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Market Analysis: Apr 07, 2000

posted on April 7, 2000


AFTER SEVERAL SESSIONS OF MARKET GYRATION BY WEEK'S END WALL STREET APPEARED A BIT CALMER. SHARE MARKETS HAD BEEN SEIZED BY ANGST, IF NOT PANIC, OVER A FEDERAL JUDGE'S RULING THAT SOFTWARE GIANT MICROSOFT HAD BEHAVED IN A PREDACIOUS FASHION. WHAT COMES NEXT ARE JUDICIAL APPEALS. IN THE INTERIM THE FINANCIAL COMMUNITY APPEARS COMFORTED BY ECONOMIC FUNDAMENTALS LIKE THE FACT THE CREATION OF NEW JOBS IS KEEPING PACE WITH THE 30-YEAR LOW UNEMPLOYMENT RATE, VENTING MUCH FEARED "WAGE PRESSURE" FROM THE INFLATION PICTURE. THE INVESTMENT COMMUNITY IS ALSO REASSURED BY LOW LONG-TERM INTEREST RATES, SOLIDIFYING THE OUTLOOK FOR CONTINUED ECONOMIC EXPANSION.

THE GRAIN MARKETS FINISHED THE WEEK ON THE DOWNSIDE AFTER LAST WEEK'S RALLY. FOR THE WEEK WHEAT PRICES WERE DOWN MORE THAN FOUR CENTS. CORN PRICES WERE DOWN MORE THAN SIX CENTS. SOYBEANS WERE ALSO DOWN MORE THAN SIX CENTS. SOYBEAN MEAL CLOSED $1.30 LOWER PER TON. COTTON FUTURES WERE 54-CENTS HIGHER.

IN LIVESTOCK, FED CATTLE FUTURES WERE A DIME LOWER. FEEDER CATTLE GAINED 15-CENTS. THE LEAN HOG CONTRACT GAINED 75-CENTS.

IN THE FINANCIALS, COMEX GOLD GAINED $1.40 AN OUNCE. THE EURO CLOSED 15-POINTS LOWER AGAINST THE DOLLAR. AND, THE CRB INDEX FINISHED THE WEEK MORE THAN THREE POINTS LOWER TO CLOSE AT 209.85.

Market Analysis: Apr 07, 2000

HERE NOW TO LEND US HER INSIGHT IS ONE OF OUR REGULAR MARKET TO MARKET ANALYSTS, SUE MARTIN. WELCOME BACK.

Martin: THANK YOU, MARK.

Pearson: WELL, LET'S TALK A LITTLE BIT ABOUT, THERE'S STILL A LOT OF CONCERN ABOUT DRY WEATHER IN THE CORN BELT. THERE HAVE BEEN SOME RAINS. IT WAS RAINING IN CHICAGO ON FRIDAY. BUT THE MARKETS WERE A LITTLE BIT STRONGER, FOR THE WEEK WERE SOFTER. WHAT'S AHEAD? WHAT DO YOU SEE HAPPENING AS FAR AS WHEAT IS CONCERNED?

Martin:, WELL, I THINK THAT, FIRST OF ALL, THERE WAS SOME TALK OF COLDER TEMPERATURES DIPPING DOWN INTO THE WINTER WHEAT BELT. WHEAT IS JOINTING RIGHT NOW, SO IT COULD CAUSE SOME DAMAGE. AND ALSO, WHEAT WAS NEAR THE LOWS THAT IT'S HAD HERE BACK IN MARCH AND ALSO NOT FAR FROM THE CONTRACT LOWS THAT THEY'VE SEEN IN DECEMBER. SO I THINK THAT IT'S SOMEWHAT OF A TECHNICAL BOUNCE. I HAVE TIMING NEXT MONDAY, TUESDAY. WE WERE UP NICELY TODAY. I THINK WE COULD BE LOWER ON MONDAY, AND THEN I'D LIKE TO SEE WHEAT TRY TO TURN AROUND AND SEE IF IT COULDN'T BOUNCE AGAIN ON TUESDAY AND START TO LIFT A LITTLE BIT. WE MAYBE TRIED TO MAKE SOME LOWS AROUND THE MIDDLE OF THE MONTH, MAYBE THE 11TH OR SO OF THE MONTH. AND IF THAT IS THE CASE, THEN WE SHOULD TRY TO RALLY NICELY INTO MAY. AT THIS STAGE OF THE GAME, YOU'RE NOT IN A BIG HURRY TO MAKE WHEAT SALES?

