2013 Bi-Weekly Market Briefings
SOYBEANS quickly reversed losses following the February report. The U.S. supply demand report was unchanged from January. The biggest changes were noted in the world numbers where overall ending stocks declined a little over 3 mmt, the result of a 2.5 mmt decline in Argentine production and a 2.0 mmt decline in Brazil. Overall world ending stocks are projected to be 8.6 mmt below last year’s 68.9. While it did not show up in this month’s report, U.S. exports should increase. Technically, old crop soybeans are headed toward the 50 percent retracement objective of $12.76 and perhaps higher. New crop November has been a little more active than old crop and could move toward the 62 percent retracement objective of $12.92. Soybeans are attempting to buy back 2012 acreage as the price ratio between November soybeans and December corn has moved from below 2.1 to above 2.2.
Building world WHEAT stocks have limited upside potential. After rising to $7, July futures have tumbled. The February supply demand balance sheet showed a 25-million-bushel increase in exports and a similar decline in projected ending stocks. Depleted export stocks in the Black Sea region have given the U.S. increased export opportunities as we become more price competitive. However, a 3.1 mmt upward adjustment in world stocks suggests another tough export year ahead for the U.S. July futures are generally working between $6.25 and $7.00. Additional resistance is located just above $7.25.
CORN numbers are helping stabilize the market. As anticipated, USDA raised corn exports in the February report. The net result of changes was projected ending stocks of only 801 million bushels. World stocks were adjusted almost 3 mmt lower, a result of a 4 mmt reduction in the Argentine crop. The smaller numbers helped stabilize old crop contracts, but December could not maintain the recent high just above $5.80. Potential 2012 U.S. plantings between 94 and 95 million acres raise concerns. If U.S. yields move back to trendline levels, 160 bushels or more, a crop of 13.8 billion bushels is possible. December has support at $5.50, and any move into the $5.80-$6.00 range should be viewed as a pricing opportunity.
December COTTON quickly turned lower following this month’s report, after gaining almost 15 cents the past two months. World stocks are building, up almost 14 million bales from last year, with a stocks-to-use ratio of 55 percent. Sagging demand has use just under 110 million bales. Cheaper man-made fibers are making it difficult for cotton in a slumping world economy. China’s drive to increase their reserve stocks is a major stabilizing factor. It is anticipated they will increase buying on dips to 90 cents or lower. U.S. plantings were projected 7.5 percent lower by the National Cotton Council at 13.63 million acres. A crop of 18.3 million bales would be harvested with normal yields. Drought conditions in Texas and Georgia remain a potential factor. Current projections suggest December rebounds above 96 cents should be viewed as good pricing opportunities.
Last week’s reports were a non-entity for RICE. Numbers on the U.S. and world level were essentially unchanged. Most notable change was a 2 mmt increase in India’s production which was offset by small declines in several other countries. Looking ahead U.S. plantings are expected to decline slightly from 2011, when acreage dropped almost a million acres. Upside potential remains limited by milled rice export demand. Overall exports are well below year ago levels and there are no indications demand will increase near term. Futures have tracked sideways between $13.50 and $14.90 for the last three months.
Butter was offered 4¢ lower Monday without drawing a buyer off the sidelines. The price settled below $1.40 for the first time in almost two years. A year ago, the price was $2.0775. Butter futures, however, were mixed, with second-quarter contracts settling at $1.5483. NMPF currently estimates that MILC payments will begin with February milk. Based on futures prices from Feb. 9, NMPF projects an MILC payment of 27¢/cwt. in February, rising to near 80¢ in April and May. Payments are estimated to continue through August. In September, the feed-price trigger increases from $7.35 to $9.50; at this point NMPF does not expect a payment for September.
CATTLE futures are being supported by tighter supplies and strong product values. The flip-side to that is that packer margins are very much in the red. That is keeping demand in check and a lid on futures’ prices. April has clearly defined resistance at $129.70, with support at $124 providing the base for the current sideways trading pattern. The monthly cattle on feed report, which will be released after the close on Friday, is expected to show a decrease in placements over last year for the second month in a row.
HOG futures are chopping along mostly sideways for the time being. This market is clearly being supported by export demand. December 2011 exports were over 23 percent above year-ago levels, and the annual export total is up 18 percent from 2010. There is no indication movement will decline in the months ahead. April has support at $85.45 and resistance at $90.57.
Sawtimber prices for both pine and hardwood remain weak due to the depressed housing market. The long-term outlook is for prices to remain low as the housing recovery will likely not occur before 2015. Pulpwood prices continue to show strength, despite being well off of the highs set just a couple of years ago. Continued strength in the pulp and paper industry will help sustain both hardwood and pine pulpwood prices.
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