2012 Bi-Weekly Market Briefings
In their recent Supply/Demand Report, USDA increased projected soybean exports by 20 million bushels. That adjustment — combined with a 10-million bushel increase in domestic use and several other minor changes — lowered projected ending stocks to 190 million bushels, just a three weeks’ supply. That provided sufficient firepower to give soybeans a one-day boost. However, the reality of a big South American crop came into focus the next day when export sales revealed a sizeable cancellation by China. While shipments have been very strong, there are still about 75 million bushels left to ship. USDA raised their Brazilian estimate to 67 million metric tons, but held Argentina’s at 53 million metric tons. Long-term, this market has a lot of downside potential. May futures have key support at $9.11, then $8.88. For November, it’s $9.10 and $8.78. A close below this support would suggest a potential move to weekly chart support at $7.76.
This month’s Supply/Demand Report provided some bearish news for corn. Many people were expecting a production reduction of 75 million bushels or more. However, the report only lowered the number 20 million bushels, to 13.13 billion. In addition, export projections were reduced 100 million bushels. After all adjustments were made, projected ending stocks came in at 1.799 billion bushels. Needless to say, that’s a substantial amount of corn going into the 2010 crop. Support for May futures is located at $3.59; September is at $3.76. The next support for both is about 33–35 cents lower. Weekly charts show support between $2.90–$3.
Wheat remains under pressure from big world supplies and poor export movement. A smaller U.S. crop could give the market a little upside potential, but USDA just raised 2009–10 ending stocks to more than 1 billion bushels. That yields a stocks-to-use ratio of 50.4 percent. While downside appears limited, July is testing support at the contract low of $4.83 ¾. Below that is $4.25 support on weekly charts. July has strong resistance at the recent high of $5.36 ¾.
Rice could be bottoming. Futures are finally consolidating near recent lows of $12.32 for May and $12.60 for September. A weak international market may see some relief, as El Niño-related drought conditions are expected to reduce production in Southeast Asia. On a rebound, initial upside objectives would be $13.11, $13.27 and $13.43 for September. This year, U.S. plantings are expected to rise 5–10 percent. USDA will release planting intentions at the end of March.
Cotton remains in an uptrend. USDA made only minor changes in this month’s Supply/Demand Report. Mill usage was raised 100,000 bales and ending stocks were lowered a like amount to 3.2 million bales. On the world stage, there was a slight increase in projected exports and a 500,000-bale reduction in Chinese production. The latter was disappointing, because China had already lowered their own estimate by 3 million bales. A round of profit taking took a little more than 500 points off May. December edged higher, but very slowly. Tightening world stocks suggest continued upside potential, even with U.S. plantings increased by 1–1.5 million acres. December should test resistance at the recent high of 78.25 cents. Support starts around 73 cents.
Cattle futures are in a steep uptrend. The market is overbought, however, so a downward correction could come anytime. Futures are carrying a large premium-to-cash price, as well. Domestic demand remains surprisingly strong in light of high unemployment. Seasonal increases in demand could limit the downside as we move into spring. April live cattle have support around $93.25. April feeders have support at $104.
Hogs are currently under pressure from a weak cash market. A Tyson plant with a 15,000-head capacity was damaged by fire last week, so there are plenty of hogs available to meet processors’ needs. Strong demand is supporting futures, and a move toward the reopening of the Russian market last week was positive. The market tends to move higher in the spring and summer months, and this year’s smaller pork production estimate suggests a tighter supply situation near-term.
Back to 2010 Bi-Weekly Market Briefings
Back to Bi-Weekly Market Briefings Index