LET'S TALK ABOUT CORN. THE CORN MARKET, AGAIN, NOT MUCH MOVEMENT THIS WEEK. BUT IT SEEMS LIKE 2, 3 CENTS IS A BIG MOVE ANYMORE IN THESE GRAINS.

Martin: IT'S LULLING US TO SLEEP IS WHAT IT'S DOING. WHEN I LOOK AT THE CORN MARKET, HERE AGAIN I THINK WE HAVE SOME LOWER LOWS TO COME, BUT I THINK WE'LL SEE THESE LOWS BEFORE THE END OF FEBRUARY. IT COULD TAKE US INTO MAYBE THE SECOND OF MARCH OR SOMETHING LIKE THAT. BUT THEN I THINK THE MAY CORN CONTRACT IS GOING TO TURN AND START TO MOVE HIGHER. I SEE SUPPORT ON THE DEC. CORN ABOUT MAYBE 229.5, 229, OF COURSE, SOMETHING LIKE THAT. ON THE JULY, 216, -16.5. AND ON THE MARCH CONTRACT, AROUND 201.5, 202. SO NOT MUCH UNDER THAN WHAT WE'VE ALREADY BEEN TO. I HAVE A FEELING THIS IS A MARKET THAT IS VERY HEAVILY SHORT WITH FUNDS. THEY'VE RELINQUISHED SOME OF THOSE SHORTS THIS PAST WEEK. BUT I THINK EVERYBODY IS SO COMFORTABLE BEING SHORT THAT THEY'RE ALMOST GETTING COMPLACENT BEING SHORT. AND I THINK THIS IS A MARKET THAT CAN TAKE THEM BY SURPRISE AS WE TURN AND START TO MOVE INTO THE MONTH OF MARCH. OF COURSE, THE BIGGY WILL BE WE'LL START TALKING ABOUT ACRES AS WE ROLL INTO MARCH, AND WE'RE STILL UP FOR GRABS UNTIL WE KNOW WHAT A FARM BILL IS GOING TO BE LIKE.

Pearson: LET'S TALK ABOUT SOYBEANS, THEN. SOYBEANS ALSO -- TALK ABOUT GETTING LULLED TO SLEEP; THEY'VE BEEN DOING IT TO US. WHAT'S YOUR TAKE ON SOYBEANS? WE HAD A LITTLE UP MOVE THIS WEEK. BUT, AGAIN, WE'RE AROUND MARCH 1, PEOPLE ARE SELLING THE CROP, TRYING TO MAKE THE LAND PAYMENT, THE RENT PAYMENT, WHATEVER. WE TYPICALLY DON'T SEE A LOT OF MOVEMENT OUT HERE IN THIS TIME PERIOD.

Martin: WELL, I THINK WHEN I LOOK AT THE CASH BEANS, I'M STARTING TO ESTIMATE THAT WE'RE SOMEWHERE BETWEEN PROBABLY 60 TO 70 PERCENT SOLD BY THE FARMER, WHICH IS MEANING THAT THAT'S A LOT OF BEANS EARLY MOVING INTO THE COMMERCIAL'S HANDS, AND THAT'S ANOTHER REASON WHY I THINK WE HAVE SOME POSITIVE POTENTIAL FOR THE BEAN MARKET. THE ONLY NEGATIVE THING I SEE FOR BEANS IS THE LARGE SOUTH AMERICAN CROP, BUT WE'VE HAD THAT THE LAST TWO YEARS. NORTHERN BRAZIL WILL PROBABLY HAVE HARVESTED ABOUT EIGHT MILLION METRIC TONS OF BEANS BY THE FIRST OF MARCH, BUT THAT'S OUT OF 42.5 ESTIMATED CROP FOR BRAZIL. ARGENTINA IS HAVING SOME PROBLEMS WITH SOME DRYNESS. THEY FINISHED PLANTING THEIR BEAN CROP THE END OF JANUARY. THAT CROP WILL PROBABLY START BEING HARVESTED AS WE GO TOWARD APRIL. SO IF THEY CONTINUE WITH SOME DRYNESS AND WE CRANK IN A LITTLE HEAT -- AND WE DID START TO SEE SOME MOISTURE TAKEN OUT FOR THEM FOR THE NEXT WEEK -- YOU COULD BE LOOKING AT A CROP PRODUCTION THAT STARTS TO REDUCE A LITTLE BIT FOR ARGENTINA.

