2012 Bi-Weekly Market Briefings
SOYBEANS are still trending higher, fed by lower crop estimates in South America and ongoing Chinese demand. Various governmental agencies and private sources have released reports recently lowering the soybean crop projection in South America. Most reports have pared the Brazilian crop by 2mmt from USDA’s latest estimate of 68.5 mmt.
Basis bids at the gulf have strengthened as Chinese demand is outpacing farmer selling. Finally, extremely mild weather conditions are stocking the “corn planting fever”, many think at the expense of soybeans. The 2012 planting intentions report will be released on Friday, March 30 about the time this goes to print. A survey of 28 analysts has soybean plantings at 75.4 million acres, in a range from 74 to 76.7 million acres. November futures made a strong run to start the week, but retraced a good portion of the gains to close slightly higher on Monday. Key resistance rests in 30 cents increments from $13.40 to the contract high of $14. Use this rally to add to 2012 crop pricing.
Potential 2012 CORN plantings are limiting upside potential. Tight stocks, which could get tighter in subsequent reports, are keeping the market on edge. However, old crop contracts have been unable to penetrate trend live resistance which is around $6.75 for May. Pre-report estimates for 2012 corn plantings range from 93.6 to 95.7 million acres with an average of 94.74 million acres. Extremely warn conditions for March have pushed the envelope forward and had raised concern that planters will roll early and long. Acreage could exceed intentions even though the soybean/corn price ratio has reached 2.4 which tend to favor beans. December futures are trading a tight range between $5.50 and $5.75. A close to either side would suggest further movement in the direction of the break out. On the downside, support at $5.35 is virtually the only thing between the market and $4 to $4.50 on long term charts.
WHEAT is grinding sideways. Improving weather in the Plains has given new life to some of the drought stricken area. But an improving crop just adds to the potential misery. July futures have been unable to mount much of an attack and or in a long term sideways mode. The long term range is $6.13 to $7.25. The tighter more recent range is $6.40 to $6.80. Wheat remains a follower and gets it upward oomph from corn as a potential good protein provider in feed. Not the intended best value for wheat.
COTTON is hanging by its fingernails to recent support. While there are signs the U.S. economy is improving, they are still world trouble sports. China, while not a trouble spot, has reduced its projected growth to 7.5%. For China, this is the lowest in 13 years. That doesn’t bode well for cotton with world stocks projected over 62 million bales. However, it has been noted that a large portion of these stocks are in India and China and not necessarily available. Indications are China’s cotton plantings will be down almost 10% in 2012. Some U.S. acreage is moving to corn and soybeans, and the drought in Texas persists. Technically, December has built support around 88 cents, but that may go by the wayside if the market can’t penetrate trendline resistance that currently is approaching 90 cents.
The RICE discussion sounds like the same song, verse 8 or 9. It goes something like this – slow export demand, ample works stocks, etc. etc. Like cotton some southern acreage is headed to other crops most likely soybeans and/or corn. That might give the market a bounce later in the crop year. On the international scene, the latest tender from Iraq isn’t likely to come to the U.S. Vietnam is doing business with the Philippines and possibly China; however movement is down almost 40% from the 5 year average for the first quarter of the year.
DAIRY - CME spot Cheddar block and barrel markets started the week off quietly with a single, unfilled block offer left on the board. With no trades, CME Cheddar block and barrel prices settled at $1.4925/lb. (-0.25¢) and $1.4600/lb. Class III futures traded mostly higher, with only APR trading down 7¢ to close at $15.61. CME spot butter and NDM markets were equally quiet to start the week off. The USDA “Livestock Slaughter” report released last Friday showed dairy cow slaughter at 525,000 head year-to-date through February 2012. That is 12,000 head more than last year. USDA’s most recent “Milk Production” report indicates that the U.S. dairy herd has increased by 27,000 head during the same period. In other words, despite greater slaughter and decreased profits, the dairy herd continues to expand.
CATTLE futures have been under pressure in recent weeks. Beef prices have fallen most of the month of March and that has taken a toll on futures as well. The monthly cattle on feed report was seen as generally bearish, but not surprising or particularly market-moving. June has found support near $120 for the time being and is attempting to build higher from that support. May feeders look to have charted a double top just above $163 and have fallen back about $8-$10 since the first of the month.
HOG futures are consolidating in a fairly narrow range. May is building support in the $93 area. Pork prices are now about 13% below year ago prices. Heavy cold storage stocks and sluggish demand are limiting the upside for now. Cash hog bids are mostly flat to a bit lower. Seasonal strength in meat demand hasn’t really materialized at this point.
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