Iowa Public Television

 

Market Analysis: Feb 01, 2002

posted on February 1, 2002


The grain markets finished the week on a lower on bearish ideas on exports and production. For the week, wheat prices were twelve cents lower. Corn futures were down four cents. Soybean futures were four to five cents lower. Soybean meal gained closed $2.10 lower per ton. Cotton futures were 77-cents higher.

In livestock, fed cattle futures were 70-cents higher. Feeder cattle gained 37-cents. The lean hog contract finished 18-cents lower.

In the financials, COMEX gold gained $6.90 per ounce. The Euro finished 29-basis points lower against the dollar. And, the CRB index finished the week a point lower to close at 189.

Here now to lend us his insight is one of our regular market analysts, Virgil Robinson. Welcome back.

Market Analysis: Feb 01, 2002

Robinson: THANK YOU, MARK.

Pearson: WELL, LET'S TALK A LITTLE BIT HERE. THAT MARCH WHEAT, YOU KIND OF SAID, WELL, UP AROUND 309, 310, THAT'S PROBABLY SOME GOOD SALES. AND NOW AT 287, I'LL TEND TO AGREE WITH YOU. FOR THOSE WHO DIDN'T GET THE JOB DONE, ARE WE GOING TO SEE ANOTHER OPPORTUNITY?

Robinson: I THINK SO, MARK. A COUPLE OF THINGS HAVE DEVELOPED HERE JUST THIS WEEK. I NOTED IN A NUMBER OF BUYING STATIONS IN THE HARD-RED WINTER WHEAT AREA AN IMPROVEMENT IN THEIR SPOT BASIS THIS WEEK, MARK, WHICH NORMALLY IS A PRETTY GOOD INDICATION THAT THEY'RE TRYING TO SOURCE PRODUCT. AND I THINK IN JUST THE LAST FEW DAYS, PRODUCERS HAVE KIND OF SHUT OFF THE SPIGOT, AND INVENTORY HAS BEEN HARD TO SOURCE, MARK. SO TO ANSWER YOUR QUESTION, I THINK THAT, COMBINED WITH THE FACT THE DRAWDOWN IN PRICE DID GENERATE SOME NEW BUSINESS -- IN EACH OF THE LAST TWO WEEKS, EXPORTABLE SALES HAVE INCREASED WEEK OVER WEEK, AND I THINK THAT'S CLEARLY A RESULT OF CHEAPER PRICE. SO TO ANSWER YOUR QUESTION, YES, I THINK THERE'S ANOTHER RUN HERE BY THE MARCH AND MAY FUTURES ABOVE $3, AT WHICH POINT I THINK PRODUCERS WILL AGAIN REWARD THE MARKET WITH THEIR PRODUCTION. THEY DID AN AWFULLY GOOD JOB IN THE MONTH OF JANUARY.

Pearson: ALL RIGHT. LET'S TALK ABOUT THE CORN MARKET WHICH, OF COURSE, WAS RISING TOO THERE WITH WHEAT AND HAS NOW BACKED OFF. SOME A LITTLE BIT SOFTER WEEK AGAIN THIS WEEK. WE'RE HEADING TOWARD MARCH 1. TYPICALLY WE'D UNLOAD CORN THERE WHETHER WE WANT TO OR NOT. WHAT'S AHEAD HERE IN THE NEXT THIRTY DAYS?

