2013 Bi-Weekly Market Briefings
Soybeans have been under pressure ahead of this month’s report as better yields were being seen in some parts of the Midwest. That was confirmed in the November report with yield pushed 1.5 bushels higher, adding 111 million bushels to the projected production. Most of the increase was accounted for by increased use, with the domestic crush rising 20 million bushels, and exports increased 80 million bushels. Projected ending stocks were increased 10 million bushels to 140 million bushels. Early trading closed the July breakaway gap at $14.74 on the January contract. Depending on today’s close, the market could be pushed toward the next support, around $13.90.
Corn report shows minor adjustments from October. Yield, expected by many to decrease, actually increased 0.3 bushels per acre. That added a paltry 19 million bushels to the production projection. Total supply also was boosted by a 25 million bushel increase in imports. The bottom line was projected ending stocks of 647 million bushels, so stocks will remain extremely tight. December futures are continuing to trade in a very tight range between $7.30 and $7.60. A close to either side of the range would indicate further movement in the direction of the breakout, with the next support near $7.05 and resistance between $7.70 and $7.90.
Wheat numbers in the November report were basically unchanged. USDA did reduce exports 50 million bushels, thus raising projected ending stocks the same amount. After an extended move to the upside new crop, July fell just short of the $9 mark before closing at its highest level of $8.95 ½ on Thursday before the report. The overnight trading hit $9 but appears at this point, after seeing the lower export number, to be making a potential key reversal top. A lower close today would complete that formation and indicate potential technical selling when trading resumes next week.
Cotton can’t catch a break. Lower production in the southwest U.S. was offset with good yield bumps in Alabama, Georgia, Louisiana and Arkansas. Even worse were world adjustments, where China’s use was whittled by 500,000 bales to just 35.5 million bales, down from 46 million bales just two years ago. Projected world stocks were raised another 1.16 million bales to over 80 million bales, putting the stocks to use ratio at 75.5 percent. Numbers like this don’t bode well for building any upward price momentum and suggests it is going to take more than one year of reduced U.S. and world plantings to get stocks back to a more normal situation.
Rice received some positive news in today’s report. Yield and production were lowered slightly, while projected exports for all rice were raised 3 million cwt. That was a combination of 4 million cwt. more long grain and a 1 million cwt. cut in medium. Long grain projected ending stocks reflected the increased use and fell to just 15.1 million cwt. Market reaction has been “underwhelming” so far. However, if we couple the tightening U.S. supply situation with reduced planting potential for 2013, there is a strong possibility of the market firming. There may be a need to encourage additional acreage, and that will take higher price levels if corn and soybeans maintain their positions.
Live cattle futures prices are attempting to consolidate. Firm cash bids coupled with a firmer wholesale beef trade lifted the futures market this week despite weakness in the U.S. stock market. Weekly export sales were a supportive factor. Negative packer margins will likely limit further firming of cash bids. Nearby December has support near $124.50, while June 2013 has support at $128.75. January feeders are testing support near $144, and a close below that level would open the market to a possible retest of support just above $142.
Hog futures have moved sharply higher in recent days. Packer margins continue to improve and that should bode well for cash prices, which are showing indications of stabilizing. February has moved back into position to test long-term resistance in the $86 area.
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