2013 Bi-Weekly Market Briefings
The SOYBEAN rebound stalled due to rain in the drought-stricken areas of South America. While dry, hot conditions likely trimmed soybean yields, the rain came at a very opportune time as much of the crop was in the reproductive stage, thus avoiding a potential disaster. World economic problems also remain a factor, creating a situation that often boosts the dollar while weighing on crude oil and equity markets. This long-term situation won’t be solved immediately. Looking ahead, the soybean market topped in early September near $14. The long-term trend is down, so make use of rebounds to price remaining 2011 crop and expected 2012 production. November futures have hit resistance at $12.25 on two occasions, and there is additional resistance at $12.57. March resistance is $12.45 and $12.90.
The CORN market is a tale of two crops. Tight old crop supplies have been made tighter by the drought situation in South America and expectations for 2012 U.S. plantings of almost 95 million acres. Rain was too late for much of the South American crop, which was in pollination during the drought’s peak. Crop estimates continue to ratchet lower. U.S. farmers have added to the tight situation by being reluctant sellers, which made for improved basis levels. Resistance between $6.60 and $6.75 would appear to be the maximum to expect for old-crop March without fresh fundamental news. New-crop December lags behind as the trade looks at 95 million acres of corn and the potential for a record crop if yield is anywhere close to trendline after two abysmal years. December resistance at $5.85 to $6.05 is the best that a market that topped last fall likely can do.
WHEAT finally gets a break. Growing concern about this year’s crop in Russia and the Ukraine, coupled with a more competitive export situation, is giving the wheat market a good bounce. There are rumors Russia might impose a wheat export ban as targeted movement is nearing. Dwindling supplies plus an improved transportation situation have made U.S. wheat competitive in the export market. July futures have an upside objective between $7.00 and $7.30. Higher will depend on corn and export demand.
COTTON has declined after testing resistance. Old-crop March could not top the dollar level, while new-crop December failed to move through a downward-sloping trendline at 95 cents. World economic situations continue to weigh on the market, but there are signs China will grow less cotton in 2012. If that is the case, improved exports are a possibility. Informa projected a 6-percent decrease in 2012 plantings, but a lot of that acreage is in Texas drought areas.
U.S. RICE has apparently fallen victim to new Iraqi specs. New requirements on the latest Iraqi tender included a minimum length of 6.8 millimeters, which, because of co-mingling of many varieties, left the U.S. on the outside looking in. The tender apparently was awarded to Vietnam, Thailand and South America. The question is whether the new specs become the standard, and if so, what that means for the U.S. The futures market slid lower, finally breaking out of a month long trading range to the bottomside. A test of the December low is expected, bringing several layers of support between $13.50 and $12.70 into play.
CATTLE futures are currently under some pressure from weak packer margins. Margins are estimated to average -$110 at this point. Further weakness in the product market this week has resulted in lower cash bids as packers attempt to lower procurement costs. Longer term, there is optimism for cattle prices. The inventory report, released on January 27, showed, as expected, the total herd is at a 60-year low. The number of heifers kept for breeding increased by 1 percent, hinting at modest expansion in the coming months, but short term, that lowered the number of feeders that will be coming to market. April live cattle have resistance in the form of a double top at $129.70 and uptrending support near $126.50.
HOG futures are consolidating in a choppy pattern. April has support at $85.50 with resistance at $89.42. Product values have weakened, but packer demand remains brisk. Packers seem to be anticipating smaller supplies this spring and are stocking up on product now to meet export needs this spring.
POULTRY. Shell eggs totaled 168 million dozen during December 2011, down 5 percent from December 2010 and 3 percent below the 174 million last month. During calendar year 2011, shell eggs totaled 2,083 million dozen, up 1 percent from the comparable period in 2010. To date, cumulative total edible product from eggs in 2011 was 2,699 million pounds, up 1 percent from 2010. The January market egg price, at 66.7 cents per dozen, is 43.3 cents less than December but 0.7 cents higher than January 2011. The January broiler price, at 49.0 cents per pound, is up 2.0 cents from December and 4.0 cents above a year ago. The January turkey price, at 66.0 cents per pound, is down 5.4 cents from the previous month but is up 9.6 cents from a year earlier.
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