2012 Bi-Weekly Market Briefings
SOYBEANS have remained volatile since the first of the year, with a slight downward bias. However, that is likely to change with the January supply/demand report. The USDA lowered 2010 yield by .4 bushels per acre, or 46 million bushels in total production. Domestic crush was reduced 10 million bushels. After other minor adjustments, the key ending stocks projection fell 25 million bushels to just 140 million bushels. That is 11 million bushels below last year and just barely above the 2008–09 figure. Look for another upward push as the market attempts to meet demand for 2011 and beyond.
CORN production and stocks were adjusted lower in this month’s report. Quarterly stocks of 10 billion bushels are down 8 percent from year-ago levels. Usage for September through November was estimated to be 4.11 billion bushels, up 250 million bushels from the same period a year ago. The 2010 yield estimate was trimmed by 1.5 bushels per acre to just 152.8 bushels per acre. Production, at 12.45 billion bushels, was reduced 93 million bushels from the November report. Feed usage was lowered 100 million bushels because of reduced livestock numbers. However, ethanol usage was increased the same amount, and the end result was ending stocks of just 745 million bushels. That is 963 million bushels less than beginning stocks. Projected world stocks fell from 130 million metric tons to 127 million metric tons. Tight stocks and good demand are likely to push futures to new recent highs. The current price ratio of 2.33, soybeans to corn, seems to favor soybeans. The battle for 2011 acres could change that ratio.
WHEAT plantings for 2010–11 are up 10 percent at just under 41 million acres. That is still 5 percent below two years ago. Hard red winter wheat plantings are up 4 percent, while soft red is up 47 percent. Big increases for soft red were seen in Arkansas, Missouri and Illinois. Also in this month’s report, the USDA raised its annual export projection by 40 million bushels, which reduced projected stocks to just 818 million bushels. Continued tightness in quality world stocks, combined with adjustments in corn and soybeans, should push July futures toward resistance at the recent high of $8.58 ½, or perhaps higher.
In this month’s report, the USDA made minor adjustments in COTTON numbers. Yield increased seven pounds per acre for a 50,000 bale upward adjustment in production. A similar increase in domestic usage left projected stocks unchanged at a mere 1.9 million bales. World stocks were lowered from last month’s report by 1.1 million bales to 42.8 million bales. Strong demand for cotton, particularly from China, continues. Earlier this month, at the 2011 Beltwide Cotton Conferences, most analysts predicted that 2011 plantings would be around 12.5 million acres, an increase of about 15 percent from last year. December futures have continued to creep higher, recently topping $1.05. Further gains may be needed if corn and soybeans continue moving higher.
RICE production for 2010 was adjusted upward in the January report. Yield was raised 58 pounds per acre, or 1.7 million hundredweight, all of which was long grain. This raised projected ending stocks to 51.8 million hundredweight, with 41.9 million hundredweight of that being long grain. The current supply situation is likely to limit upside potential, although there could be some carryover from soybeans and corn. The international market remains a little soft, but that could change, as the Philippines are expected to enter the market soon. However, U.S. milled price levels are about $125 per metric ton above Asian quotes. March futures have trend-line resistance around $14 with support at $13.25–$13.35 for the time being.
CATTLE futures were sharply higher, based on USDA’s lower production estimate for 2011. Production was projected to fall 651 million pounds, or 2.5 percent, from last year. Strong wholesale values were also supportive, moving to $168.40, the highest level in eight months. Consumer resistance could be seen around $170, and packers could make cutbacks based on declining operating margins.
HOG futures continued to climb, with February closing just below the late-September high. The USDA projected pork production will be slightly lower in 2011. At the same time, exports are expected to rise almost 10 percent. That should keep hog prices firm in the near term. Packer cutout margins remain favorable.
In DAIRY, cheese buyers were more determined this week, bidding blocks up 7.5 cents without attracting a seller. It was the biggest one-day gain since May 21, 2008. Barrels also increased 7.5 cents, trading once. The rally on cheese sent front-month Class IIIs significantly higher: February surged 53 cents; March was up 42 cents; April, 31 cents; and June, 21 cents. The February contract has increased $1.20 in the last four days, and February–June have all gained more than a dollar in the last month. Butter held at $2.10 again, sending butter futures lower.
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