Iowa Public Television

 

Market Analysis: Mar 17, 2000

posted on March 17, 2000


HELLO, I'M MARK PEARSON.

AFTER SPENDING MUCH OF THE FIRST QUARTER SULKING OVER THE POTENTIAL OF INFLATION AND HIGHER INTEREST RATES, THE NATION'S STOCK MARKETS THIS WEEK ERUPTED IN A SPASM OF CONFIDENCE.

HIGHER RETAIL SALES, AS WELL AS HIGHER PRICES AT THE WHOLESALE AND CONSUMER LEVELS WOULD SEEM TO ENSURE THE INFLATION WARY FEDERAL RESERVE WILL RAISE INTEREST RATES. BUT THE FINANCIAL COMMUNITY SEEMED HEARTENED BY THE FACT THAT OUTSIDE OF THE VOLATILE FOOD AND ENERGY COMPONENTS OF THE CONSUMER PRICE INDEX, INFLATION IS RELATIVELY TAME. THE SHARP RUN-UP IN ENERGY COSTS HAS NOT, AS YET, PROVOKED MUCH INFLATION.

THE GRAIN MARKETS POSTED SOME DRAMATIC GAINS THIS WEEK AS THE TRADE BEGINS TO WORRY ABOUT DROUGHT POTENTIAL IN KEY GROWING REGIONS. FOR THE WEEK WHEAT PRICES GAINED MORE THAN 22-CENTS. CORN PRICES GAINED

14-CENTS. SOYBEAN FUTURES ROCKETED MORE THAN 27-CENTS HIGHER. SOYBEAN MEAL GAINED $5.50 PER TON. COTTON FUTURES WERE $1.35 HIGHER.

IN LIVESTOCK, FED CATTLE FUTURES CLOSED 68-CENTS LOWER. FEEDER CATTLE WERE $1.10 LOWER. THE LEAN HOG CONTRACT, HOWEVER, CLOSED THE WEEK 62-CENTS HIGHER.

IN THE FINANCIALS, COMEX GOLD CLOSED $5 LOWER PER TON. THE EURO WAS UP 75 BASIS POINTS AGAINST THE DOLLAR. AND THE CRB INDEX FINISHED THE WEEK NEARLY THREE POINTS HIGHER TO CLOSE AT 215.

Market Analysis: Mar 17, 2000

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

Hjort: THANK YOU, MARK.

Pearson: WELL, LET'S TALK ABOUT IT. A BIG UP MOVE. A LOT OF CONCERN ABOUT WEATHER. LET'S TALK ABOUT WHEAT FIRST.

Hjort: OH, THE WHEAT MARKET WENT ALONG WITH THE REST OF THE CROWD AND DID HAVE A RALLY, AS YOU POINTED OUT. BUT YOU LOOK AT IT ON THE CHARTS COMPARED TO CORN AND BEANS, AND WHEAT STILL LOOKS VERY, VERY BEARISH. THERE'S A GOOD REASON FOR THAT, AND IT'S THE FUNDAMENTALS. WE'VE GOT AN ABUNDANT SUPPLY OF THE OLD CROP. AND REALLY, IN THE LAST MONTH, NOW, WE'VE HAD GOOD RAINS OVER A GOOD SHARE OF THE CENTRAL AND SOUTHERN PLAIN. AND THAT'S RECHARGED SOME OF THE SOIL MOISTURE, BROUGHT SOME OF THAT WHEAT BACK TO LIFE, SO TO SPEAK. YOU'RE PROBABLY NOT LOOKING AT RECORD YIELDS DOWN THERE, BUT AT LEAST YOU'RE ON TRACK TO HAVE A DECENT CROP. ALSO, YOU LOOK AROUND THE WORLD AND THERE'S REALLY NO MAJOR WEATHER PROBLEM OR CROP PROBLEM ANYWHERE AROUND THE WORLD. SO IT WOULD APPEAR, AT THIS TIME ANYWAY, THAT WHEAT PRODUCTION WORLDWIDE WILL MEET OR MAYBE SLIGHTLY EXCEED THE DEMAND ONCE AGAIN, BUT STILL A PRETTY NEGATIVE LOOK TO THE WHEAT MARKET. WHEAT, IN ORDER TO RALLY, IS GOING TO HAVE TO RELY ON THE CORN AND THE BEANS.

Pearson: IS THERE STILL ANY CONCERN ON YOUR PART ABOUT USING THIS RALLY TO MAKE SOME SALES?

