2012 Bi-Weekly Market Briefings
Although Corn has provided much of the impetus for recent record moves in beans and wheat, it hasn’t exceeded its 1996 high of $5.54½—but it’s close. It’ll probably happen, since projections say ’08 plantings will be about 88 million–90 million acres. We expect use to expand to 13½ billion bushels, so something will have to give. We’ll either plant more acres, raise yields, or stocks will fall to the bare minimum. In any case, it looks as if price must rise, because up to now exports and feed use haven’t been cut. So what we are seeing now is a typical “retracement” of gains.
Recessionary fear may be the key factor, since big declines in the stock market are triggering similar losses in other countries. The result is this may break commodity markets, too. December support starts just below $5, with more support near $4.80. Inability to hold above here signals a top and suggests we need new fundamentals—weather problems, for example—to move the market up. Conversely, a December close above the $5.40 contract high probably will send the market to $6.
Soybeans have made “beans in the teens” reality. It took a long time, but futures finally hit $13. November hit $13.04½ before making a substantial two-day downward retracement. Like corn, the question becomes whether the market has topped or is just resting. The answer is in how many acres are planted. Most estimates suggest 5 million–7 million acres more than in ’07, totaling 68 million– 70 million.
Where will the extra acres come from? In the mid-South and Southwest, growers will squeeze a few out of cotton and rice. Most of the battle is between corn and soybeans, though. November has support at $12, $11 and $10. A close below the last will signal a major top. Upside, $14 is the next objective if the market exceeds the contract high.
New-crop Wheat, boosted by smaller-than-expected U.S. plantings, has penetrated resistance after a month of consolidation. July has broken old $8.30 resistance and is knocking on the $9 door. Fewer acres combined with good demand and weather concerns have spurred the new contract high. Index funds have seemed to put wheat on the front burner. Smaller winter wheat plantings have pushed spring wheat into the acreage battle. The $10.09½ old-crop high made in mid-December may become the upside objective. However, recession fears can trip the balance. A July close below $8.30, then $7.65, will signal the top has been made.
Cotton made a potential top while the market reacted to recession fears. They affect cotton more than many crops, since cotton’s not food. Early stock market weakness has triggered an initial cotton sell off. December has gapped below trend-line support and left a potential “five-day island top.” “Potential” because the market is extremely volatile and can close that gap and negate the formation. The market is very nervous and due a downward correction. Retracement objectives are 76.8, 75.6 and 74.4 cents. Further chart support is near 76 cents, then 71.
Rice Futures are holding, and early indications are they may fare well as business pressures bleed into the commodity markets. After big early slides, the market moderated and now looks to be working within a previously set consolidation area. March tested support just under $14 before firming. A close below there may mean a move to retracement objectives of $13.79–$13.26. The $14.63 contract high offers serious resistance, although the international market was firm at last report. A September close below $14.25 suggests a possible slide to support about 15 cents lower.
Cattle Futures are oversold and due a corrective rebound. Concerns for the U.S. economy, however, make any rebound a tough sell. Traders worry that a downturn will affect meat-demand. February seems to have set support at the recent $89.13 low, but the market’s inability to close above $91 has limited the upside. Feeders have gained some support from weaker corn prices, although the cash market’s ample supply limits futures’ upside.
Hog Futures are also wrestling economic concerns. Meat demand questions are capping prices, but the weak dollar has helped keep export demand active. Signs that cash prices are at bottom are supportive for now. Under pressure from premium-to-cash prices, February is trading near contract lows. April has support at the $60.90 contract low and resistance at $63–$64.
In Poultry, Broiler meat production, with continued higher Chick placements, is expected to hold steady better in the first-half of ’08. Higher production means many broiler product prices will be under pressure. We expect a strong export market to absorb some of that production. Whole Turkey prices stayed relatively strong through December.
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Eggs remained at very high levels through ’07, as a smaller table-egg flock brought lower production Exports totaled 605 million pounds, a 10-percent rise. Turkey exports totaled 48 million pounds, less than 1 percent more than a year ago. U.S. eggs sets for the week ending Jan. 12 were 216,449,000, 5 million more than the same time last year. Chick placements for that week were 179,257,000, 8 million more than a year earlier.