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Market Analysis: Mar 10, 2000

posted on March 10, 2000


AN EVER-NERVOUS WALL STREET WAS MADE MORE FITFUL THIS WEEK BY THE CONVICTION THAT INFLATION WARRIOR ALAN GREENSPAN STILL WANTS TO RAISE INTEREST RATES TO KEEP ECONOMIC GROWTH IN CHECK.

EVEN SO, THE FEDERAL RESERVE ITSELF REPORTS MANUFACTURING ACTIVITY AND RETAIL SALES ARE STRONG WITHOUT INFLATION. AND THE LABOR DEPARTMENT REPORTS THE PRODUCTIVITY OF U.S. WORKERS ROSE AT THE FASTEST PACE IN SEVEN YEARS. HIGHER OUTPUT AND LOWER LABOR COSTS ARE NOT USUALLY THE FORMULA FOR INFLATION.

THE GRAIN MARKETS FINISHED THE WEEK MIXED AS THE TRADE DIGESTS A COUPLE OF GOVERNMENT REPORTS. FOR THE WEEK, WHEAT PRICES GAINED MORE THAN TWO CENTS WHILE CORN PRICES WERE A MORE THAN A PENNY LOWER. PRICES WERE UNDER PRESSURE IN THE SOYBEAN PIT CLOSING MORE THAN FOUR CENTS LOWER. SOYBEAN MEAL FINISHED THE WEEK 90 CENTS HIGHER PER TON. COTTON FUTURES WERE UP MORE THAN 60-CENTS FOR THE WEEK.

IN LIVESTOCK, FED CATTLE FUTURES WERE DOWN THIRTY CENTS. FEEDER CATTLE FINISHED 17-CENTS LOWER. THE LEAN HOG CONTRACT, HOWEVER, FINISHED THE WEEK $2.70 HIGHER.

IN THE FINANCIALS, COMEX GOLD CLOSED THIRTY CENTS LOWER PER OUNCE. THE EURO GAINED TEN BASIS POINTS AGAINST THE DOLLAR AND THE CRB INDEX GAINED NEARLY A POINT TO CLOSE AT 212.15.

Market Analysis: Mar 10, 2000

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

Newton:, HI, MARK.

Pearson: WELL, LET'S TALK A LITTLE BIT ABOUT WHAT'S GOING ON IN THIS GRAIN MARKET HERE, AND NOT A WHOLE LOT REALLY THIS WEEK AS IT ALL SHOOK OUT. BUT A COUPLE OF KEY REPORTS COMING OUT... USDA, SUPPLY AND DEMAND, AND, OF COURSE, STOCKS REPORT. WHAT'S YOUR IMPRESSION, WAYNE, AS WE SIT HERE.

Newton: WELL, MARK, THE REPORT THAT CAME OUT TODAY WAS PRETTY MUCH HO-HUM AS FAR AS THE NUMBERS WERE CONCERNED. THERE WAS A LITTLE INCREASE IN EXPORT ON THE SOYBEANS, BUT THE CARRYOUTS REMAIN THE SAME. THE BEANS AT 1.7 BILLION AND SLIGHTLY OVER 300 MILLION IN SOYBEANS AND ALMOST A BILLION BUSHELS IN WHEAT. SO THE STOCKS REPORT -- OR THE SUPPLY AND DEMAND REPORT WAS PRETTY MUCH A NON-EVENT AND THE MARKET KIND OF SHOWED THAT TODAY.

Pearson: LET'S TALK ABOUT THE WHEAT MARKET IN PARTICULAR. IT DID GAIN A COUPLE CENTS FOR THE WEEK. WHAT'S YOUR FEELING RIGHT NOW? IT WON'T BE THAT MUCH LONGER, AND WE'LL BE HARVESTING WHEAT.

Newton: NO, I THINK THAT MARKET HAS GOT SOME WEATHER RELATED PRICE BUILT INTO IT, AND $3 WHEAT IN DECEMBER HAS GOT TO BE SOMEWHAT OF A TEMPTATION, BUT I'D REALLY DO THIS WITH OPTIONS. THIS WHOLE MARKET AND GRAIN COMPLEX IS GOING TO HINGE ON WHETHER THE GRAIN BELT GETS ADEQUATE RAINFALL BECAUSE SUBSOIL IS A PROBLEM ALL THROUGHOUT THE MIDWEST AND THE PLAINS STATES. SO IT'S A MARKET THAT YOU NEED TO TAKE ADVANTAGE OF AND DEAL WITH NORMAL KINDS OF YIELDS, INSOFAR AS YOUR FINANCIAL PLANNING IS CONCERNED AND DO SOME PRICING, BUT NOT NECESSARILY THE FUTURES. I'D DO IT WITH SOME OPTIONS. $3 WHEAT WITH A BILLION DOLLARS CARRYOUT IS NOT A BAD PRICE, GIVEN THE GOVERNMENT PROGRAM AND ALL.

