2012 Bi-Weekly Market Briefings
Soybean markets appear to have accounted for a big South American crop, at least for the near-term. Beans have been trading sideways to higher, but further upside gains may be difficult without U.S. planting problems. Export sales have dwindled in recent weeks, but the good news is shipments remain strong. That suggests potential cancellations of recent sales will be minimal. For now, the market appears to be in sideways mode, with May futures above $9.60. Resistance starts at last week’s high of $9.85, with additional pressure at $10. November has been unable to move above $9.50, but should that happen, additional resistance starts at $9.75.
Corn futures continue to trend upward on strong domestic demand. The March stocks report is expected to show stronger-than-expected domestic usage. Last month, USDA pushed those numbers higher by projecting ethanol use at 4.3 billion bushels. In addition, quality problems are apparently creating additional feed demand. Further problems are anticipated, because much of the crop was cut under high-moisture conditions. Longer-term, 2010 planted acreage is expected to increase if weather conditions are favorable. Because of this winter’s big snowfall, it’s possible we could have a late-planted crop for the third year in a row. May futures are approaching the January crop report gaps that start around $3.95. A move to $4 or above should be considered a pricing opportunity for old crop. Likewise for new crop September at $4.10 or higher.
Huge ending stocks for wheat are projected in the United States, as export demand remains slow. USDA is currently projecting 981 million bushels of carryover. This will limit upside potential, despite the fact that this year’s crop is 14 percent smaller. July above $5.25 should be considered a pricing opportunity. Wheat continues to be influenced by outside market requirements, as investment funds tend to buy on breaks. How long that will last is a real question.
Rice futures remain in a downtrend that began in mid-December. The international market remains weak after India indicated they would use their own stocks instead of importing rice. Vietnam is finally curtailing sales after pushing milled values down near $400 per tonne. Thailand has substantial intervention stocks available but has been unwilling to sell at lower values. Prospects of increased 2010 U.S. plantings are adding additional pressure. Growers have indicated a potential increase of as much as 10% in some areas. Current support is around $13.25 for both old and new crop futures.
Old crop cotton continues to rocket higher. May futures have moved above 84 cents as domestic and global stocks tighten. China added to concerns last week when they lowered their production estimate from 32 million bales to 29 million bales. In the February report, U.S. ending stocks were projected to be 3.3 million bales, and that may decline further in subsequent reports. Old-crop cotton at $1 is now being mentioned in some circles. New-crop December is following, but at a very slow pace. The recent high of $78.25 might be strong resistance. However, any perceived planting problems could send the market higher.
Strong demand is providing support for cattle futures. The choice cutout is trading above $150 per hundredweight for the first time in six months. This suggests two things: demand is strong and supplies are relatively tight. Fewer cattle were put on feed this winter, and bad weather has hurt performance in many areas. After a brief correction the last week of February, May feeders have set a new contract high. The April live contract is also bouncing back from a brief technical correction. The recent high of $93.52 ½ is the first level of resistance.
Hog futures are also being supported by strong demand. Product values are nearly 30 percent higher than a year ago, and frozen stocks are being pulled to help meet demand. This strong demand has slowed the liquidation of the breeding herd, however, so supplies will increase this spring and summer in response to the higher prices. April has resistance at the recent high of $74.25.
In dairy: For the week ending Feb. 27, block cheese prices fell 7.25 cents with 31 loads traded. Barrels fell 8.75 cents with 16 loads traded. Butter increased 4.5 cents with 13 loads changing hands. January milk and feed prices were revised substantially, decreasing profitability. The January all-milk price was revised 40 cents lower; corn price was revised 21 cents higher; soybean price was revised 30 cents higher. The February income-over-feed costs (the all-milk price minus the cost of feed) is $9.22, a slight increase over January. In their monthly Livestock Slaughter Report, USDA indicated dairy farmers sent 232,000 cows to slaughter in January. This is up 1,000 head from December, but 49,000 head less than a year ago.
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