2013 Bi-Weekly Market Briefings
The monthly crush figure for soybeans was 10 million bushels below year-ago levels, but last Friday, a private analytical firm projected ’09 soybean plantings would exceed corn for the first time in history. Normally that would pressure the market, yet soybeans rallied to close 25–30 cents higher. It seems that while just about everyone is projecting a big switch from corn to beans, the market isn’t convinced. In recent days the price ratio of November soybeans to December corn has fallen below 2-to-1. That seems to favor corn and suggests farmers may still opt against beans on some of their “flex” acres.
Crude oil appears poised to move higher, and the uptrend in the dollar seems to be wavering. Good export movement and smaller projected ending stocks are also positive trends. However, without another strong play by funds, the upside for soybeans would be limited.
November has moved into the big gap that was left in mid-February. It would take a move to $8.91 to close that gap. Don’t wait too long to pull the trigger on some ’09 sales.
Private forecasts are projecting substantially smaller corn plantings in ’09. One of those estimates puts corn at just 81.4 million acres, down from 86 last year. Seemingly that would boost corn, but its trade has been stable while soybeans have soared. The March Supply/Demand report was also kind to corn, with 100 million bushels added back to the ethanol-use column. That seems optimistic, but a firmed undertone in crude oil is a positive for corn and ethanol. The increase in use reversed the trend of the last several months and suggests that perhaps things are stabilizing. On the negative side, big entries into the loan guaranteed late summer pressure on the market. Use any short-term rally as a pricing opportunity. September contract resistance ranges from $4.30–$4.60. December is 10–15 cents higher.
July wheat broke a long-term downtrend a week ago and has moved higher in recent trading. However, this may be a short-term upturn, because world and U.S. stocks are quite large. Exports remain minimal as U.S. exporters find it difficult to be competitive. Smaller domestic plantings and drought conditions in the Southern Plains are supportive.
Cotton finally caught a break in the March report. A downward adjustment in China’s production number raised their import projective which, in turn, boosted the U.S. export projection. On the negative side, U.S. mill use was lowered yet again. December futures are stabilizing near recent lows but remain well below the loan. Earlier declines in soybeans and corn seemed to have pulled cotton back into the mix for some producers, and projected planting cuts may be less than previously thought.
Rice futures have slipped to a new recent low. In the March report, USDA made minor adjustments in projected exports. While minor, it may be a sign of more to come, unless U.S. sales increase. With Vietnam placing a temporary ban on exports, the United States appears to finally be competitive in the export market. At this point, a pending tender from Iraq has not been confirmed. The U.S. mill industry desperately needs this sale. In recent days, rice futures dipped below the long term 62 percent retracement objective of $11.46. A late rally left May sitting right on that level, which appears to be major support.
Cattle futures, under pressure from general economic concerns, are still trending lower. Because of the recession, traders continue to worry about the strength of beef demand, both domestic and global. Values are languishing, and packers are still losing $20-$30 per head. April has support at the recent contract low of $82.
Hog futures seem to have bottomed — for the time being. A seasonal decline in supplies has already begun. Last week’s kill was more than five percent smaller than the week before. Composite pork values are moving higher. It’s not enough to put packer margins back in the black, but they’re losing significantly less money than they were just a week or two ago. Futures are selling at a premium to cash, which could limit upside for the time being. June is building support at $71.
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