Iowa Public Television

 

Market Analysis: Jan 04, 2002

posted on January 4, 2002


The big news in the grain pits of Chicago was the excitement generated in the wheat pit due to crop problems and changing world demand. For the week, wheat prices gained more than 16-cents. Corn futures were a fraction to more than a penny higher. Soybean futures were a quarter to more than a penny lower. Soybean meal closed the week 40-cents lower per ton. Cotton futures were 62-cents higher.

In livestock, fed cattle futures were down 78-cents. Feeder cattle futures were down 73-cents. The lean hog contract finished one dollar lower. In the financials, COMEX gold gained $2.40. The Euro gained 95-basis points against the dollar. The CRB index finished the week a half point higher to close at 193.30.

 

Market Analysis: Jan 04, 2002

Pearson:HERE NOW TO LEND US HIS INSIGHT IS ONE OF OUR REGULAR MARKET ANALYSTS, DOUG HJORT. WELCOME BACK.

Hjort:THANK YOU, MARK.

Pearson:WELL, LET'S TALK A LITTLE BIT ABOUT THIS WHEAT MARKET. CERTAINLY A BIG MOVE IN CHICAGO THIS WEEK. PEOPLE ARE LOOKING AT SOME REAL CRITICAL AREAS FOR THESE WHEAT PRICES AND, OF COURSE, THE INTEREST IS WHETHER OR NOT THAT GETS SPILLED OVER TO THE CORN AND TO THE SOYBEAN PITS. LET'S TALK FIRST ABOUT WHAT'S DRIVING THIS WHEAT MARKET.

Hjort:WELL, AS YOU SAID A LITTLE BIT AGO, THERE'S A LITTLE BIT OF A CHANGE OR A REFOCUSING, ANYWAY, OF DEMAND FACTORS AND SUPPLIES, AS FAR AS THAT GOES. A LITTLE BIT OF CROP CONCERNS IN THE NORTHERN HEMISPHERE. BUT A LOT OF THAT, YOU WON'T KNOW UNTIL SPRING AND THE CROP TRIES TO GROW, SO IT'S A TALKING POINT NOW BUT THAT'S ABOUT IT. THE BIGGEST THING, THOUGH, THAT'S HAPPENING HERE IS ON THE TECHNICAL SIDE OF THE MARKET. WE'VE HAD ENOUGH FUNDAMENTAL NEWS HERE TO PUSH PRICES UP TO AND INTO STOPS JUST ABOVE THE MARKET. SUE MARTIN IDENTIFIED THAT AREA VERY WELL LAST WEEK ON THE SHOW. AND THIS WEEK, WE PUSHED ON THROUGH THOSE KEY RESISTANCE AREAS ON MONTHLY CHARTS. AND THEREBY, THE MARCH FUTURES CLOSING ON FRIDAY WAS THE HIGHEST SINCE APRIL OF 1998. NOW, THAT'S A LONG, LONG TIME TO BE DRIFTING ON SIDEWAYS JUST WALLOWING AT THESE LOWER PRICES. THE TECHNICAL MEANING OF ALL THAT IS, BY BREAKING THAT AND HAVING SPENT SO MUCH TIME GOING SIDEWAYS, THERE COULD BE A MAJOR, MAJOR PRICE RALLY COMING IN THE WHEAT MARKET. NOW, UNDERSTAND THAT'S ON MONTHLY CHARTS, SO IT DOESN'T HAVE TO HAPPEN NEXT WEEK OR THE WEEK AFTER. IT COULD HAPPEN TWO, THREE, FOUR MONTHS OUT BEFORE THE PLAY REALLY PLAYS OUT COMPLETELY. SO THAT PUTS US INTO OUR SPRING HERE. AND IN THE NORTHERN HEMISPHERE, WE'D SEE WHEAT COMING OUT OF DORMANCY AND WE WOULD START TO SEE, IF THERE'S A PROBLEM THERE, A SERIOUS PROBLEM, THEN, OF COURSE, THAT SUPPLY, VERY TIGHT SUPPLY/DEMAND RELATIONSHIP NOW WOULD BECOME EVEN TIGHTER AS WE LOOK INTO THE NEW YEAR. ONE OTHER FACTOR, AND IT APPLIES TO THE CORN AS WELL AS THE WHEAT. THIS YEAR -- AS A MATTER OF FACT, IN THE LAST TWO YEARS, EVEN THOUGH OUR YIELDS WORLDWIDE, TOTAL GRAIN YIELDS, HAVE BEEN RIGHT AT RECORD-HIGH LEVELS, WE ARE CONSUMING A CONSIDERABLY MORE AMOUNT OF GRAINS THAN WE ARE PRODUCING WORLDWIDE, DRAWING ENDING STOCKS DOWN RATHER SIGNIFICANTLY. NOW, WE STILL HAVE PLENTY OF GRAIN LEFT RIGHT NOW TO SUPPLY THE WORLD. BUT GOING INTO THE NEW YEAR, IF WE DON'T INCREASE ACREAGE ON GRAINS -- AND THE CHANCES ARE THAT WE WILL NOT VERY MUCH ANYWAY -- YIELDS WILL HAVE TO BE RIGHT UP HERE AT THIS RECORD-HIGH LEVEL ONCE AGAIN, AND EVEN SO, WE'RE GOING TO CONSUME MORE, DRAWING STOCKS DOWN TO WHAT WOULD BE CALLED A RELATIVELY TIGHT SUPPLY/DEMAND BALANCE. SO WHEAT IS THE FIRST ONE TO BREAK OUT HERE. NOW, SO FAR IT HASN'T AFFECTED THE CORN OR THE BEANS VERY MUCH, AND IT MAY TAKE SOME TIME FOR THAT TO DEVELOP.