Martin: NO, I'M NOT. YOU KNOW, I LOOK AT THE WHEAT MARKET, AND I THINK WHAT MORE COULD WE THROW THAT'S NEGATIVE AT THE MARKET. I THINK EVERYTHING NEGATIVE IS HERE. UNFORTUNATELY, FOR THE WHEAT PRODUCER, EXPORT SHIPMENTS ARE RUNNING ABOUT A PERCENT BEHIND A YEAR AGO, AND THAT'S THE NEGATIVENESS. BUT, BOY, THERE'S SOME UNDERLYING BULLISH FUNDAMENTALS. YOU KNOW, THE CROP CONDITION REPORT'S RATINGS ARE THE WORST THEY'VE BEEN IN YEARS, MAYBE IN HISTORY. WE HAVE THE LOWEST ACREAGE THAT WE'VE HAD ON RECORD SINCE 1973. THERE'S REALLY SOME FUNDAMENTALS THAT ARE BUILDING A CASE FOR THIS MARKET ON A LONG, LONG-TERM BASIS. SO I THINK THE WHEAT PRODUCERS HAVE BEEN THROUGH ABOUT FOUR YEARS OF TOUGH TIMES. THIS IS THE END OF IT. I DON'T SEE THE MARKET GOING MUCH LOWER. IT MAY TAKE US A LITTLE BIT TO GET HIGHER, BUT I THINK THAT THE WORST IS BEHIND US AND WE HAVE TO LOOK AHEAD AND BE POSITIVE.

Pearson: IS CORN GETTING TO BE A LEADER?

Martin: WELL, CORN IS TRYING TO BE A LEADER. OF COURSE, IF CORN RALLIES, THEN IT HELPS PULL THE WHEAT UP, BUT WHEAT IS A DRAG ON CORN FOR THE MOMENT. BASICALLY RIGHT NOW CORN IS DOING IT'S OWN THING RIGHT ALONG WITH SOYBEANS. THE PULLBACK THAT WE'VE SEEN THIS PAST WEEK WAS JUSTIFIED, EVEN THOUGH A LOT OF PRODUCERS DON'T WANT TO SEE THAT. IT'S VERY JUSTIFIED. IT'S TOO EARLY TO RACE THE MARKET TOO QUICKLY OR WE'LL FIZZLE OUT. WE'LL PRICE OURSELVES OUT. THE ONE THING WE SEE EVERY TIME WE DIP BACK IS WE SEE DEMAND SURFACE. ANOTHER REASON FOR THE CHOPPINESS IS BECAUSE IT'S HARD TO DEAL WITH A WEATHER MARKET IN THE MONTH OF MARCH AND EARLY APRIL. THE CROP IS JUST GOING IN THE GROUND. YOU NEED IT DRY TO PUT THE CROP IN THE GROUND SO, TO ME, THAT'S NOT REALLY A PRICE POSITIVE, IT'S A LITTLE BIT OF A PRICE NEGATIVE. I THINK WE ACCUMULATED SOME WEEK LONGS IN THE MARKET AT HIGH PRICES, FOR WHAT WE HAVE SEEN HIGH PRICES, THE PAST WEEK. AND I THINK THAT THOSE WEEK LONGS ARE STILL HANGING ON, AND THAT CONCERNS ME JUST A LITTLE. IT MAY DRAG ON THE MARKET A LITTLE BIT LONGER.

Pearson: GOING ON DOWN THE ROAD... AGAIN, THE $64,000 QUESTION IS STILL THE WEATHER. AT THIS POINT WE'VE BEEN IN THE DRIEST PREPLANTING PERIOD THAT WE'VE BEEN IN, IN YEARS AND YEARS AND YEARS, AT LEAST SINCE '88. SO HOW ARE YOU PLAYING IT? HOW ARE YOU RECOMMENDING CLIENTS, PRODUCERS OUT THERE RIDE THIS MARKET?

