2012 Bi-Weekly Market Briefings
Soybean yields are exceeding expectations as the harvest drives toward conclusion. Yields in the western cornbelt, while not fantastic, are expected to buoy this month’s supply/demand report due later this week. The average prereport puts production at 2.759 billion bushels, up 124 million bushels from the September report. USDA will likely offset a portion or all of this with increased demand. China continues to be a strong purchaser, and the September export estimate of 1.055 billion bushels should rise. The U.S. will be the seller of choice as old crop supplies in South America dwindle. New crop there is being planted, and the acreage is projected to be huge. With all this being said, November futures completed a 50 percent retracement of the June-September increase when it fell to $15.04 last week. The market could move to the gap area between $14.78 and $14.93, or the 62 percent retracement objective of $14.57, with a close below $15.04. However, holding that level would suggest a potential rebound toward $16.50.
December corn futures made a huge reversal low at $7.05 the last week of September and have been in a consolidation phase since. Retracement objectives of $7.77 and $7.94 rest just above the top of the consolidation area. The October report to be released later this week could determine whether the market heads higher or retests support at $7.05. Yields are said to be improving, but harvested acreage is said to be declining. Both will determine the production, which averages 10.6 billion bushels in prereport trade estimates. That is 126 million bushels below the September report. A lower estimate likely sends the market toward the upside retracement objectives.
Old-crop wheat futures continue a gentle slide lower despite indications. Black Sea region exports will decline sharply in the next month. Little demand has come to the U.S., suggesting price is thought to be too high. Support around $8.50 continues to hold, but that may not last. On the new crop side, July has been mostly sideways between $8.25 and $8.60 after a brief move to $8.95 quickly failed. The $8.95 high now becomes major resistance.
Since late June, December cotton futures have traded between 70 cents and 77.5 cents. Recently the trade fell back to the bottom of that range as harvest activities increased, and yields appeared to be good. Drought again consumed large amounts of the Texas crop. However, world stocks are bountiful and will continue to limit upside potential. China has huge stocks and is expected to purchase significantly less U.S. cotton in the coming year. They are, however, bargain hunters and are still making significant value purchases. For now, December 2013 is trading the same pattern as December 2012, but about 4 to 5 cents higher.
After declining from the early August high near $16.40, November rice futures bottomed at $14.55 then made a 50 percent retracement near $15.50. That has become solid resistance over the last month. Losses from Hurricane Isaac and poor milling yields haven’t triggered any buying fervor. Prospects of smaller plantings in South America and in the U.S. in the spring could provide a market bounce at some point. Thai supplies remain a burden hanging over the market, even though in many respects it is a world away. After suffering through three adverse crop years for rice, some acreage in the Mid-South production area is sure to find its way to corn or soybeans. How much could determine how big the bounce in the market is.
December live cattle futures have established a short-term uptrend in the past couple of weeks, with support in the $125 area. Longer term support is between $123 and $124. A test of resistance at the 40-day moving average of $127.22 is possible. November feeders are trending higher as well, with support near $144. Significant resistance near $149.50 could limit upside potential. Improving beef cutout values this week will help boost weak packer margins.
Hog futures continue to trend higher. December has significant resistance at $77.75, and futures need to close above that level to signal another leg up. The CME lean hog index has rallied 20 percent in just 13 market days, providing the impetus for strong futures movement. Hog supplies are adequate to meet demand at the present time, though, and cash values are mostly flat as a result.
The CME cash butter price continued its firm trend. The market turned sharply lower on Friday with 13 sales reported and the price down $0.0925 to $1.8600. Butter orders are strong for both retail and food service needs. Butter export assistance continues to be extended through the CWT program. Most recently, assistance was extended for the export of 91 MT (200,621 pounds) now through the first quarter of 2013. Cheese prices across the U.S. continued to move higher. Monthly average prices for barrels for September at the CME Group are more than 17 cents higher than prices a year ago, but production is slowing. Blocks are also nearly 17 cents higher for the same period. In the West, tight milk supplies have slowed cheese making. Cheese demand for retail accounts is good, with food service accounts adding to their orders. Trading at the CME Group closed the week with barrels at $2.06, and blocks closed Friday at $2.10. Milk production is increasing by varying degrees. Eastern milk production is increasing with import loads needed in the Southeast and Florida to meet Class I demand.
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