2012 Bi-Weekly Market Briefings
Soybeans appear to have topped with November’s post Labor Day move to $17.89 and subsequent decline below $16.00. Having said that, demand from China remains strong, but economic woes there may dim their buying prospects. A big crop in South America is anticipated and recent rains have put planters in high gear. One private consultant projects a South American crop of 150 mmt or slightly more, almost a third more than last year. The current inverted market (higher on the front contracts or no carry as you move to the more distant contracts) is suggesting to producers that storage is not a viable option, and that the 2012 crop should be sold, if not now, on any rebound. Looking ahead to the 2013 crop, the soybean/corn price ratio is just over 2.1 and favors corn. To get soybean acreage the ratio will have to move toward 2.3 or higher. So, soybeans must gain on corn, but that could happen with corn declining faster than soybeans. Do your homework, figure your costs and price the 2013 crop accordingly.
Wheat futures have settled in and are holding at good levels. New Crop July is working sideways with good support just above $8.40. Ability to hold this level will be the key to future movement. A close below $8.40 brings support near $8.15, then $7.80 into play. Planting of the U.S. winter crop will be a factor, but the situation is likely to key on tightening global supplies. Russia’s push to make export sales has left it with a tight situation and indications it will limit further exports.
Corn's inability to take out the $8.49 early August high on a subsequent move suggests that December futures have topped. Trading has been confined to a range of 20 cents ($7.40 to $7.60) the last week as harvest yields in the northern part of the Corn Belt are better than expected. That will help the supply situation, especially since price already has cut demand significantly. At some point, some export demand is expected to shift back from wheat to corn. A December close below $7.40 likely signals a move toward the early July gap around $6.75.
Cotton has been unable to make any significant upward moves with December futures topping around resistance at 77.5 cents. A smaller U.S. crop in the September report was drowned by a huge increase in projected ending world stocks, which climbed above 76 million bales. China, the major U.S. buyer, has stocks approaching 35.5 million bales. Coupled with its economic woes, demand could be diminished during the 2012-13 marketing year. December futures could move toward early summer support without fresh export demand.
Rice futures finally bottomed just above $14.50 and have worked up to resistance about a dollar higher. Harvest in the Mid-South is quickly moving toward conclusion, although Hurricane Isaac made the process much more difficult, while cutting yields as much as 10 percent in some fields. Those losses may offset the September increase in the USDA supply/demand report of 6.3 million cwt. Time will tell. Export demand for milled rice remains limited with only a couple of countries, Haiti and Ghana, making major purchases. Paddy rice continues to move to Mexico and other Central American destinations. International competition is strong with big Thai intervention stocks hanging over the market.
Live cattle futures have fallen well below the trading range that has supported prices for the past couple of months and additional weakness looks likely. Falling wholesale beef prices and technical selling were the impetus for the move. The monthly cattle on feed report showed bigger than expected near-term cattle supplies which pushed the market over the edge. December looks poised to test support near $123.50, and a failure at that level would signal a move toward longer-term support at $122. November feeders have violated the recent up-trend signaling that the recent high just below $150 will be tough resistance for the market.
Hog futures are still trending higher for the time being. Packers are bidding higher for cash supplies in order to meet their slaughter needs, and that is supporting nearby contracts. The next chart resistance for the October contract is nearly $2 higher at $78.
Poultry Commercial hatcheries in the 19-state weekly programs set 184 million eggs in incubators last week. This was up 2 percent from the eggs set the corresponding week a year earlier. Average hatchability for chicks hatched during the week was 85 percent. Broiler growers in the 19 state weekly programs placed 161 million chicks for meat production during last week. Placements were down slightly from the comparable week a year earlier. Cumulative placements from Jan. 1 through Sept. 15, 2012 were 6.06 billion, down 3 percent from the same period a year earlier.
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