2013 Bi-Weekly Market Briefings
SOYBEANS remain extremely volatile, as do other agricultural commodities.
Global unrest is the most recent addition to the long list of factors contributing to sharp swings in commodity prices. Large positions held by investment funds are subject to change on a daily basis. Thus, we see big moves down one day, then big moves up the next as funds adjust positions relative to outside market influences. And, of course, there are fundamentals to deal with. In the case of soybeans, for instance, prices are being stunted by an improving South American crop (expect production estimates to increase in this month’s report) and anticipation that China will switch from U.S. to South American beans. A tightening U.S. stocks situation is positive as soybeans attempt to claim acreage for 2011. Look for November to maintain the current trading range, $12.70–$14, until the market feels comfortable with 2011 plantings.
CORN holds a slight edge in the 2011 plantings battle. However, that is in price only. Other factors such as total cost and management time may move the needle back toward soybeans. And of course, weather at the time of planting will be a major factor. Old-crop corn is showing signs of being a little top heavy, with several unsuccessful attempts to move above $7.40. The market is concerned about long-term use and the potential end of ethanol tax breaks. Worldwide, wheat appears to be gaining a little ground on corn for feed usage. December futures have hit a brick wall at $6.20, with substantial support around $5.70.
WHEAT led the recent downturn as weather improved in the drought-stricken areas of China. While crop conditions in the hard red winter wheat belt of the United States remains poor, there are sufficient old-crop supplies to meet strong export demand. The July chart — which consolidated after a $1.50 downward retracement — may be completing a “bear flag,” which will have a downside objective near $7. Current crop conditions don’t favor such a move, but stranger things have happened. A close below $7.90 would signal the “bear flag” move. A close above $8.64 would be needed to move the market back toward the early-February high.
RICE futures continue to weaken as large U.S. supplies pressure the market. May futures are testing support around $13.50. A close below $13.43 will signal a potential move to the early-October low of $12.72, or perhaps lower. While U.S. rice milled values have declined, they’re still the highest in the world. New-crop September remains in a consolidation formation with some support around $14.60. Better support is seen around $14. Smaller plantings in 2011 are a positive factor.
Right now, COTTON is the very definition of “volatile.” Huge swings (some as wide as 14 cents) are a daily occurrence, particularly in old-crop contract months. A very tight U.S. stocks situation is likely to continue unless 2011 plantings exceed 13 million acres. That may happen, as it appears December futures above $1.20 are enticing additional acres to cotton. December has developed a strong trading range between $1.14–$1.35. A close outside that range would signal further moves in the direction of the breakout.
CATTLE futures exploded to the upside on March 9, and the April contract set a historic high for the nearby month. June could move toward resistance at $120, and resistance for October appears to be around $122 for the time being. May feeders have also moved to new contract highs and could test resistance at the $137.50 top of their current trading channel. The market is clearly overbought, though, so a turnaround could come quickly.
The chart picture for HOGS is improving. Higher cash prices are supportive, but light movement is a limiting factor for futures. April is consolidating in a narrow range between $86–$90. A move above that $90 level is needed to suggest an additional leg up.
In POULTRY, commercial hatcheries in the 19-state weekly program set 207 million broiler-type eggs in incubators last week. This was up slightly from the number set the corresponding week a year earlier. Average hatchability for chicks hatched during the week was 84 percent. Broiler growers in the 19-state weekly program placed 168 million chicks for meat production last week, down slightly from the comparable week a year earlier. Cumulative placements for the year are at 1.34 billion, up 1 percent from the same period a year earlier.
Back to 2011 Bi-Weekly Market Briefings
Back to Bi-Weekly Market Briefings Index