Robinson: WELL, KIND OF THE SAME OLD SCENARIO HERE, MARK. EXPORT SALES AND SHIPMENTS CONTINUE TO BE GENERALLY DISAPPOINTING. THE ISSUE EVOLVING AROUND CHINA AND THEIR CONVERSATION ABOUT GMO PRODUCT OR LIMITING -- OR ELIMINATING THE IMPORTATION OF GMO PLACED MATERIAL IS OF CONCERN. PRIVATE SOURCES SUGGESTING CORN ACREAGE MAY EXPAND THREE, PERHAPS MORE, MILLION ACRES THIS SPRING, ALL KIND OF KEEPING THE CORN MARKET IN CHECK. FUTURES OFF, AS YOU MENTIONED, 3 TO 4 CENTS THIS WEEK. HOWEVER, CASH VALUES, MARK, DID NOT FOLLOW FUTURES LOWER. BASIS LEVELS AGAIN FIRM. SO THERE IS YET DEMAND, EVEN THOUGH USAGE IS NOT PARTICULARLY LARGE. MY BEST READ HERE IS PROBABLY SOME ADDITIONAL WEAKNESS IN THE NEAR TERM. MAYBE THE SPOT FUTURES CONTRACT DROPS BELOW A COUPLE OF DOLLARS HERE BRIEFLY, BUT I THINK BETWEEN NOW AND END OF MONTH, THERE WILL BE A RESURGENCE HERE, I THINK, IN SOME DOMESTIC DEMAND. MOST OF OUR FEEDERS HAVE CONTINUED TO BUY ONLY AS NEEDED. THE RECENT SPELL OF WEATHER AND THE FORECAST HERE, PERHAPS SOME MORE WINTER-LIKE CONDITIONS THROUGH THE BALANCE OF FEBRUARY, WILL PROMPT, I THINK, SOME PRETTY GOOD DEMAND. THAT, I THINK, COMBINED WITH A LITTLE BETTER EXPORT SCHEDULE THE BALANCE OF FEBRUARY WILL GIVE US AN OPPORTUNITY. AND MARCH FUTURES BACK TOWARDS 215 TO -20, AT WHICH POINT I THINK I WOULD REWARD THE MARKET WITH SOME OLD CROP INVENTORY, MARK.

Pearson: AND QUICKLY, VIRGIL, ON NEW CROP. I THINK WE WERE AROUND 239, 240, UP IN THERE. DECEMBER, YOU RECOMMENDED SALES. HOPEFULLY PEOPLE TOOK ADVANTAGE OF THAT. AGAIN, WE SHOULD GET ANOTHER SHOT COME PLANTING TIME TO MAYBE GET THAT DONE?

Robinson: I THINK ONE THING HERE... NEXT WEEK, MARK, WE'LL HAVE REVISED PRODUCTION AND SUPPLY AND DEMAND ESTIMATES FROM THE USDA, FOLLOWED SHORTLY THEREAFTER BY THEIR ANNUAL OUTLOOK CONVENTION IN D.C. I DON'T THINK THE USDA WILL INDICATE THE KIND OF ACREAGE INCREASE IN CORN THAT THE PRIVATE INDUSTRY IS. THAT MAY BE -- MAY BE THE CATALYST, COMBINED WITH SOME MORE WINTER-LIKE CONDITIONS AND SOME DEMAND PULLS THAT WE HAVEN'T EXPERIENCED OF LATE, TO GIVE US ANOTHER RUN IN DECEMBER FUTURES BACK TOWARDS THAT 245 TO -50 AREA, AT WHICH POINT I THINK DEFENSIVE STRATEGIES ARE APPROPRIATE. SO TO ANSWER YOUR QUESTION, YEAH, I THINK THERE'S AT LEAST ONE MORE OPPORTUNITY THERE.

Pearson: QUICKLY OVER ON THE BEANS, VIRG. AS YOU LOOK AT WHAT'S HAPPENED THERE IN BRAZIL, IT WON'T BE LONG AND THERE WILL BE A HARVEST GOING ON DOWN THERE.