Martin: WELL, MARK, I'M VERY BULLISH. YOU KNOW THAT. I'VE BEEN BULLISH FOR SOME TIME, AND I CONTINUE TO WARN PEOPLE NOT TO EXPECT TOO MUCH TOO QUICK, BUT I MAINTAIN THAT, FOR THE PRODUCER HOLDING ONTO THE CROP, THAT THE REAL ULTIMATE TIME TO SELL HIS CROP THIS YEAR WAS -- WHAT HE DID THE LAST THREE YEARS WRONGLY IS GOING TO BE RIGHT THIS YEAR, I BELIEVE, IN JULY. I THINK YOUR HIGHS FOR CORN WILL BE SEEN IN JULY. MAYBE EARLY AUGUST AT THE LATEST FOR NEW CROP, AND SO I'M TELLING THEM NOT TO SELL HERE. IF YOU'VE GOT TO SELL OR PRICE SOMETHING, DO PUTS THEN JUST TO PROTECT YOURSELF BECAUSE THERE'S BETTER TO COME. I LOOK AT THESE PULL-BACKS AS BUYING OPPORTUNITIES. NOW, IF WE FIND A PULL-BACK HERE THIS NEXT WEEK AGAIN AND TEST THIS WEEK'S LOWS, WHICH WOULD NOT SHOCK ME IF WE DO THAT, THEN I THINK THAT THAT'S PROBABLY THE LAST OF IT AND THEN WE START TO MOVE UP NICELY INTO MAY. IF THEY KEEP TALKING WEATHER, THEN I BELIEVE WE'RE GOING TO HAVE WEATHER PRICED IN PROBABLY BY THE 10TH OF MAY AND THEN THE MARKET WILL GO INTO A VERY HEFTY PULL-BACK THAT WILL BE VERY SHARP, VERY STEEP ON DECLINE. FARMERS WILL PROBABLY PANIC AND LET GO OF GRAIN. AND THEN WE'LL TURN AROUND AND BOTTOM IN JUNE AND COME RIGHT BACK UP AND MAKE OUR HIGHS IN JULY TO, POSSIBLY, EARLY AUGUST.

Pearson: ALL RIGHT. IS THAT GOING TO RIDE FOR SOYBEANS TOO?

Martin: YES, SOYBEANS, I THINK, GOES RIGHT ALONG WITH THAT. IN FACT, ACTUALLY THAT'S WHERE THE FUNDS SEEM TO KEEP WANTING TO CONCENTRATE IS BEANS BECAUSE THEY CAN MOVE MORE IN A DAY THAN CORN. THE ONE THING NICE ABOUT SOYBEANS IS IT WAS A PLEASANT SURPRISE BUT EXPORTS HAD BEEN UNDERESTIMATED THIS YEAR BY THE USDA. WE'RE RUNNING SHIPMENTS RIGHT NOW 22 PERCENT GREATER THAN A YEAR AGO. CORN EXPORTS ARE RUNNING ABOUT 7 PERCENT GREATER THAN A YEAR AGO. SO WE'RE WELL AHEAD OF WHAT THE USDA STARTED OFF THINKING. SO CARRYOUTS ARE SLOWLY SHRINKING AND THEN, OF COURSE, THAT'S WHAT THE MARKET IS DEALING WITH. IT CAN DEAL WITH OR QUANTIFY THE SUPPLY SIDE. BUT UNDERNEATH ALL THIS IS REALLY A TRUE DEMAND MARKET GROWING ECONOMIES ELSEWHERE. NOW THAT WE'VE TALKED ABOUT THE HOOF-AND-MOUTH DISEASE IN SOUTH KOREA AND ASIA, WELL, THAT BRINGS DEMAND BACK TO US PROBABLY ULTIMATELY, AND THAT MAKES OUR DOMESTIC USAGE EVEN BETTER. SO I THINK ON THE LONG TERM, IT'S A VERY GOOD MARKET AND WE JUST HAVE TO KEEP THAT IN MIND.

Pearson: ALL RIGHT, LET'S TALK ABOUT COTTON. IT HAD AN UP WEEK THIS WEEK.

Martin: YES, IT DID. COTTON IS TRYING TO HOLD -- CHINA IS IN VERY TIGHT SUPPLY OF COTTON. AND I'VE VAGUELY BEEN TALKING ABOUT PUTTING MORE OF THEIR COTTON ONTO THE WORLD MARKET OR ONTO THE MARKET TO TRY TO HOLD THEIR DOMESTIC PRICES DOWN. KIND OF SOMETHING SEEMS SIMILAR TO WHAT HAD BEEN GOING ON IN THE SOYMEAL MARKET THERE. BUT I THINK THAT CHINA COULD BE, DOWN THE ROAD, AN IMPORTER OF COTTON FROM THE U.S. SO MAYBE WE'VE GOT SOME BRIGHT LIGHTS DOWN THE ROAD BUT, AGAIN, IT'S SORT OF LIKE THE REST OF THE AG MARKETS, IT'S GOT TO BE A SLOW EVOLVING THING. AND WHEN YOU'RE TALKING DEMAND, THAT'S ELUSIVE, IT EBB AND FLOWS, AND THAT'S HARDER FOR THE MARKET TO DEAL WITH OR THE PUBLIC TO DEAL WITH.

