2013 Bi-Weekly Market Briefings
Rice is showing a firmer price pattern. Recent sales to Iraq and Costa Rica have stimulated the market, which is still firming as harvest advances. Haiti, Ghana, Mexico and Central America are still regular customers. Strength in wheat and the other major food grains, plus a weaker U.S. dollar, is helping fight the stronger price. Many of these buyers are in a tight supply situation and may have little choice but to make buys.
November Futures remain in a strong upward trend, with the market consolidating just below the recent $11.77 high. The next long-term chart objective is the January ’97 high of $12.45. Any downward retracement will hit resistance at $11.58, $11.40 and then, $11.27.
Cotton is beyond expectations as December moves above 65 cents. Recent gains in soybeans and grains, and concern about ’08 plantings, have boosted the fiber. Early harvest reports suggest the ’07 crop is on target, though the smallest in almost 20 years. Huge ending stocks supplement the crop. That combination likely will be enough to keep ’07 crop futures from moving substantially higher to prevent acres from slipping further. Although December ’08 Futures are at a 7–8-cent premium to ’07, they may have to move into the upper 70-cents range to hold acres and compete with wheat and soybeans.
The next major long-term chart objective is the October ’03 high, 84.8 cents. December resistance is at the recent 67.4-cent high and the 68.8-cent contract high. Support ranges from 61.25 to 64.2 cents.
The Wheat rally is still going strong. Bolstered by a smaller U.S. crop, Australia’s continued weather problems and large exports, December Futures are approaching $10. At the same time, new-crop July ’08 Futures have gapped higher than recent resistance, having made new contract highs daily.
Strong use indicates price may not have rationed the short U.S. and world supplies. Sept. 1 stocks were 1.72 billion bushels, 115 million below expectations. This suggests that in the first quarter of the ’07–08 marketing year, use was more than 25 percent greater than last year. Growers anticipating planting more ’08 wheat should be ready to take advantage of these record prices.
Major support levels for any downturn in July ’08 Futures will be $6.35, then $5.85. A close below the first will suggest topping action.
Soybeans are strong as harvest progresses. Concern over this year’s smaller crop and the need to attract more acres in ’08 have kept beans moving higher, despite advancing harvest activities.
With carryover expected to be less than 200 million bushels, soybeans will need to buy acres back. Current prices put soybeans at a premium to corn, thereby pulling acres back.
Index funds are a big part of recent gains. That’s good, but they’ll take profits eventually. When that occurs, the market will be susceptible to a big down move. Current price levels will encourage renewed interest just as planting starts in South America. So look for big crops in Argentina and Brazil. The bottom line: be prepared to price next year’s crop. If basis is a problem, use a Hedge-to-Arrive contract and set the basis later.
For ’07, upside objectives are the ’04 high of $10.64, and the $10.76½ 1977 high. A close below $9.70 may mean a temporary top, with support under $9.50, the old contract high.
Corn yield reports are terrific. Record acreage plus great yields usually is a deadly combination — and they may prove so again. Reports suggest the USDA may have to adjust the average yield another two or three bushels an acre higher in this month’s report. If so, 2007–08 ending stock projections may near 2 billion bushels and take some pressure off ’08 plantings.
You may still see pressure on price, however, as harvest activity rises and storage space fills up. Today’s December close below $3.72 hints at further declines. A penetration of support just below $3.60 will indicate a possible retest of support around $3.25.
December Live Cattle Futures appear to have topped for now. After gapping higher, but failing to challenge resistance at the $101.45 contract high, the market has charted a bearish key reversal. Now, it’s headed lower toward support at the September low of $98.15. Next support is the $96.50 August low.
Tight fed-cattle supplies this fall and winter should limit the downside. Competition from relatively cheap pork, however, might keep prices in check.
October feeders are consolidating at $115–$117. A breakout in either direction will signal where the market is headed. The sell-off continues in the Hog pit. Historic high weekly slaughter totals have resulted in a glut of pork on the market. Packer margins are headed into negative territory, especially since expected Chinese demand hasn’t really materialized. The USDA reported Friday that frozen stocks equal 102.8 percent of those a year earlier. October hogs are headed for a retest of the $55.10 contract low.
Georgia’s f.o.b. dock-quoted price on broilers and fryers for current trading is 81 cents, based on full truckload lots of ice pack USDA grade A-sized 2½–3-pound birds. Eighty-one percent, 924 loads, offered are confirmed in a 75–82- cent range, with a preliminary weighted 80.3-cent average.
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The market still is weak and the live supply adequate for light-to-normal demand. Average weights are desirable to occasionally heavy, mostly desirable. As this is written, estimated slaughter is 5.2 million head, compared to 4.9 million seven days earlier.