Robinson: ALREADY STARTED, AS A MATTER OF FACT, MARK. UNUSUALLY EARLY THIS YEAR. I THINK UPWARDS OF A MILLION TONS HAVE ALREADY BEEN HARVESTED IN PARTS OF BRAZIL. RESULTS HAVE BEEN, ON AVERAGE, DECENT OR ABOUT NORMAL. THE SIZE OF THAT CROP CONTINUES TO INHIBIT OUR PRICE RECOVERY OR THE OPPORTUNITY FOR PRICE RECOVERY. BASIS LEVELS AGAIN THIS WEEK FIRM, MARK, TO OFFSET THE WEAKNESS IN FUTURES. SO CLEARLY, AS MEASURED BY THAT INDICATOR, THE DEMAND FROM THE DOMESTIC PROCESSOR AND FROM THE EXPORTER IS STRONG. NEXT WEEK I WILL -- I WOULD BE VERY SURPRISED IF THE USDA DOESN'T AGAIN DECREASE THIS YEAR'S PROJECTED CARRYOUT BY ANOTHER 10 OR 20 MILLION BUSHELS. DEMAND IS JUST PHENOMENAL AT THIS POINT IN TIME. NOW, DOES THAT MEAN WE HAVE TO RECOVER AND FUTURES MARKETS PUSH SIGNIFICANTLY HIGHER AT PRESENT? NO. I THINK AGAIN, THE NEARBY CONTRACT, 450 AND HIGHER, TOUGH SLEDDING AND AN OPPORTUNITY TO MOVE THROUGH SOME INVENTORY, MARK.

Pearson: QUICKLY OVER ONTO LIVESTOCK CATTLE INVENTORY REPORT... REAL QUICK, VIRG. MUCH OF A RESPONSE TO THAT?

Robinson: WELL, NOTHING TERRIBLY UNEXPECTED, MARK. BUT I THINK UNDERLYING THE ENTIRE REPORT, TWO THINGS SURFACE. ONE, THERE IS NO EFFORT AT PRESENT TO EXPAND THE HERD SIZE, AND THAT'S, I THINK, ENCOURAGING. NUMBER TWO, MARK, FOR THE SIXTH CONSECUTIVE YEAR, CALF CROP IS SMALLER. I THINK THAT SHOULD UNDERPIN FEEDER VALUES. IF THE ECONOMY IS TRULY BOTTOMING OR IN THE PROCESS OF BOTTOMING, AND THERE ARE SIGNS IN THAT DIRECTION. HOTEL RESTAURANTS AND INSTITUTIONAL DEMAND, MARK, HAS IMPROVED PRETTY SIGNIFICANTLY THE LAST SEVERAL WEEKS. THAT'S AN ENCOURAGING SIGN. SMALLER FED SUPPLIES IDEALLY IMPROVE DOMESTIC DEMAND. IT WOULD BE IDEAL TO SEE JAPAN'S ECONOMY BEGIN TO RECOVER. IF THAT'S THE CASE, MARK, THEN OUR PROJECTIONS, MID 70S IN THE SECOND QUARTER, APPROACHING 80 IN THE THIRD AND FOURTH, I STILL THINK ARE ON TRACK.

Pearson: SOME GOOD NEWS THERE FOR THE CATTLEMEN. ABOUT THIRTY SECONDS, VIRGIL. WHAT'S YOUR TAKE ON PORK?

Robinson: GOOD SOLID DEMAND. YEAR OVER YEAR INCREASE, MARK, IN DISAPPEARANCE. NO SIGNS OF HERD EXPANSION. PRODUCERS ARE RELATIVELY CURRENT, KEEPING MARKETINGS CLEAN. LOW 40S INTO MARCH/APRIL. I THINK A LITTLE HIGHER IN THE MAY/JUNE PERIOD. AND THEN KIND OF LEVELING OFF AND PROBABLY MOVING LOWER FOURTH QUARTER OF 2002. THAT IS THE PERIOD OF MOST CONCERN. ANY RECOVERY -- OR ANY ADDITIONAL PRICE IMPROVEMENT, $2, $3 IN THOSE FUTURES CONTRACTS, I THINK WILL OFFER SOME HEDGING OPPORTUNITIES IN THE FOURTH QUARTER OF THIS YEAR, SPECIFICALLY THE OCTOBER AND DECEMBER FUTURES.

Pearson: VERY GOOD, VIRGIL. THANK YOU SO MUCH.

Robinson: THANK YOU, MARK.

Pearson: THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, BE SURE TO JOIN US AGAIN NEXT WEEK WHEN WE EXAMINE HOW SOME FARMERS ARE COPING WITH THE ASSAULT OF URBAN SPRAWL. UNTIL THEN, I'M MARK PEARSON. THANKS FOR WATCHING. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

Tags: agriculture commodity prices genetic engineering markets news