Pearson: LET'S TALK ABOUT ONE OTHER COMMODITY THAT'S BEEN UNDER PRESSURE AND CONTINUED THIS WEEK, AFTER A LITTLE BIT OF A BOUNCE, IS THE COTTON MARKET.

Martin: WELL, IT CERTAINLY HAS. NOW, COTTON DID HAVE SOME VOLATILITY THIS WEEK. IN FACT, IT WIPED OUT THE LAST TWO MONTH'S HIGHS AND THEN TURNED AROUND AND FAILED. BUT I THINK IT'S TELLING US THAT THE MARKET IS STARTING TO TIP ITS HANDS. I THINK A LOT OF MARKETS ARE STARTING TO DO THIS, WHERE WE'RE SHOWING THE EARLY SIGNS OF LOWS. AND I THINK THE COTTON MARKET HAS GOT SOME LOWS IN HERE. I DON'T SEE IT GOING MUCH LOWER. IN FACT, I LOOK AT THE MAY CONTRACT AND I THINK WE'RE GOING TO TAKE THOSE FUTURES UP TO AROUND 43, 44 CENTS, AND POSSIBLY THE JULY UP TO AROUND 50.

Pearson: WHAT DO YOU THINK IS GOING TO BE THE CATALYST THAT'S GOING TO DRIVE THESE COMMODITIES BACK TO THE UPSIDE? WE'VE BEEN IN REALLY A FIVE-YEAR SPIRAL HERE WITH PRICES UNDER PRESSURE.

Martin: WELL, FIRST OF ALL, LET'S JUST TAKE CORN, AN INSIDE RANGE HERE LAST YEAR. BEANS HAVING A LOWER LOW AT THE BEGINNING OF THIS YEAR, TAKING OUT LAST YEAR. THE CONTRACT OF JULY WILL BE INTERESTING TO WATCH TO SEE IF IT CAN TAKE OUT LAST YEAR'S LOWS -- OR I SHOULD SAY THE 1999 LOWS, WHICH IS 401. I DON'T LOOK FOR THAT TO HAPPEN. TO BE HONEST WITH YOU, I THINK THE 415 AREA IS GOING TO STOP US AND THE 420 AREA, THAT 5-CENT RANGE IS OUR LOWS. AND I DON'T SEE -- I HEAR A LOT OF TALK ABOUT $3 IN FRONT OF BEANS. I DON'T BELIEVE IT MYSELF. THINK IT'S GOING TO TAKE A HUGE CROP COMING OUT OF THE U.S. TO PUT US DOWN THERE. AND I THINK THAT WHEN YOU LOOK AT THE WEATHER -- AND THE EQUATORIAL WATERS ARE WARMING. AND IF YOU TAKE YEARS IN WHICH -- OF COURSE, OVER THE LAST 32 YEARS, HALF OF THEM WERE WARMING. AND IF YOU TAKE THOSE YEARS AND YOU MOVE IN A SEASONAL PATTERN AS YOU COME INTO THE YEAR, THE PATTERN FAVORS HIGHS AS YOU GO INTO -- THEY CAN BE APRIL, MAY, OR JUNE, BUT THEY REALLY FAVOR THE MONTH OF JUNE. AND I LOOK FOR HIGHS THIS YEAR, HIGHER THAN WHAT WE'VE SEEN SO FAR, SO TAKING OUT THE JAN. HIGHS IN JUNE. AT THAT TIME I WOULD CERTAINLY BE LOOKING AT DOING SOME PRICING, AND I LOOK FOR THE MONTH OF JULY AND AUGUST TO BE DOWN. BY LATE AUGUST, I WOULD LOOK FOR A LOW. WELL, INTERESTINGLY ENOUGH, THOSE YEARS THAT FAVOR WARMING GOING TOWARDS AN EL NINO DO FAVOR THAT PATTERN AS WELL. AND THEN THE LAST PART OF THE YEAR, IF THE EL NINO CRANKS UP FOR SOUTH AMERICA, THEY COULD BE COMING INTO A DRY PLANTING SEASON. IT COULD SET THIS MARKET ON A COUNTERSEASONAL MOVE THROUGH THE FALL.