Hjort: WELL, I THINK PROBABLY YOU SHOULD. IT'S HARD TO SAY HOW FAR THE CORN AND THE BEANS WILL GO HERE. WEATHER, DROWN FEARS IN MID MARCH, IT DOESN'T MAKE A LOT OF SENSE FOR A MAJOR RALLY. AND YET THE WAY THE CHARTS ARE SHAPING UP, IT LOOKS LIKE THEY COULD CONTINUE TO MOVE HIGHER. SO AS THAT HAPPENS, I FORGET EXACTLY IF ITS SOMEWHERE AROUND 15 CENTS HIGHER AS A MAJOR RESISTANT POINT ON WHEAT CHARTS. AND YOU GET TO THAT LEVEL AND, IF NOTHING HAS CHANGED BY THAT TIME, I THINK THAT WOULD BE A MARKETING OPPORTUNITY.

Pearson: ALL RIGHT, LET'S TALK ABOUT THE CORN MARKET, WHICH QUITE A WEEK THIS WEEK. AS YOU LOOK AHEAD, LIKE YOU SAY, WE'RE TALKING ABOUT A DROUGHT IN MID MARCH. A LOT OF TIMES WE DON'T TRUST METEOROLOGISTS OVER THE NEXT 24 HOURS. SO IS THIS A RALLY FOR CORN PRODUCERS TO LOOK AT MAKING SOME SALES?

Hjort: OH, I THINK ESPECIALLY FOR OLD CROP. FOR NEW CROP, IT'S AWFULLY HARD TO TELL SOMEONE NOT TO MAKE A SALE HERE. THESE ARE LEVELS TO WHERE, IN ALMOST ANY YEAR, YOU REALLY LOOK SERIOUSLY IN STARTING THEM A MARKETING PROGRAM. THIS YEAR COULD BE A LITTLE DIFFERENT, THOUGH. GO BACK TO LAST YEAR. WE HAVE A RELATIVELY LARGE ACREAGE OF CORN PLANTED HERE IN THE UNITED STATES. WE HAD A HIGH YIELD OF ALMOST 134 BUSHEL PER ACRE, THIRD HIGHEST IN HISTORY. AND YET WE'RE GOING TO USE MORE CORN THAN WE RAISED LAST YEAR. NOW, THE GENERAL CONSENSUS IS THAT ACREAGE WON'T GO UP MUCH IF AT ALL THIS YEAR. IT MIGHT BE ABOUT THE SAME AS LAST YEAR. SO WHAT HAPPENS IF THIS DRYNESS THAT WE HAVE AROUND LINGERS, NOT A MAJOR DROUGHT, DON'T CUT YIELDS 10, 15, 20 PERCENT, BUT CUT THEM JUST A BIT BACK TO A MORE NORMAL, A MORE AVERAGE LEVEL RATHER THAN TREND LINE, AND YOU'RE GOING TO START PULLING THAT ENDING STOCK DOWN. SO THE CORN SUPPLY/DEMAND BALANCE, AS WE LOOK AHEAD, IS GOVERNED BY THIS EXTREMELY STRONG DEMAND. YOU HAVE TO REMEMBER THAT WE'RE CONSUMING MORE GRAIN AND MORE OILSEEDS THIS YEAR THAN WE DID LAST YEAR, A RECORD PHASE. AND WE'RE SCHEDULED TO CONSUME EVEN MORE NEXT YEAR. THAT MEANS THAT CORN YIELDS HAVE TO BE VERY HIGH. 130 BUSHEL PER ACRE OR MORE OR ELSE THESE PRICES COULD KEEP GOING UP. SO I'D BE A LITTLE SLOW ON MARKETING NEW CROP JUST YET.

Pearson: SAME THING ON THE BEANS.

Hjort: YEAH, THE BEANS, OF COURSE, THE SUPPLY DEMAND IS DIFFERENT BECAUSE OF THE HUGE ACREAGE THAT WE PLANTED LAST YEAR AND WITH THE ASSUMPTION THAT WE MIGHT PLANT A FEW MORE ACRES NEXT YEAR -- OR THIS SPRING, RATHER. LAST YEAR WE HAD A LOW YIELD ON SOYBEANS, AND IF THAT COMES BACK TO NORMAL, WITH AN INCREASED ACREAGE, WE COULD EASILY OUTPRODUCE THE DEMAND. SO SOYBEANS ARE A LITTLE BIT DIFFERENT EXCEPT THAT NOW YOU TRY TO LOOK AT MARKETING, THE SOYBEAN PRICE IS LOW COMPARED TO THE CORN PRICE. SO THAT WOULD ARGUE THAT SOYBEAN PRICES SHOULD RALLY JUST TO COME BACK IN A MORE EQUILIBRIUM TO THE CORN MARKET.

Pearson: AGAIN, DROUGHT MID MARCH, IT'S HARD TO BANK A WHOLE LOT ON THAT, BUT WOULD YOU CLEAN UP SOME OLD-CROP SALES ON THE BEANS.

Pearson: YEAH, I THINK SO. I THINK YOU NEED TO NIBBLE AWAY ON THOSE. I PROBABLY WOULDN'T CLEAN EVERYTHING UP JUST YET BECAUSE, IF THE DROUGHT DOES CONTINUE -- THAT'S A BIG IF. THAT'S A LONG TIME TO REMAIN DRY, AND MOST LIKELY WE'RE GOING TO HAVE SOME RAINS ALONG THE WAY, BUT, YES, I WOULD USE RALLIES TO MAKE SOME OLD-CROP SALES.

