2012 Bi-Weekly Market Briefings
Events in Japan sent SOYBEANS reeling, as uncertainty about export movement shook the market. Funds bailed out to find a safer environment for their investments. But just as quick as the tsunami ravaged Japan, the market retraced losses. While Japan’s infrastructure took a major blow, there has been little slow down in shipments. Mills to the south of the country are expected to pick up the slack caused by the damage in the north. Roads and rail lines were heavily damaged, which will present the challenge of getting displaced products to the proper places. But for the most part, the market is back to trading well-known factors like a big South American crop and tightening U.S. stocks. There are also a lot of questions about how much soybeans the U.S. will plant in 2011. One recent estimate put the crop at 75.5 million acres, down about two million from 2010. That prompted a quick rally, which is testing trend-line resistance around $13.45 with support a dollar lower. A close to either side of that range will suggest further movement in the direction of the breakout.
CORN rallied on rumors of a big sale to China. That rumor is unsubstantiated at this point, but a couple of sales to “unknown buyers” total a little more than half of the rumored 500,000-ton sale. Gains of more than 80 cents lifted May near $7, while new-crop December once again probed major resistance around $6.20.
Early planting estimates around 92 million acres haven’t been a deterrent to the market. While the Japanese disaster raised uncertainty, the potential sale to China is expected to more than compensate for any possible cancellations. Tight stocks remain a key factor. Support for May starts around $6.10 and around $5.50 for December.
After losing more than $2.50 per bushel, July WHEAT rebounded along with corn and beans. However, the rebound lasted just two days despite poor U.S. crop conditions and acceptable export sales. Shipments need to increase to an average of 33 million bushels a week to meet the USDA projection. Falling short of the 38-percent retracement objective of $7.90, July futures have trend-line resistance in that same area. A close above that resistance would give objectives of $8.21 and $8.52. Substantial support has developed around $6.90.
Prospects of a substantial decrease in U.S. RICE plantings helped rally the market. The rebound carried September futures through trend-line resistance. Informa Economics projected U.S. plantings at just 3.2 million acres, a substantial decrease from 2010. In addition, last year’s dry conditions have persisted, depleting some reservoirs which have yet to be replenished. Poor yields, poor milling quality and high prices for alternative crops will reduce this year’s crop. September futures have upside retracement objectives at $15.05 and $15.44. Support ranges from $13.40–$13.70.
COTTON flinched following the Japanese disaster, as concern about Asian demand heightened. However, the market found substantial support and quickly rebounded. December remains in a solid trading range from $1.15–$1.35. Even separate planting estimates of 13.1 million and 13.3 million acres didn’t cause the market much heartburn. Those numbers are an increase of more than 20 percent from last year’s 10.97 million acres. The key in 2011 will be abandonment, which typically can exceed 10 percent. In 2010, it was a mere 2 percent. Extended dry conditions in a large area of Texas and across the Midsouth and southeast United States suggest abandonment will be closer to the norm in 2011. Thus, the market may need and want plantings greater than currently projected.
CATTLE futures are trying to climb higher after recent losses. Improving beef cutout values are a positive and should allow packers to keep bids near record levels. This week, choice cutouts moved above $189 per hundredweight, changing ideas that record-high beef prices have slowed demand. June has resistance at the chart gap between $114.70 and $115.82. Demand for replacement cattle remains strong and is supporting feeder futures. May has resistance above $133.
HOGS recovered losses charted in reaction to the disaster in Japan. Shipments to Japan, the largest export market for U.S. pork, have not slowed significantly due to the disaster. The market is also moving higher in anticipation of the quarterly USDA report, which will be released very soon. The market is expecting all three major categories to be slightly lower than year-ago levels. June has resistance at the recent high of $102.20.
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