Pearson: OKAY. LET'S TALK LIVESTOCK. THE FED-CATTLE MARKET LOOKS PRETTY GOOD. I MEAN, WE'VE SHRUNK THIS COW HERD AGAIN THIS YEAR. I WOULD HOPE THAT THE GENERAL ECONOMY PERKING UP IS ALSO GOING TO DO ITS THING. WHAT'S YOUR OUTLOOK NOW FOR BEEF PRICES?

Martin: WELL, I THINK THAT THE CATTLE PRICES HAVE GOTTEN A LITTLE OVERDONE. WE'RE GOING INTO LENT, AND SO I THINK WE'RE GOING TO SEE THE CUTOUT PEAK OUT HERE THIS WEEK. WE'RE GOING TO TAKE PRICES BACK LOWER HERE NEXT WEEK ON CATTLE. AND THEN I THINK WE'LL TURN AND COME BACK STRONGER. THE APRIL CONTRACT ON THIS BREAK HERE THIS NEXT WEEK I THINK IS A BUYING OPPORTUNITY. I LOOK FOR HIGHER PRICES, MAYBE AROUND 77 CENTS, 77.50, POSSIBLY AS HIGH AS 78.5 ON THE APRIL FUTURES. AND I WOULD NOT EXPECT A HIGH UNTIL LATE MARCH AT THE EARLIEST AND POSSIBLY NOT UNTIL ABOUT APRIL 11.

Pearson: ALL RIGHT. THE HOG MARKET?

Martin: THE HOG MARKET IS DOING REALLY WHAT IT OUGHT TO BE DOING. THIS IS PRETTY SEASONAL. BUT USUALLY STARTING ABOUT NOW, THIS NEXT WEEK AS WE GO INTO THE END OF THE MONTH, IS YOUR WINDOW. SO WE HAVE ABOUT A TWO-WEEK WINDOW HERE, BUT IT COULD BE THIS NEXT WEEK THAT CASH AND CUTOUT BOTTOM AND START HIGHER. AND I WOULD NOT BE REAL NERVOUS WITH THE HOG MARKET. I THINK APRIL HOGS HAVE HIGHER HIGHS COMING. I LOOK AT PRODUCTION AND I THINK THAT OUR SLAUGHTER IS GOING TO DROP ABOUT ONE PERCENT, MAYBE TWO, BUT I THINK ABOUT ONE PERCENT HERE AS WE GO IN THE SECOND QUARTER. EXPORTS ARE VERY GOOD. JAPAN HAS BEEN AN AVID BUYER OF PORK. I LOOK AT THE MARKET AS BEING IN GOOD SHAPE. I THINK THIS IS NOTHING MORE THAN A SEASONAL PATTERN DOWN AS WE PICK UP SOME SLAUGHTER HERE, AND I THINK WE'RE GOING TO TURN AND MOVE HIGHER, PROBABLY TAKING APRIL HOGS TO 65 CENTS.

Pearson: VERY GOOD. SUE MARTIN, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE EXAMINE HOW A GROUP OF FARMERS ARE USING THE NET TO MARKET TO A LUCRATIVE NITCH. UNTIL THEN, I'M MARK PEARSON. THANKS FOR WATCHING. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

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