Pearson: LET'S TALK ABOUT OPTION STRATEGY FIRST ON CORN, BECAUSE THERE'S A LOT OF CONCERN IN THE MIDWEST AND PARTICULARLY THROUGHOUT THE CORN BELT ABOUT MOISTURE LEVELS, SUBSOIL MOISTURES IN PARTICULAR. ODD WEATHER CONDITIONS, THE WARM WEATHER, AND SO FORTH. WHAT WOULD BE THE BEST OPTION STRATEGY FOR, SAY, A CORN GROWER.

Newton: I THINK, AND I'VE SAID ALL ALONG THAT WE NEEDED TO LOOK AT THE NEW-CROP CORN AT 250 TO 260 RANGE. OTHER ANALYSTS ARE PROVIDING THAT SAME KIND OF ADVICE. WE'RE BACK INTO THAT RANGE. WE'VE BOUNCED DOWN TO 249 A COUPLE TIMES THIS WEEK, I THINK, PROBABLY CLOSE TONIGHT AROUND 251, 252. BUT THE BEST APPROACH THAT WE FOUND IS TO BUY A PUT, SELL A 270, 280 CALL, AND A 220 PUT UNDER THAT, AND A PREMIUM IS ALMOST NIL. IT GIVES YOU SOME FLOOR UNDER YOUR MARKET WHILE PROVIDING AT LEAST A START FOR A SCALED-UP SELLING PROGRAM. I WOULDN'T SELL THE WHOLE FARM INTO THIS MARKET, BUT I'D SURE GET SOME SOLD AT THESE LEVELS.

Pearson: WHAT ABOUT AN OPTION STRATEGY ON SOYBEANS?

Newton: THE SOYBEAN MARKET IS A LITTLE DIFFERENT DEAL WITH SLIGHTLY OVER 300 MILLION PROJECTED IN CARRYOUT, AND THE DEMAND THAT EXISTS FOR SOYBEANS. I BELIEVE THAT'S ONE I WOULD JUST KIND OF SIT TIGHT ON. I SURE WOULDN'T HEDGE WITH A FUTURES CONTRACT. THERE AGAIN, I'D COME BACK TO THE OPTION STRATEGY FOR THAT. THE BEAN FOLKS ARE GETTING MORE AND MORE DEMAND, MORE AND MORE PRODUCTS OUT THERE, AND THE CONSUMPTION AND THE SUPPLY IS CONTINUALLY GETTING WORKED THROUGH. THERE'S ALREADY TALK OF SOME SWITCHING AROUND. YOU MENTIONED EARLIER IN THE SHOW ABOUT BEAN ACRES AND COTTON ACRES AND THAT SORT OF THING. SO THERE AGAIN, WE'RE GOING TO SEE SOME WEATHER CONSIDERATION, BUT THAT'S A MARKET TO WATCH AND WATCH CAREFULLY. IF YOU'VE SOLD ALL THE OLD CROP EXCEPT FOR THAT WHICH YOU KEPT BACK FOR A WEATHER SCARE, I'D JUST SIT ON THAT FOR A LITTLE WHILE AND SEE HOW THIS SPRING UNFOLDS.

Pearson: OKAY, AT THIS STAGE OF THE GAME, COTTON MARKET, YOU MENTIONED IT. THERE'S SOME POTENTIAL SWITCHING FROM COTTON TO BEANS. CONCERNS ABOUT THE WEATHER. WHAT ABOUT THE COTTON MARKET? IT HAD ANOTHER GOOD WEEK THIS WEEK. .

Newton: WELL, MARK, AS I'VE SAID BEFORE, THIS 60 CENT -- OR $60 COTTON IS SOMETHING TO BE RECKONED WITH. IT'S KIND OF THE HIGH END OF THE RANGE. OBVIOUSLY WE'VE SEEN HIGHER MARKETS BUT FROM THE STANDPOINT OF THE WE'RE CLOSED KIND OF PRICES, THEY'RE GOOD MARKETS. DECEMBER COTTON, I THINK, WAS AT 62 TODAY. THE U.S. SUPPLY AND DEMAND REPORT SAID WE'D CARRY OUT 4.4 MILLION BAILS. THAT'S A LOT OF COTTON. IT'S GOING TO TAKE A LOT OF EXPORT BUSINESS TO WORK OUR WAY THROUGH THAT. BUT IF IT DOESN'T RAIN IN EITHER THE SOUTHEAST OR THE SOUTHWEST, THEN ALL THE BETS ARE OFF, BUT I THINK YOU'VE GOT TO RECKON WITH 62-CENT COTTON, AND NOT VERY LONG AGO, IT WAS 47. WE NEED TO KEEP THAT IN MIND.