Pearson:WELL, A SIGNIFICANT TECHNICAL IMPACT HERE THIS WEEK AS FAR AS THE WHEAT MARKET IS CONCERNED. WE TALK ABOUT TECHNICALS AND PEOPLE ARE OUT THERE STILL WONDERING -- FUNDAMENTALLY THERE'S GOT TO BE SOMETHING DRIVING THIS THING. AND I ASSUME WE DON'T HAVE MUCH SNOW COVER ON THIS CURRENT CROP.

Hjort:WELL, THAT'S RIGHT. THEY TALKED ABOUT THE COLD TEMPERATURES OUT HERE IN WESTERN KANSAS AND SO ON, DOWN AROUND ZERO THERE FOR A COUPLE OF NIGHTS. COLD TEMPERATURES DOES NOT REALLY DAMAGE HARD RED WINTER WHEAT VERY MUCH. WHAT IS MORE DAMAGING IS WHERE YOU GET TO THOSE KIND OF TEMPERATURES. AND THEN, AS WE SAW ON FRIDAY, TEMPERATURES WERE IN THE 50S, EVEN UP TOWARD 60 DEGREES. THAT FREEZING AND THAWING ACTION, THAT'S PROBABLY VERY DAMAGING -- "CAN" BE VERY DAMAGING, LET'S PUT IT THAT WAY. SO NOT JUST COLD TEMPERATURES, BUT FREEZING AND THAWING ACTION. BUT, YES, THERE IS QUITE A CONCERN ABOUT THE NEW CROP. AND THE SPARKS GROUP SUPPOSEDLY PREDICTS THIS WEEK THAT ACREAGE -- WINTER WHEAT ACREAGE IS NOT UP VERY MUCH FROM LAST YEAR, AND THAT WAS AT 30- OR 40-YEAR LOWS.

Pearson:ALL RIGHT. SO WE'VE GOT THOSE FACTORS GOING. SO OUR ADVICE AT THIS STAGE OF THE GAME, AS FAR AS THE WHEAT PRODUCER IS CONCERNED, IF HE'S HELD THE OLD CROP TO THIS POINT, CONTINUE TO HOLD ON?

Hjort:THAT'S RIGHT. ALTHOUGH NEXT WEEK IS GOING TO BE VERY IMPORTANT AND THE WEEK AFTER. NOW THAT WE'VE BROKEN THROUGH THIS TECHNICAL RESISTANCE, WE HAVE TO PROVE UP ON IT. IN OTHER WORDS, WE HAVE TO BUILD A BASE ABOVE THOSE OLD RESISTANCE LEVELS BEFORE THE SIGNIFICANT RALLY CAN CONTINUE.

Pearson:ALL RIGHT. BUT NOT A POINT TO MAKE SALES TO ANY GREAT EXTENT.

Hjort:NO.

Pearson:REAL QUICK, CORN AND BEANS, DOUG. WHAT CAN WE SAY?

Hjort:NOTHING MUCH TO TALK ABOUT. FUNDAMENTALS ARE NOT CHANGING. WE HAVE MAJOR REPORTS COMING OUT NEXT FRIDAY. FINAL CROP PRODUCTION, QUARTERLY STOCKS, SUPPLY/DEMAND REVISIONS, WINTER WHEAT PLANTED ACREAGE WILL BE ALONG WITH IT. UNTIL THE TRADE SEES THOSE NUMBERS, NOBODY IS GOING TO GET VERY EXCITED, I DON'T THINK, ABOUT BUYING THIS MARKET. WE PUT NEW-CONTRACT LOWS IN THE CORN FUTURES THIS WEEK. SOYBEANS IN BOTH THE LAST TWO WEEKS. THOSE MARKETS ARE STILL VERY, VERY NEGATIVE. WHEAT HELPED HOLD THEM TOGETHER ON THURSDAY AND FRIDAY OF THIS PAST WEEK BUT DID NOT RALLY IT VERY MUCH.