Pearson: LIVESTOCK, CATTLE-ON-FEED REPORT THIS AFTERNOON ON FRIDAY AFTERNOON. IT WAS OUT AND MARKETINGS WERE ABOVE EXPECTATIONS. PLACEMENTS ABOUT AS EXPECTED, LEAVING THE ON-FEED NUMBER MAYBE JUST A LITTLE BIT LESS THAN THEY WERE LOOKING FOR. IT'S STILL A RECORD ON FEED. SO WE'VE GOT A LOT OF CATTLE TO MOVE THROUGH THE YARDS IN THROUGH THE SUMMER. THEN LATER ON AS WE GO ON INTO THE FALL, WE CAN SEE PRICES COMING UP SOME MORE. REMEMBER, TOO, WE'RE AT A PERIOD OF TIME RIGHT NOW TO WHERE PRICES USUALLY SEASONALLY KIND OF TEND TO TOP OUT, DRIFT ON DOWN INTO THE JUNE MARKET, SO I'D BE PRETTY CAUTIOUS HERE. NEXT WEEK AND THE WEEK AFTER, IF WE CAN'T RESUME THE RALLY HERE -- WE'VE GOT TO LEVEL OFF ON THE CASH PRICES THIS WEEK AFTER BEING UP STRONG FOR TWO WEEKS. SO IF WE CAN'T RESUME THE RALLY NEXT WEEK OR THE WEEK AFTER, I'D BE WILLING TO EVEN LOOK AT MAYBE SOME JUNE HEDGES.

Pearson: WHAT ARE YOU LOOKING PRICE WISE IN THE NEXT TWO TO FOUR WEEKS?

Hjort: WELL, THE NEXT TWO TO FOUR WEEKS, PROBABLY A 72 TOP, 73, SOMEWHERE IN THERE. BY SUMMERTIME, YOU COULD PROBABLY BE DOWN AROUND 68, AND THERE ARE SOME THAT COULD BE PREDICTING IT COULD BE WORSE THAN THAT. SO IF YOU GET THE OPPORTUNITY TO HEDGE SOMETHING IN JUNE OVER $70, I WOULD LOOK SERIOUSLY AT THAT.

Pearson: LET'S TALK OVER ON THE HOG SIDE. WE DID HAVE AN UP WEEK AS FAR AS FUTURES WERE CONCERNED FOR THE HOGS. THE HOG MARKET HAS BEEN HANGING IN THERE. YOU'VE BEEN FAIRLY FRIENDLY. WHAT'S YOUR OUTLOOK NOW ON HOGS?

Hjort: I'M STILL FAIRLY FRIENDLY TO THE HOGS OVER THE NEXT TWO TO THREE MONTHS. WE'RE SEEING VERY GOOD OPPORTUNITIES HERE, GOOD RALLY OPPORTUNITIES, AND THE CASH MARKET, PRETTY SLOPPY, BOUNCES ALL OVER THE PLACE; BUT EACH WEEK, IT'S JUST BEEN CREEPING UP JUST A LITTLE BIT THE AVERAGE PRICE. SO NORMALLY ON A SEASONAL PATTERN, YOU'D SEE STRENGTH TO CONTINUE FOR AT LEAST ANOTHER MONTH, MAYBE TWO BEFORE WE LEVEL OFF. I LOOK FOR MID 40S, MAYBE A LITTLE BIT HIGHER THAN THAT IN THE CASH BUTCHER PRICE WITHIN THE NEXT MONTH OR SO, AND I'D LOOK AT THAT. YOU LOOK AT THE SUMMER FUTURES. OH, IT'S ENTICING TO TRY TO HEDGE THERE, AND YET THAT VEHICLE IS REALLY DIFFICULT TO TRY TO HEDGE, BUT YOU CAN LOCK IN $52 HOGS THERE BASIS THAT JUNE/JULY FUTURES. IT'S PRETTY HARD TO PASS THAT UP.

Pearson: VERY GOOD. DOUG HJORT, THANK YOU SO MUCH. THAT WRAPS UP THIS EDITION OF "MARKET TO MARKET." ONCE AGAIN BEFORE WE GO, IT'S IMPORTANT TO REMIND YOU PUBLIC TELEVISION VIEWERS THAT PROGRAMS LIKE "MARKET TO MARKET" ARE MADE POSSIBLE BY VIEWERS LIKE YOU. IF YOU FIND VALUE IN WHAT YOU'RE VIEWING, YOU MAY WANT TO CONSIDER INVESTING IN YOUR LOCAL PUBLIC TELEVISION STATION. UNTIL NEXT WEEK, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.


Tags: agriculture commodity prices markets news