Pearson: ALL RIGHT. LET'S TALK ABOUT THIS CATTLE MARKET. IT'S BEEN VERY GOOD. A LITTLE BIT SOFTER ON THE BOARD THIS WEEK, BUT THE CASH MARKET WAS GOOD. WHAT'S YOUR OUTLOOK? TAKE US DOWN THE ROAD SIX WEEKS, WAYNE.

Newton: WELL, MARK, YOU HIT A KEY NUMBER FOR US EARLIER IN THE SHOW WHEN YOU TALKED ABOUT THE DEMAND THAT'S OUT THERE. I THINK THE NUMBER THAT YOU REPORTED WAS $68 POUNDS PER CAPITA. THAT'S REALLY GREAT NEWS AND THAT'S A NUMBER THAT A LOT OF THE MARKET AND MARKET ANALYSTS CAN'T EQUATE TO. BUT IT SHOWS UP IN OUR SIDE BECAUSE WE PLACED MORE CATTLE FOR THE LAST SEVEN MONTHS THAN WE DID A YEAR AGO, AND WE CONTINUE TO SEE SOLID PRICES. SO THE DEMAND SIDE IS NOT NEARLY AS PREDICTABLE AS THE SUPPLY SIDE, SO THAT'S A REAL GIFT TO US. WE'RE SELLING CATTLE THIS WEEK AT $1.13, $1.14. 71, 72, I THINK THE ASKING PRICE NEXT WEEK WILL BE $1, $2 HIGHER THAN THAT. THE CHOICE SELECT SPREAD IS NEARER TO $6. I THINK THAT TELLS US THAT WE HAVEN'T PULLED THE CALVES INTO THE EQUATION YET. USUALLY WHEN WE START INTO THE NEW CROP CATTLE, WHY, THAT SPREAD WILL WIDEN. BUT THE DEMAND HAS BEEN EXCELLENT. BOX MOVEMENT HAS BEEN GOOD, AND IT'S BEEN VERY STRONG. I THINK IT'S UP $6 FOR THE WEEK. SO I THINK WE NEED TO KEEP THE GATE SWINGING. BUT IT WILL BE A TOUGH BARGAIN AREA. IT'S A SELLER'S MARKET.

Pearson: THAT'S RIGHT. LET'S MOVE OVER TO THE HOG MARKET A LITTLE BIT. THE HOG MARKET AGAIN HAS BEEN RECOVERING. THE BOARD WAS STRONG THIS WEEK, AND THE CASH HOG MARKET HAS ALSO BEEN LOOKING BETTER.

Newton: MARK, $60 APRIL HOGS ON THE LEAN HOG FUTURES AND $17 JUNES ARE VERY, VERY ATTRACTIVE PRICES. IF YOU DO THE MATH ON THAT, YOU ADD A 73 PERCENT YIELD, FOR THE CASH PRICE IT OUGHT TO BE AROUND 44. IT'S TRADING AROUND 41 TO 42.5. I DIDN'T SEE THE CASH MARKETS TODAY, BUT I THINK THE CASH IS DUE SOME MORE UP IN THAT. I THINK IT'S PREDICTABLE THAT WE COULD SEE 50 CENTS A WEEK AS WE GO ON FURTHER OUT AND THE SUPPLY IS STARTING TO DIMINISH INTO THE SUMMER MONTHS. BUT THE FALL ONES WILL BE THE ONES I'D WATCH. WE NEED TO TAKE ADVANTAGE OF THIS SUPPLY SITUATION TO BE LOOKING AT THE THIRD AND FOURTH QUARTER FOR HEDGING OPPORTUNITIES.

Pearson: OKAY, LOOK OUT AHEAD THERE FOR HEDGING OPPORTUNITIES IN THE FALL. IT LOOKS LIKE SOME BETTER TIMES, AT LEAST FOR THE LIVESTOCK SECTOR. THANK YOU, WAYNE, VERY MUCH. THAT WILL WRAP UP THIS EDITION OF "MARKET TO MARKET." NOW, BEFORE WE GO, WE WANT TO REMIND YOU THAT THIS IS THE TIME OF YEAR WHEN PUBLIC TELEVISION STATIONS AROUND THE COUNTRY REMIND US HOW ITS PROGRAMS ARE FINANCED. YOU ARE THE PUBLIC IN PUBLIC TELEVISION. IF YOU LIKE PROGRAMS LIKE MARKET TO MARKET, THEN YOU MAY WANT TO INVEST IN YOUR LOCAL PUBLIC TELEVISION STATION. UNTIL THEN, THANKS FOR WATCHING. I'M MARK PEARSON. HAVE A GREAT WEEK.

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