2012 Bi-Weekly Market Briefings
Corn roared into March like a lion, posting big gains on the first trading day like other crops. The obvious question is whether the month will go “out like a lamb” as far as the markets are concerned. Corn received a boost from a private forecast of just over 86 million acres, well below expectations. Further support came from stronger crude oil and indications of further tightening in vegetable oil stocks. Surprisingly, demand is still good despite record prices. A fly is in the ointment, though. Although the market gapped to new highs, both old-crop March and new-crop December closed at the low end of the day’s range. That shows possible technical weakness. December support starts at $5.40.
Soybeans are riding soy oil higher. Stronger Chinese demand and reports of a short rapeseed crop in India have propelled oil to an almost-40-percent gain since January. No doubt the acreage battle is still being waged. The same private forecast that pegged corn at 86 million acres has beans at 74 million. If that’s so, you’d expect it to break the bean market — but it hasn’t happened. Keep in mind the official USDA survey is now underway and is released March 31.
In general, corn below 90 million appears to be positive, while beans above 70 million will be negative. Anticipate a break at some point and be sure you protect yourself. If you want to lock in a price and still be able to participate if the market goes higher, use “Put” options. With the current volatile markets, premiums for options are high. In the end, though, they may be cheap insurance. November futures will have key support at $13.
Wheat has exhibited a potential top. Feb. 27, July Futures spiked to $12.50 and have been somewhat volatile since. The July chart appears to be toppy, and it might be the jumping off point for index funds. Fundamentals seem to be out the window for the time being, but they’ll come back into focus. Demand will be satisfied, or supply will increase or, at least, expectations will. July Futures have initial support at $10, which, if penetrated, might mean a move to the next level at $9.
Rice, like wheat, is a food grain, and tight world supplies are driving futures to a record. Thailand and Vietnam are s2elling it at its highest level since 1973. Strong demand from Iran, Iraq, the Philippines, Indonesia and other nations is outstripping that Vietnam-Thailand supply, however.
Vietnam is holding additional March sales. However, a big tender from the Philippines may break Vietnam’s resolve. Overall world stocks are projected to be at the lowest level in 25 years. This sets the stage for the big gains expected in futures and should push some additional mid-South acres to rice. Current September Futures should translate into $7–$7.50 a bushel. Technical indicators suggest the market is very overbought and perhaps due a downward correction. Because it’s a thinly traded market, rice is always vulnerable. An initial downside retracement for September Futures will probably be near $15.40.
Bolstered by index fund interest, Cotton is the latest entry in the ’08 acreage-bidding war. Perhaps because the fiber looks underpriced relative to other commodities, it has attracted the funds. There appears to be no real fundamental reason. The United States’ mill use is still falling, and exports are lagging projections. We expect stocks larger than February’s 8.2 million-bale projection. That suggests cotton can, and probably should, top soon. Although $1 cotton is possible, it’s much more probable later in the year.
Percentage-wise, Poultry has contributed more than pork to total meat and protein growth, although the latter is where supply attention has focused so far this year. Total production is up 8.1 percent for the year, led by hen meat — only a fraction of total chicken output — which is 25 percent higher. Turkey production is nearly 12 percent higher so far in ’08, and broilers have grown by 7½ percent.
The Georgia f.o.b. dock price for broilers and fryers as this is written is 80¼ cents based on truck-load lots of ice-pack USDA Grade-A-size, 2½–3-pound birds. Eighty percent (923) of loads offered are confirmed at 78-1/5–80½ cents, with a preliminary 79.16-cent weighted average. The market is moderate and live supply adequate for good-to-light, mostly normal demand. Estimated slaughter was 4.97 million birds, compared to 5.1 million Feb. 29.
Sharply higher feed and recession worries are pressuring Cattle futures. The market is largely ignoring wholesale products’ renewed strength, but that may limit losses if it holds. The April Live-Cattle contract has violated the short-term up trend and moved to a new 13-month low. Indications the market is oversold and futures are trading at discount to cash may limit losses. March feeders also penetrated support at $103 and appear headed to the $99.30 mid-January low.
Hog futures are also pressured. Weekly kills continue to exceed last year’s by a wide margin. Weights also are still coming in heavier than in 2007, despite high corn prices. Concerns about the U.S. economy have traders worried about meat demand, as well. April Futures recently set new lows and might move toward support near $54 on the weekly chart.
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