2012 Bi-Weekly Market Briefings
SOYBEAN report cut numbers, and raised projected ending stocks. USDA inched yield and production higher adding 10 million bushels to the 2011 crop. However, more damaging was a 10 million bushel reduction in the domestic crush and a 25 million bushel cut in exports. The combination of cuts and production increased projected ending stocks 45 million bushels to 275 million almost double 2 years ago. This took the spotlight off recent weather concerns in South America, resulting in a 62% retracement late December gains. Inability to hold here could see a move back to the mid December low of $11.04 ½. Weather in Argentina and southern Brazil remains questionable and should limit further downside pressure. Rebounds will find resistance at the recent high near $12.45. For new crop November support is the recent low of $11.16, with resistance the recent high of $12.31. The current November Soybean and December Corn price ratio is 2.1 which favors corn over beans. That suggest acreage will move to corn unless soybeans rise or corn falls.
CORN, was slammed by larger than expected stocks. Pre-report estimates suggested ending stocks of 750 million bushels. However, domestic use fell below expectations and coupled with a ½ bushel per acre increase in yields left projected ending stocks at 846 million bushels, down just 2 million bushels. The report triggered heavy selling resulting in a limit decline following the report, in old crop contracts. March futures now stand just 22 cents above the recent low of $5.76. New Crop December has fallen to $5.55, with support at the recent low near $5.35. Recent hot, dry weather in South America resulted in USDA cutting Argentina’s production by 3 million metric tons, while leaving Brazil’s estimate unchanged. Some private estimates have lowered the Argentina estimates even more. Continued hot, dry weather may result in lower numbers in future reports. December resistance starts around $5.90.
WHEAT declined on larger than expected plantings for 2012. 41.9 million acres were planted this year, up 900,000 acres from last year. Hard red acreage was up 1.6 million acres to 30.1 million acres. Soft red was down 300,000 acres but the trade was expecting a decrease of 1 million acres. Export projections were raised 25 million bushels, while domestic use was lowered 16 million bushels. Projected ending stocks were reduced slightly to 870 million bushels. Upside potential remains limited. July futures should remain in the current trading range of $6.13 to $7.03.
COTTON report clipped another 100,000 acres off harvested acreage. This cut 160,000 bales off the 2011 crop. Projected exports were reduced 300,000 bales which resulted in projected ending stocks of 3.7 million bales. While USDA cut U.S. exports China’s imports were raised 500,000 bales. Upside potential is limited, unless it appears 2012 plantings will not be sufficient. Currently, it appears cotton will lose acreage to corn and soybeans in the mid-south and southeast U.S.
RICE futures remain in a narrow trading range between $13.78 and $15.14. USDA lowered production 3.1 million cwt., but trimmed use by 4 million cwt. which raised projected ending stocks to 38.5 million cwt. International markets remained under pressure with recent quotes trending lower. Thailand and Vietnam have seen price levels decline with the reentry of India into the market and no immediate change is anticipated.
Broiler-type eggs set down six per cent. Commercial hatcheries in the 19 State weekly programs set 193 million eggs in incubators during the week ending 7 January 2012. This was down 6 per cent from the eggs set the corresponding week a year earlier. Average hatchability for chicks hatched during the week was 85 per cent. Average hatchability is calculated by dividing chicks hatched during the week by eggs set three weeks earlier. Broiler-type chicks placed down four per cent. Broiler growers in the 19 State weekly programs placed 162 million chicks for meat production during the week ending 7 January 2012. Placements were down 4 per cent from the comparable week a year earlier.
Cattle futures showed surprising strength early this week. Despite the fact that packer margins are running approximately $75 per head in the red, packers increased cash bids by $2 on Tuesday. In response, nearby February futures gapped higher and look to have additional upside potential. Deferreds were already trading at a premium to cash prices, so the upside is more limited for those contracts. Feeders are trading at all-time high levels. Higher equities, crude oil and a weaker dollar provided good support.
Hog futures are moving higher as well, despite the fact that packer margins have moved into the red. China remains quiet with respect to pork purchases, but that may change with the approach of the Lunar New Year holiday. April is building support in the $85.50-$85.70 area, the twice tested low of the recent down-move.
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