2013 Bi-Weekly Market Briefings
Soybeans are keeping a high profile as outside markets provide direction, and fundamentals seem forgotten. Beans and other ag markets are getting a boost from crude oil and the weak dollar.
The latest USDA Report shows the minimal net change, a 5 million-bushel reduction in expected ending stocks. Known fundamentals — including Brazil’s and Argentina’s projected big crops, anticipated movement from corn to beans in ’08 U.S. plantings, and tight world vegetable oil stocks — are just minimally affecting soybean futures.
Index funds perceive beans as undervalued relative to crude oil, which is at record highs. So, they’re investing big in beans and other grains. Producers should take advantage of this and be ready for an eventual down turn that topping action in crude oil or strengthening of the dollar likely will signal.
Key chart points on the upside are the April ’04 high of $10.64 and the $10.99½ 1998 high. January support starts at $10.10. New-crop November has strong resistance just under $10; support just over $9.50.
Wheat has hit a brick wall just below $7. New-crop July futuresrfor ’08 hit $6.94 or more seven times in the past seven weeks as the market remained in a narrow consolidation band, with $6.53 support.
The market’s still trying to ensure big plantings in ’08 wheat. World stocks keep dwindling. Potential for a dry winter in the southern plains is keeping the market nervous. Old-crop values have slid as importers filled immediate needs and Argentina again has indicated they will export wheat.
As expected, the latest Corn Report was positive. The USDA reduced yield to 153 bushel an acre and production 150 million bushels from the previous month. A 50 million-bushel feed-use reduction partly offset higher production that left a 100 million-bushel reduction in projected ending stocks. Having anticipated the reduction, the market corrected downward slightly before the report.
December Futures tried resistance at $3.90 before returning to key trend-line support at $3.75. A close either side of this range will indicate further movement that direction. Resistance on the upside is an old gap at $3.95, then the $4.31 contract high. Downside, support’s at $3.56, $3.35 and $3.25. December ’08 has a very steep trend line in place, with current support at $4.22. A new $4.36½ contract high suggests growing concern over corn maybe switching back to beans in 2008.
The USDA Report is tipping Cotton lower. Again, it’s proving resilient and has substantially increased yield in the latest report. Much of the gain — 600,000 of the 708,000 bales — is in Texas. Also, the USDA cut projected exports 500,000 bales. The result? A 1.2 million-bale rise, to 7.6 million, in expected ending stocks.
China’s import needs were also reduced 500,000 bales. This rise in supply will likely keep old-crop pressured. Recent resistance is probably going to hold. With March set to become lead contract, further drops are likely. Initial support just above 65 cents may be tested. Long term, new-crop must move into the upper 70s to keep acres from sliding again in ’08.
Tight world stocks are pushing Rice Futures to 14-year highs. January recently surpassed the ’97 high of $12.45 and came within a dime of 1993’s $13 high. Strong rough rice export sales and good mill activity provided impetus for the strong move.
Total exports and sales are almost 60 percent above last year. Mills have enough orders to keep them busy into January, with good sales to Ghana, Haiti, Iraq and the Philippines. Rough rice is moving to Mexico and Central America. Vietnam’s and India’s export bans are in effect, leaving Thailand as the main provider and allowing them to move substantial quantities of old intervention stocks.
January Futures need to move about $13 to retain the current up turn. If they can’t, we’ll likely see the market retrace gains, and major support will be the old $12.10 resistance.
In Poultry, this week’s Georgia dock-quoted price on broilers and fryers is 78 cents, based on full truckload lots of ice pack USDA Grade A 2½–3-pound birds. Some 86 percent offered (927 loads) are confirmed at 65¾–81 cents, with a 77.62-cent preliminary weighted average.
The market is steady to weak and the live supply adequate for mostly normal demand. Average weights are desirable. Estimated slaughter is more than 5.12 million head, compared to almost 4.71 million Nov. 9.
For now, Cattle Futures likely are bottomed. Market-ready supplies should be manageable through the winter, and that should provide cash-price support.
Monthly placements for spring tell a different story. December Live Cattle are consolidating at $95–$96, and February’s are consolidating at $98–$99. January Feeders are building support at the recent $107.10 low.
Hog Futures are trying to recover a bit from the recent sell-off. Better pork values, packer margins and technical buying have boosted the market. However, the past six weekly kills have been records. The USDA added 80 million pounds to its ’07 Pork Production Estimate in the monthly Production & Supply-Demand Report. So, burdensome supplies probably will limit the futures market’s upside potential. December support is the $50.95 contract low.
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