2013 Bi-Weekly Market Briefings
Effective Apr. 2, the Daily Market Report will be available only by Internet. It can be accessed by going to www.arfb.com, under Ag Market and Statistics.
SOYBEANS remain in a solid uptrend that began in mid-December. While USDA didn’t change any U.S. supply/demand numbers, big cuts were made in South American projections. A total of 5 mmt were chopped off the Brazilian and Argentina crops. Thus, tightening world stocks and strong Chinese demand are providing the basis for what appears to be speculative fund buying that could end any time. The soybean/corn price ratio moved above 2.3 and appears to be drawing some acreage to the soybean side. November futures have moved cautiously above $13.00, but as of today are struggling to hold that level. Futures aren’t likely to exceed the early September high of $14.00. Resistance at $13.50 to $13.60 will likely hinder further gains. Producers should use current strength to add to 2012 crop pricing or to initiate sales if none have been made yet.
The CORN rally is being fueled by tight farmer holding and renewed Chinese interest. Good weather moved Midwest farmers to field work instead of marketing. Limited supplies remain a factor and could lead to continued tight holding until the March 30 stock report. Long-term, producers should consider several factors. The demand base for corn is showing signs of erosion. Feed use is projected at 4.6 billion bushels, down from 4.8 last year. This reflects fewer cattle and a projected 2 percent cut in poultry numbers. Ethanol use is flattening at 5 billion bushels. Export demand is projected lower as foreign supplies build, in response to higher price levels. If 2012 plantings are in the 94- to 95-million-acre range, a return to trendline yields could mean a build-up in stocks. Good weather is allowing early field work in the Midwest. Old crop May has several points of resistance between $6.60 and $6.80, while December resistance is almost a dollar lower at $5.70 to $5.85. Key support is $5.50 and $5.35. Below that there isn’t much support until $4.50. Pricing of expected 2012 production should be well underway. Rallies should be used for catch-up sales.
The WHEAT outlook remains less than optimistic. Improving conditions are being seen in Kansas and Oklahoma, and may overshadow poor conditions in drought-stricken areas of Texas. World stocks were trimmed by 3.54 mmt in this month’s report, but are more than adequate at almost 210 mmt. The U.S. has filled several Egyptian tenders after more than eight months without a single sale to that country. Wheat also holds a price-ratio advantage to corn, which improves its potential feed demand. However, given all that, the upside appears limited. July futures have key resistance at $7.00, then $7.25. Support starts at $6.35 and at dime intervals to $6.15. Rallies toward $7 should be used as pricing opportunities.
World RICE production was raised 2.65 mmt in the March report. Increases in Burma and India contributed most of the gain, which, along with an adjustment in beginning stocks, was accounted for in increased domestic use leaving projected ending stocks virtually unchanged. U.S. numbers were adjusted slightly with long grain stock rising 2 million cwt. to account for reduced exports and increased imports. Long grain stocks are projected to be 23.6 million cwt, or a major portion of total stocks of 40.5 million cwt. Upside potential for rice is limited in the short run as ample stocks from other origins remain available at competitive price levels. Demand for U.S. milled rice remains quiet even after a $100 per ton price decline. May futures have established support near $13.75, with initial resistance a dollar higher. Smaller plantings may allow for price improvement later in the year.
COTTON got a major one-day boost from India’s announced export ban. India is reviewing that situation and is expected to make a final determination later this month. That comes after several preliminary announcements further confused the issue. 2012 U.S. plantings are projected to be 12.4 to 13.6 million acres. The bigger question is whether the drought-stricken area of Texas will receive moisture and what harvested acreage will be. A normal crop would approach 20 million bales and simply add to U.S. stocks projected to be 3.9 million bales. Declining world use has elevated projected world stocks to 62.3 million bales. Given that, the cotton market will struggle to hold December futures support around 89 cents. Weekly charts have support near 84 cents. Current resistance is 97 cents.
Live CATTLE futures have taken about $4.00 off the market over the past two weeks. Packer margins are running far into the red at this point, and that will limit cash bids for now. Exports are the bright spot in the market, however, with export totals last week running 14 percent ahead of the same week last year. Monday’s spike low of $122.65 will provide the first level of support for June. Feeders are trying to confirm that a top has been put in. April has a potential double top at $162.00.
HOG futures have been under pressure. Weak domestic demand and poor packer margins are the story in the pork market. April seems to have stabilized for now, having established support at $86.62 ½. A fall below that level would likely trigger a move toward support at $85.70-$85.45.
DAIRY. U.S. cheddar cheese exports increased 27 percent, or 2.4 million pounds, to 10.8 million pounds in Jan. 2012 vs. Jan. 2011. This stellar gain is due, in part, to the continual growth in cheddar cheese exports to Mexico, which totaled 2.3 million pounds, up over 560 percent vs. Jan. 2011. Mexico accounted for more than 21 percent of U.S. cheddar cheese exports this January. The CME spot cheddar barrel cheese price was bid 0.5¢ higher to $1.5075/lb. The CME spot cheddar block price settled at $1.4925/lb. That is a 1.5¢ discount to the barrel market. Class III futures settled higher. CME spot butter trading was a little more interesting, with a trade at $1.4675/lb., up 1.75¢. A bid at $1.4650/lb. and an offer at $1.4750/lb. were left on the board.
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