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Market Plus: Nov 08, 2002

posted on November 8, 2002


Market Plus: Nov 08, 2002

Pearson: This is Mark Pearson on the Market Plus page here for the Market to Market weekly television program. Happy to have with me this week, Doug Hjort our market analyst. Doug, during the show you mentioned these technicals in the grains. And we haven't had a lot of fundamental news. Now it's going to change Tuesday when the USDA crop numbers come out. But really, technicals, you mentioned on the show, they've been driving much of what has been happening in this market.

Hjort: They have and part of the reason the technicals are -- well there's two reasons -- that they're more important now than they used to be last year or five years ago or whatever. One is that the commodity funds, of course, and the big speculators pretty well control what happens in the market, at least on the day by day basis and they trade mostly technical.

The second thing is that the numbers, production, supply/demand numbers one world grains have been revised three different times, major revisions in the last two years, I guess, two and a half years. That's very upsetting to a fundamentalist like me and I could go on for hours on that but I promise you I won't.

The situation is that the fundamentalists have to have good, reliable numbers and when the base numbers, the back year numbers start to change and are being revised it throws everybody off. That has driven even some of us die-hard fundamentalists over looking more and more at charts trying to figure out where prices are going to go. That's why technicals are far more important.

This week on soybeans, for example, contract high in November beans is $5.91. We got up to either $5.84 or $5.85 this week and then we sold off from there. Well, it's not -- it doesn't take rocket scientists to figure that out that you're going to have a fold back from a record high -- well record high for that month which is a very, very high price for the last four years.

But seeing how it broke away from that so dramatically late on Friday, that's technical stuff that's going on there. And remember too that the day by day trading on technicals and in the trade, the speculator is looking at short-term support levels. When we look at weekly extended charts for marketing purposes, the wheat market this week, even though it sold off fifteen cents on Friday, it's still well supported in this broad band, very broad band but it's still alright. There's something that does on the fundamental side and I think a lot of farmers are on that side. We have to start understanding more about the technical side.

Pearson: Very good. All right Doug, real quick, you mentioned on the show too this cattle market. There is a lot of talk that we're going to see a huge bull move in fed cattle. We're seeing a start of it now on futures. Should we get real excited or should we start making some hedges?

Hjort: We need to be watching that price very, very carefully because you can lock in seventy-five cash equivalent out there right now, maybe a little better. And yet, yes there are projections out there that say eighty-dollar cattle, maybe something better. It's very easy to get too bullish. But I think in this particular case I would not take advantage of those hedges right now.

If you've got a lot of cattle on feed and you could hedge 25 percent of them here that probably would be good marketing. But I think after the first of the year and maybe right through the holiday season, I think we'll have some struggle here for the next six weeks but after that I think we'll have at least another attempt to try to take these prices up. So, I'd delay hedging now but watch that price very, very carefully.

Pearson: All right, appreciate it very much and that wraps up our Market Plus segment here on our Market to Market Web Page. Thanks for checking in, I'm Mark Pearson, have a great week.


Tags: agriculture commodity prices markets news USDA