Pearson:LET'S MOVE OVER TO THE LIVESTOCK. FED-CATTLE MARKET... THERE WAS A CONCERN ABOUT BEEF DEMAND AFTER 9/11. WE'VE SEEN THINGS KIND OF COME BACK. WHAT'S YOUR TAKE HERE FOR THE NEXT COUPLE OF MONTHS ON THIS CATTLE MARKET?

Hjort:WE'VE GOT VERY HEAVY CATTLE LEFT IN THE FEEDLOTS, AND WE HAVE A LOT OF THEM, SO IT'S GOING TO TAKE SOME TIME TO WORK THOSE WEIGHTS DOWN TO A MORE NORMAL LEVEL. BEEF DEMAND IS PRETTY GOOD. IT CAME ON THROUGH EVEN THE HOLIDAY SEASON AND LOOKS LIKE IT WAS BETTER THAN WHAT WAS EXPECTED. SO WE'RE LOOKING AT THAT. EVEN THOUGH BEEF PRICES ARE RIGHT UP AT RECORD HIGH PRICES, WE'RE STILL DOING PRETTY GOOD ON THE DEMAND SIDE. THAT WILL BODE WELL FOR ON DOWN THE ROAD GOING INTO THE SPRING, AND WE SHOULD SEE PRICES MOVING HIGHER. BUT IT'S GOING TO BE A SLOW GO FROM HERE. IN THE LAST TWO WEEKS, WE'VE BOUNCED BACK UP PRETTY SHARPLY ON PRICE, BUT NOW I THINK IT'S GOING TO BE A MORE STEADY TO MAYBE SLIGHTLY FIRMER MARKET AS WE GO INTO JANUARY.

Pearson:LET'S TALK ABOUT THIS HOG MARKET TOO. THERE WAS SOME CONCERN THAT THE USDA REPORT ABOUT INTENTIONS FOR BREEDING KIND OF PUTTING A LITTLE BIT OF A PALL IN THIS HOG MARKET. WHAT'S YOUR TAKE ON THAT? DO YOU THINK THAT'S GOING TO HIT US MIDSUMMER?

Hjort:THE HOGS AND PIGS REPORTS HAVE BEEN CONFUSING, LET'S SAY, TO BE GENTLE WITH IT, FOR SOME TIME. AND THIS LAST ONE HAD SOME OF THAT CONFUSION WITH IT AS WELL. IF YOU TAKE THE NUMBERS AT FACE VALUE, HOG PRICES ARE GOING TO BE ALL RIGHT. BUT REMEMBER, JUNE/JULY FUTURES ARE ALREADY CARRYING 800-, 900-POINT PREMIUM TO THE FEBRUARY FUTURES. SO FUTURES PRICES ALREADY HAVE A GOOD SIZED PRICE RALLY -- CASH PRICE RALLY BUILT IN. TO TRY TO GET THOSE FUTURES TO MOVE ANY HIGHER MIGHT BE VERY DIFFICULT. IF A PERSON WANTS TO USE THE LEAN-HOG FUTURES CONTRACT AS A HEDGING VEHICLE, I THINK IN THE NEXT TWO OR THREE WEEKS, THERE MIGHT BE SOME OPPORTUNITIES TO DO THAT. BUT THAT WOULD BE ABOUT IT AS FAR AS THE HOG TRADE IS CONCERNED. AND I ALMOST LEFT HERE WITHOUT MENTIONING COTTON PRICE. WE'VE GOT A 60-CENT GAIN IN MARCH COTTON THIS WEEK. WHAT'S YOUR FEELING ON COTTON NOW? HAVE WE BOTTOMED OUT AND ARE WE STARTING TO WORK OUR WAY UP?

Hjort:WELL, I THINK WE HAVE BOTTOMED OUT, BUT WHETHER WE CAN GENERATE SOME STRENGTH HERE, THAT'S QUITE ANOTHER STORY. SUPPLIES ARE STILL ABUNDANT WORLDWIDE. GET INTO THE NEXT GROWING SEASON, AGAIN IT'S KIND OF LIKE THE WHEAT AND THE CORN. IT'S NEXT YEAR ONCE AGAIN THAT WE HAVE TO HOPE FOR.

Pearson: VERY GOOD. DOUG, THANK YOU SO MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET," THE FIRST EDITION OF THE 2002 YEAR.


Tags: agriculture commodity prices markets news wheat