2013 Bi-Weekly Market Briefings
On Jan. 25, November SOYBEANS threw a key reversal signal, suggesting at least a temporary top. Other commodities, including corn, have given similar signals in the past week. While downside seems limited, these formations should serve as warning signs that the markets are tired and will need fresh fundamental information to reinvigorate uptrends. The key reversal in soybeans came just days after China reconfirmed intentions to buy huge quantities of U.S. beans. On the negative side, better weather conditions in Argentina and indications that Brazil may produce a record crop have helped temper unbridled buying. Rampant inflation in China raises concerns about future fiscal restraints, which might limit demand. Monday’s high of $13.64 becomes resistance for November futures; support starts around $12.70. March futures have support in the form of an upward sloping trendline around $13.60. Resistance is the recent high of $13.24.
CORN futures remain in an uptrend despite making a key reversal top last week. The market quickly negated the key reversal by moving higher just two days later. However, the market is showing additional topping signals. Despite good long-term news — the EPA recently approved the use of 15-percent ethanol blend in about 62 percent of all vehicles — the market hasn’t been able to sustain upward movement. With oil falling below $90, ethanol margins will tighten in the short term. Downside is limited until the market is assured that usage is beginning to decline or until adequate 2011 acreage is committed to corn. December support is $5.60, with resistance at this week’s high of $5.92 ½. March support is $6.25, then $5.94 with resistance at $6.67.
July WHEAT appears to be heading for $9 or better. Strong export demand, combined with dry conditions in the Great Plains and in China, is drawing the market toward upside objectives. For July, that is $9.10 and then $9.40. The latter was registered in July 2008 when the market exploded to all-time highs. In the months ahead, a world-wide shortage of high protein wheat could produce unprecedented demand, as countries attempt to cover food needs. July futures have key support at the early-January high just under $8.60. A close below that could send the market toward $8.
Volatility remains high in the COTTON market. On Jan. 25, cotton posted key reversals in a wide range of trading. However, the influence of outside markets and fund trading has reduced the reliability of this technical signal. It does suggest, as already indicated, that the market is vulnerable and could top at any time. Old-crop cotton has moved to historic highs, with March nearing $1.68 and December hitting $1.14. A move above these levels is possible (actually probable) as demand remains strong. U.S. cotton acreage is expected to increase 10–15 percent to a projected 12.5–13 million acres. World acreage also will increase, so good crop conditions could bring quick relief to the stocks situation. Lower priced synthetics will replace some cotton as blends increase. Be prepared to price a good portion of this year’s crop early.
RICE futures resumed their uptrend following a Jan. 25 sell-off. While futures are moving higher, the disparity in the market is widening. The futures and cash markets are not trading in the same time zone, as basis remains extremely high — approaching $2.50. U.S. milled price levels are being quoted at $600 plus, or $100–$125 above Asian quotes. U.S. mills are winding down earlier sales and need new business with little in sight. Generally, futures are being driven by investment funds, which are anticipating big U.S. acreage cuts, buying and then profiting. So, look for further volatility and a market that doesn’t appear to reflect reality. March futures have resistance at $15.35 and then $15.81. Support is between $13.30 and $13.65.
CATTLE futures are under pressure from a bearish monthly cattle-on-feed report. The report showed feedlot numbers up 4.6 percent from this time last year. That was a bit above the trade expectation and the largest inventory in many months. December placements were up 16.1 percent from last year. Demand will be tested in coming weeks as the market tries to absorb these large supplies. February has support around $105.80.
HOG futures were mixed. A severe foot-and-mouth outbreak in South Korea is providing some support for U.S. prices. South Korea has announced they will allow duty-free pork imports through at least June to help deal with the situation. Long-term, it appears late-spring contracts will test resistance at $100. However, futures are overbought and possibly due a short-term downward retracement.
In DAIRY, milk futures turned higher as cheese prices continued the uptrend. March led the way with prices up 56 cents at one point and a new contract high. Futures prices have jumped this month with March up $3.44 since the beginning of the year. Blocks gained 4.25 cents to $1.6925 with barrels up 1.25 cents to $1.6425 on unfilled bids. Since the beginning of the year, block price has increased 35 cents while barrels gained 30.25 cents. Nonfat dry milk prices show no sign of slowing, with Extra Grade up 3 cents and Grade A increasing 4.25 cents. Butter price has remained steady at $2.10 since Jan. 7 with very few loads traded. Typically, churns use this time of year to build inventory for the rest of the year, but high costs associated with holding the inventory is keeping production close to demand according to USDA’s Dairy Market News.
Back to 2011 Bi-Weekly Market Briefings
Back to Bi-Weekly Market Briefings Index