Pearson: YOU'VE BEEN FRIENDLY TO CATTLE FOR AT LEAST A YEAR NOW, AND THE MARKET HAS BEEN EXTREMELY GOOD. WHAT'S AHEAD? WHAT'S THIS NEXT QUARTER GOING TO LOOK LIKE, SUE?

Martin: WELL, I THINK WE'RE GOING TO BE MORE CHOPPY THIS NEXT QUARTER. I THINK THAT DURING THE MONTH OF APRIL, CATTLE, THIS NEXT WEEK, I THINK MIGHT BE BETTER THAN PEOPLE EXPECT OR ANTICIPATE. THE CASH MARKETS HERE, WE DID CARRY SOME CATTLE OVER INTO NEXT WEEK. AND WE'RE HEARING ABOUT PACKERS CUTTING BACK THE SLAUGHTER BECAUSE THEY'RE TRYING TO HOLD UP THE WHOLESALE BEEF PRICES. BUT WE DID SEE CHOICE CATTLE PRICES ARE CUT OUT GAIN ON THE SELECTS TODAY. AND I THINK THAT'S SOMETHING WE'RE GOING TO START SEEING THE REST OF THE MONTH. I THINK THAT APRIL CATTLE HAS DONE A GOOD JOB HOLDING ON THE RULE-OUTS FROM THE APRIL TO THE JUNE CONTRACT FOR LONGS. WE HAVE SOME SHORTS IN THE MARKET THAT SOLD BACK IN EARLY MARCH, FEBRUARY, BECAUSE OF EXPECTATIONS OF HEAVY SLAUGHTER. AND WE WILL SEE HEAVY SLAUGHTER, BUT WHEN YOU LOOK AT THE MARKET: 1) WE SHOULD NOT MUCH IN THE WAY OF DELIVERS BECAUSE THERE'S NO BASIS TO MAKE IT JUSTIFIABLE; SECONDLY, WITH THE CASH MARKET BEING AT WHERE THE FUTURES ARE AND VERY MUCH STRONGER OVER THE JUNE CONTRACT, IT BEHOOVES THE PRODUCER TO KEEP THE CATTLE MOVING EVEN AT LIGHTER WEIGHTS. SO THAT'S EVEN GOING TO KEEP A TIGHTER SUPPLY ON CHOICE CATTLE AND MORE AVAILABLE --

Pearson: WILL THIS CHOPPINESS HOLD $70?

Martin: I THINK WE WILL AND I THINK THAT THE JUNE CONTRACT MIGHT LUCKILY GET UP AROUND 71. I THINK THAT THE APRIL CAN STILL GET TO 74.5.

Pearson: ALL RIGHT. LET'S TALK QUICKLY ABOUT THE HOGS AND WHAT'S HAPPENING OVER THERE. AGAIN, STRONGER BOARD THIS WEEK.

Martin: OH, AND IT CONTINUES TO BE SO. EVERY TIME WE START TO GET A DIP AND EVERYBODY THINKS THE TOP IS IN AND THEY KEEP TALKING HEDGE, HEDGE, HEDGE, THE FUNDS STEP RIGHT BACK IN AND BUY MORE BECAUSE WE'RE ALL LOOKING AT THE SAME THING. THE HOOF-AND-MOUTH DISEASE DOWN THE ROAD, JAPAN HAS CUT OFF SOUTH KOREAN IMPORTS. THAT MEANS WE MIGHT GET SOME OF THAT BUSINESS. BUT THE OTHER THING REALLY IS THAT WE HAVE GOOD DEMAND FOR PORK AND WE HAVE TIGHT -- WELL, DECENT NUMBERS, BUT YET THE DEMAND IS SO GOOD FOR PORK. AND ON TOP OF IT, WE'VE HAD A GOOD GRILLING SEASON STARTED EARLY FOR BEEF AND PORK. I THINK THAT I DON'T WANT TO HEDGE HOGS BEFORE MAY.

Pearson: ALL RIGHT. 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 THE PROSPECTS FOR THE ETHANOL MARKET. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

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