2012 Bi-Weekly Market Briefings
So far this year, cotton has stayed in range. Old-crop cotton made a push at the upper end, but has not had enough buying support to get it done. Increased export demand suggests Chinese supplies may be tighter than originally thought. An improving global economy could spark renewed interest in tightening ’09 stocks. A March close above 77 cents would signal another leg up. New-crop December has been a little slower in trading, toward the November high of 78.25 cents. It will probably take more to bring additional acres in 2010.
Rice found trendline support after breaking $14.50. A short crop in India and typhoon damage in the Philippines rallied futures to $15.98 in mid-December. The Philippines rushed to make purchases with weekly tenders that fired the market. India quelled expectations for another runaway climb by indicating they would use reserves instead of buying on the world market. That sent futures sharply lower, with January dropping more than $1.50 in six trading days. The market appears to be settling on a trendline around $14.30 with good support. Look for trade to remain within this wide range. March futures are trading between $14.50–$16.27 with resistance around $15.25.
An influx of money from index funds moved soybeans sharply higher in the first session of 2010. Gains were pared during the session, but the market may still test old-crop resistance at $10.70–$10.75. New-crop November was a little more hesitant after hitting resistance at $10.35. The recent high at $10.60 could be the high-water mark, but it depends on index funds, the dollar and outside markets like crude oil. On the fundamental side, Chinese demand could dry up over the next several months as a huge South American crop becomes available. U.S. export sales are more than 85 percent of USDA’s projection, and we are just a third of the way through the marketing year. Producers should consider initial pricing of 2010 soybeans with November at, or above, $10; add to that if November tests $10.50 or higher.
Wheat made the most dramatic push following the New Year’s holiday. Most of the buying was from index funds, which considered wheat underpriced relative to corn and soybeans, and therefore, a good investment. In the real world, unfortunately, U.S. wheat is not competitive in the global market, and export demand is next to nothing. Producers should take advantage of any upturn caused by those recent purchases. July resistance ranges from $5.85–$6.20.
Corn started 2010 on solid ground. However, that might be a slight exaggeration, as several million acres in the Midwest remain unharvested and covered by snow. Losses on the remaining corn could be as high as 100 million bushels. In spite of that loss, there will be an ample amount of corn this year. The question is: what will be needed in the future as high crude oil prices keep ethanol profitable? USDA projects 4.2 billion bushels of corn will be used for ethanol this year, more if any idled plants come back online. Long-term, we could see the market bid to keep corn acres or add to them. Currently, old crop has stiff resistance just above $4.20, while new-crop September made a brief push above $4.45. Consecutive closes above these levels would signal another move higher. For initial 2010 pricing, consider September corn at $4.30 or higher.
Live cattle futures started 2010 by charting a huge downward reversal, giving the charts a decidedly bearish appearance. The Jan. 4 high near $87 may prove to be key resistance for February. A close below $85.35 would signal further declines, beginning with a retest of support at $84.55. Movement has been somewhat sluggish the past few weeks because of holiday slowdowns in slaughter schedules. However, recent firmness in the wholesale beef market has kept prices in the “steady to a dollar higher” range. November placements were reported to be down 8 percent from a year ago, which was a larger-than- expected decline.
Growth in hog futures stalled during the holidays, with the market moving mostly sideways. However, the first few days of 2010 saw a renewed buying interest that boosted prices back toward recent highs. February has resistance at $68.05. Last week, USDA projected a larger-than-expected pig crop for the last quarter of 2009. That could limit the upside somewhat.
In poultry, the estimated broiler slaughter for the week ending Jan. 2 was 126,980,000. Actual slaughter for the week ending Dec. 26 was 126,587,000. For heavy-type hens, estimated slaughter for the week ending Jan. 2 was 916,000. Actual slaughter for the week ending Dec. 26 was 897,000. For light-type hens: estimated slaughter for the week ending Jan. 2 was 1,401,000. Actual slaughter for the week ending Dec. 26 was 1,097,000. The total slaughter for the week ending Jan. 2 was 129,297,000; for the week ending Dec. 26, 128,581,000.
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