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Market Analysis: Jan 18, 2002

posted on January 18, 2002


The grain markets finished a mixed roller-coaster week as worldwide weather continues to impact the pits in Chicago. For the week, wheat prices were down a dime. Corn futures were a fraction to a penny lower.

Soybean futures were volatile through the week and finished two to three cents higher. Soybean meal see-sawed through the week, finishing $3.30 higher per ton.

Cotton futures were 29-cents higher.

In livestock, fed cattle futures gained $1.68. Feeder cattle closed 35-cents lower. The lean hog contract gained forty cents.

In the financials, Comex gold closed $4.30 lower per ounce. The Euro gained 72-basis points against the dollar. The CRB index finished the week nearly four points lower to close at 190.90.

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

Market Analysis: Jan 18, 2002 LET'S TALK ABOUT THIS UP-AND-DOWN MARKET. IT GETS KIND OF ENOUGH TO GET A LITTLE BIT OF BLOOD GOING HERE. IN THE PITS OF CHICAGO, WHAT'S YOUR OUTLOOK NOW? LET'S TALK ABOUT THIS WHEAT MARKET FIRST. WE CLOSED CHICAGO BELOW $3. IS THAT SIGNIFICANT?

Pfitzenmaier: YEAH, THERE WAS PRETTY SIGNIFICANT SUPPORT THERE IN THAT 98.75 TO 99 AREA, SO CLOSING UNDER THAT, SEVERAL OF THE TECHNICAL INDICATORS HAVE TURNED LOWER ON THE WHEAT. WHEAT MAY STRUGGLE HERE. IT COULD EVEN ESSENTIALLY HAVE A PULLBACK IN THAT MARCH WHEAT, BACK IN THAT 289 TO 291 AREA. IT WOULDN'T BE A BIG SURPRISE. I WOULD GUESS IT'S PROBABLY GOING TO FIND FAIRLY GOOD SUPPORT AT THAT AREA. BUT IT'S PROBABLY DONE ALL IT'S GOING TO DO ON THE UPSIDE FOR A WHILE HERE, AT LEAST UNTIL WE GET SOME SPRING WEATHER OR SOME BETTER DEMAND NUMBERS. YOU KNOW, WE REALLY HAVEN'T HAD THAT GREAT OF DEMAND NUMBERS ON THIS WHEAT. THAT NEEDS TO HAPPEN IN ORDER TO BE ABLE TO SUSTAIN THAT OR AT LEAST GO UP AND TAKE OUT THOSE HIGHS.

Pearson: AS FAR AS SELLING OPPORTUNITIES AT THIS STAGE OF THE GAME, I GUESS WE JUST SIT TIGHT.

Pfitzenmaier: YEAH, IF YOU'RE WILLING TO RIDE THAT OUT. I MEAN THERE'S PROBABLY MORE -- IN THE SHORT RUN, THERE'S PROBABLY MORE DOWNSIDE THAN UPSIDE. SO IF YOU NEED CASH SHORT-TERM, YOU PROBABLY BETTER GET WITH GETTING IT SOLD. IF YOU CAN WAIT A WHILE, YOU'LL PROBABLY SEE IT BOUNCE BACK UP AGAIN.

Pearson: ALL RIGHT, LET'S TALK ABOUT THIS CORN AND SOYBEAN MARKET. AGAIN, FROM WHAT WE'VE SEEN HERE IN THE LAST COUPLE OF YEARS, THIS IS A VOLATILE WEEK WHEN WE MAKE THESE 2-, 3-, 4-CENT MOVES, 5, 6 CENTS IN BEANS. SO WE'VE HAD THAT THIS WEEK. WE'VE BEEN THROUGH IT. WHAT'S AHEAD?

Pfitzenmaier: WELL, IN THE BEAN MARKET, WE'RE IN A WEATHER -- WE'RE IN JUST A GOOD OLD-FASHIONED WEATHER MARKET. JUST LIKE WE HAVE IN THE SUMMERS UP HERE, WE'VE GOT THIS SMALL, DEFINED AREA IN RIO GRANDE DO SUL, BRAZIL, THAT'S DRY, THAT EVERYBODY IS CONCERNED ABOUT. AND WE JUST KEEP RATCHETING UP THESE BEANS. YOU HAD THE FUNDS IN A VERY SHORT POSITION. THEY HAVE BEEN SPENDING TWO WEEKS HERE COVERING THOSE POSITIONS. WE'VE RALLIED THE MARKET UP INTO THE RESISTANCE AREAS. NOW WE'RE STARTING TO GET A LITTLE SHIFT IN THE FORECAST. AND NOW WE'RE GOING TO SIT HERE AND SEE OVER THE WEEKEND IF WE WALK IN TUESDAY AND IT'S RAINING OR A BIG RAIN FORECAST, WE'RE PROBABLY GOING TO BE UNDER SOME PRESSURE. IF IT'S DRY, THEN WE'RE PROBABLY GOING TO CONTINUE THIS UP. I DO THINK THE UPSIDE IS PROBABLY FAIRLY LIMITED, MAYBE 10 TO 15 CENTS BEYOND WHERE WE'RE AT RIGHT NOW AND NOT MUCH MORE THAN THAT. SO THIS DEFINITELY HAS TO BE USED AS A SELLING OPPORTUNITY, THIS BEAN MARKET, FOR ANY BEANS YOU WANT TO GET MOVED THROUGH THE WINTER HERE.

