2012 Bi-Weekly Market Briefings
Soybeans appear to have made a seasonal low, but a November close below $14.85 brings downside objectives of $14.78 and $14.57 back into play. A close above $15.75 signals additional potential with a probable upside between $16.05 and $16.75. Fundamentals are mixed, with Chinese buying remaining exceptionally strong. The last export inspections report at 61.4 million bushels was well above expectations, and almost two thirds was headed to China. Early reports from South America indicate Brazil will surpass the U.S. in soybean production, although wet conditions are hammering planting in Argentina and southern Brazil. As you move north in Brazil, lack of moisture is a problem. This may result in some intended corn acreage going to soybeans. The current 2013 soybean/corn price ratio is 2.1, which still favors corn.
Corn completed a 50percent retracement of the August/September decline and continues to trade in a 35 cents consolidation phase below $7.75. The low of $7.05 was cut in late September and appears to be solid support. Demand considerations will limit upside potential over the coming months. Export movement is down almost 50percent from last year, while imports from South America are being seen in the southeastern U.S. Several early estimates peg 2013 U.S. plantings at 97.5 to 98 million acres, up slightly from 2012. While the Midwest has received some recent rain, drought conditions persist, raising concern about the 2013 crop.
Wheat markets have been bolstered by reports that the Ukraine will deplete their export supply in three to four weeks. Global wheat supplies are tightening, increasing opportunities for the U.S. to gain favor in the export market. Technically, old crop December is in a downtrending channel, with support near $8.50 and resistance around $9.00. Additional resistance is located at $9.25 and $9.50. New crop July is in a sideway consolidation phase with support at $8.25 and resistance at $8.75 and $8.90. A move higher doesn’t appear likely without fresh export demand and/or increased drought concerns.
Cotton futures rallied above 79 cents last week on tight tenderable supplies and some new crop quality issues. However, the rally quickly ran out of steam as overall fundamentals remain negative. World stocks are projected to be more than 79 million bales, with China holding 36.6 million bales. While China continues to buy cotton, their use for 2013 is projected to be just 36 million bales, down 10 million bales from two years ago. 2013 world and U.S. plantings are expected to decline. U.S. acreage could dip a third or more, taking plantings below 8 million acres. However, it will likely take at least two years to get stocks to a more manageable level.
Rice futures remain in a long-term sideways trading range. For the last year, the market has held between $13.50 and $16.00. For the last six weeks, that range has narrowed to 75 cents, with trading holding between $14.75 and $15.50. U.S. production is below 200 million cwt. for the second year in a row, which will leave ending stocks of just 32.4 million cwt. That is down a third from 2010-11 stocks of 48.5 million cwt., despite reduced export demand. The 2013 crop could bring a third year of reduced production as farmers eye profit potential of soybeans and corn.
Cattle futures ignored last week’s bullish cattle on feed report and worked lower to begin the week. Placements at 81percent of year-ago levels were near expectations, as were the on-feed numbers of 97 percent. Cash cattle trade is slow as packers appear reluctant to raise bids with profit margins still in the red. Choice beef values are near $200, which typically has reduced consumer demand. The question is whether consumers will balk at buying beef. Feeder futures have resistance around $150 until spring.
Hog futures may be topping. The market is being pressured by this month’s cold storage report, which showed stocks of 630.6 million pounds, or about 10 million pounds above expectations. Stocks are up more than 28percent from year-ago levels. December futures have trendline support around $77, which if broken would suggest a move to $75.
Shell egg demand has begun to stir in anticipation of the upcoming Thanksgiving holiday demand period and has returned to above average levels. Wholesale shell egg prices have begun to firm as offerings are limited and held with confidence; supplies are moderate to heavy; trading is slow to moderate. Breaking stock prices are steady to higher for light offerings and light to moderate supplies; trading slow to moderate; breaking schedules normal. The preliminary sample of supermarket featuring into next week indicates a doubling of activity with a slightly lower average ad price. Incentive usage is sparse at best. As this week’s features move through the pipeline, inventories have begun to build for the holiday demand season, with ads expected to hit the papers within the next two to three weeks.
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