Pearson: ALL RIGHT. NOW, WHAT'S YOUR FEELING, THEN, FOR CORN?

Pfitzenmaier: CORN KIND OF GOT SUCKED ALONG. IF YOU LOOK AT IT, CORN HAS WORKED HIGHER BUT NOT A LOT HIGHER. THE UPSIDE POTENTIAL THERE I THINK IS FAIRLY LIMITED TOO. AGAIN, PROBABLY A GOLDEN OPPORTUNITY TO START GETTING SOME OF THAT CORN MOVED. SOME OF THESE TECHNICALS ON THE CORN ARE STARTING TO GET A LITTLE SLOPPY HERE TOO, SO I GUESS I WOULDN'T STAY REAL MARRIED TO LONG CORN POSITIONS. WE RAN INTO THAT RESISTANCE AT 214.5 TO 215.5 ON THE MARCH CORN, FELL AWAY FROM THAT PRETTY RAPIDLY. AND IT'S JUST GOING TO BE A VERY DIFFICULT AREA TO GET THROUGH. YOU START RUNNING OUT OF DEMAND. DEMAND CONTINUES TO LAG BEHIND. YOU KNOW, WE'D REALLY LIKE TO GET SOMETHING GOING IN CORN, BUT YOU CAN'T WHEN THESE EXPORTS KEEP LAGGING. WE HAD A GOOD WEEK THIS WEEK, BUT YOU'D NEED A SUSTAINED SEVERAL WEEKS OF THAT FOR THE MARKET TO GET ITS REAL CONFIDENCE BACK HERE.

Pearson: IT'S INTERESTING, I'VE BEEN OUT TALKING TO SEVERAL FARM GROUPS HERE THIS LAST WEEK AROUND THE COUNTRYSIDE. AND AS I'VE BEEN OUT THERE TALKING TO FOLKS, I'VE NOTICED A COMPLACENCY OUT THERE REGARDING MARKETING, AND A BIGGER FOCUS IS REALLY ON THE FARM BILL. PEOPLE ARE MORE FOCUSED ON THE FACT THAT THERE IS NO LDP IN MANY AREAS RIGHT NOW ON CORN. AND THERE STILL REMAINS $1.08 LDP, ALTHOUGH IT SHRUNK; IT SEEMS THE FOCUS HAS BEEN MOVING TOWARDS THAT. YET WE'VE KIND OF HAD SOME MARKETING OPPORTUNITIES OUT HERE, PARTICULARLY THE LAST TWELVE MONTHS.

Pfitzenmaier: YEAH, THAT'S AN AREA OF CONCERN TO ME ANYWAY, AS WE SEEM TO HAVE BECOME LDP CENTRIC HERE AND WE'VE SORT OF IGNORED SOME FABULOUS OPPORTUNITIES FOR FORWARD PRICING. YOU KNOW, YOU'VE GOT THESE FABULOUS INSURANCE CONTRACTS THAT WILL GIVE PEOPLE SOME CONFIDENCE THAT THEY'RE GOING TO HAVE A CROP. YOU'VE GOT SEED TECHNOLOGY THAT'S MADE OUR CROP A LITTLE MORE CONSISTENT AND I THINK CREATED OPPORTUNITIES FOR US TO BE A LITTLE MORE AGGRESSIVE IN FORWARD PRICING. YOU LOOK AT DECEMBER CORN UP IN THAT 245 AREA VERSUS THE LOAN RATE, I MEAN THAT'S 50, 60 CENTS OF OPPORTUNITY. AND DESPITE THAT, WE SPEND A LOT OF TIME WORRYING ABOUT WHETHER I'VE GOT A 10-CENT LDP OR AN 8-CENT LDP. WE'RE GIVING UP DIMES HERE AND SPENDING A LOT OF TIME WORRYING ABOUT PENNIES. AND I THINK OUR FOCUS HAS BECOME A LITTLE SKEWED BY THIS GOVERNMENT PROGRAM.

Pearson: THAT'S RIGHT. WE NEED TO RESET OUR PARAMETERS A LITTLE BIT, BUT THERE'S STILL SOME OPPORTUNITIES OUT THERE.

Pfitzenmaier: ABSOLUTELY. AND I THINK ACREAGE WISE WE'RE STARTING TO SEE A LITTLE SHIFT, BECAUSE WE'VE GOT A FARM PROGRAM THAT'S SET UP THAT REWARDS YOU SO MUCH FOR YIELD THAT FARMERS ARE REALLY CONCENTRATING ON WHERE'S THE BEST YIELD GOING TO COME FROM. IS IT GOING TO COME IN CORN OR GOING TO COME IN BEANS? FOR THE LAST -- RECENTLY ANYWAY, THE CORN HAS BEEN OUTPERFORMING THE BEANS, AND I THINK THERE'S A REAL CHANCE WE'RE GOING TO SEE SOME SHIFTING OF ACREAGE FROM BEANS TO CORN THIS YEAR SIMPLY BECAUSE YIELD IS SO IMPORTANT IN THIS FARM PROGRAM.

Pearson: WHICH, OF COURSE, RESULTS IN MORE PRESSURE NEXT YEAR.

Pfitzenmaier: ABSOLUTELY.

Pearson: PLAN ACCORDINGLY. LET'S TALK A LITTLE BIT ABOUT THE LIVESTOCK BUSINESS. THE FED-CATTLE CONTRACTS... I THINK WE'VE GOT 7s IN FRONT OF ALL THE ONES ON THE BOARD RIGHT NOW. ARE YOU FEELING A LITTLE BIT OF A TURNAROUND IN THIS CATTLE TRADE?

Pfitzenmaier: YEAH. CATTLE HAVE GAINED EXCEPTIONALLY WELL, BUT WE'VE BEEN MOVING CATTLE. DEMAND IS STARTING TO PICK BACK UP AGAIN. MARKETINGS ARE UP A LITTLE BIT. I GUESS, MAYBE WE'VE GOT A MONTH OR SO HERE WHERE WE'RE GOING TO KIND OF STRUGGLE. WE PUT $2 ON THE CASH THIS WEEK. EXPECTATIONS ARE THAT THAT'S GOING TO KIND OF CONTINUE HERE. SO, YEAH, IT LOOKS TO ME, IF WE CAN SUSTAIN THIS DEMAND, IF WE CAN REALLY TURN THE ECONOMY AROUND HERE IN THE SECOND OR THIRD QUARTER. I THINK THERE'S SOME OPPORTUNITIES FOR CATTLE TO RALLY $3 OR $4. NOW, HAVING SAID THAT, YOU STILL HAVE THE RISK OF TERRORIST ATTACKS OR, YOU KNOW, THE CATASTROPHIC THING THAT COULD HAPPEN. SO A LOT OF PRODUCERS, I THINK, ARE AFRAID OF THAT ENOUGH THAT WE'RE GOING OUT AND PUTTING SOME SORT OF FLOOR PROTECTION DISASTER INSURANCE, IF YOU WILL, UNDER THIS CATTLE MARKET. HOPE YOU DON'T NEED IT. HOPE IT'S A WASTE OF THE PREMIUM YOU SPEND AND THAT THE OPTIMISM THAT WE'VE GOT HERE SORT OF COMES TO FRUITION.

Pearson: ALL RIGHT. NOW, SO GOOD NEWS ON THE CATTLE. HOGS, AGAIN, REALLY NOT A BAD WEEK THERE EITHER.

Pfitzenmaier: NO, ALL THE FACTORS THAT ARE POSITIVE FOR THE CATTLE ARE ALSO POSITIVE FOR THE HOGS. THAT DEMAND FIGURE IS CERTAINLY A POSITIVE FOR THAT MARKET. IT'S KIND OF TURNED AROUND. THE CASH MARKET HAS FIRMED UP. I THINK THERE'S SOME UPSIDE POTENTIAL IN THAT HOG MARKET ALSO. YOU HAVE TO BE A LITTLE ENCOURAGED. YOU KNOW, THAT LAST PIG REPORT SHOWED KEPT FOR BREEDING DOWN A PERCENT, SHOWED PIGS SAVED PER LITTER OFF A LITTLE BIT. AND YOU START TO WONDER IF MAYBE SOME OF THESE FACILITIES -- BREEDING FACILITIES AREN'T GETTING A LITTLE AGE ON THEM AND MAYBE SOME OF THE BENEFITS OF THEIR NEWNESS ARE STARTING TO WEAR OFF. AND MAYBE THE HOG MARKET HAS GOT SOME REASONS TO BE OPTIMISTIC IN THE SHORT RUN HERE.

Pearson: ARE YOU GETTING A LITTLE, MAYBE, HEDGING TOWARDS -- MAYBE LOOKING AT SOME HEDGES, THOUGH, LATE SPRING, SUMMER?

Pfitzenmaier: WELL, THE SAME ISSUE, REALLY. I THINK IT CERTAINLY WOULD BE BENEFICIAL TO HAVE SOME KIND OF A FLOOR UNDERNEATH YOU AND SOME SORT OF DISASTER INSURANCE AND HOPE THAT YOU DON'T NEED IT.

Pearson: VERY GOOD. TOMM PFITZENMAIER, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." JOIN US AGAIN NEXT WEEK WHEN WE'LL EXAMINE THE COURTING OF RURAL VOTERS IN THE COMING ELECTION YEAR AND HOW THAT MIGHT IMPACT THE FARM BILL. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK. CAPTIONS BY: MIDWEST CAPTIONING DES MOINES, IOWA

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