2013 Bi-Weekly Market Briefings
Soybeans strongly rebounded over the last month, fueled by strong Chinese buying and weather concerns in South America. Chinese demand will likely continue into late winter when South America’s crop is available. Weather has improved in Brazil and Argentina, and now is a negative factor. But Washington concerns and holiday trading will keep the market volatile. January futures peaked above $15, and it appeared there could be another strong leg higher. But the market turned on a dime ($15.09) and quickly retraced gains. A close below last week’s low of $14.53 would signal further weakness in old crop contracts. New crop November is trading sideways just above $13.00, and a close below $12.95 would signal a retest of support at $12.50. The new crop soybean/corn price ratio of 2.10 still favors corn. This soybean acreage could decline in 2013. Soybeans must increase relative to corn to gain acreage.
USDA trimmed projected wheat exports by 50 million bushels to 1.05 billion bushels, and raised projected stocks the same amount. Competitive alternatives have pressured U.S. export sales with futures trading near $9.00. The latest report sent the March contract to a five-month low. New crop July briefly fell below support at $8.25 and could be vulnerable to additional technical selling. The next major support is just above $7.80, but the recent downturn has garnered export interest, with Egypt making several recent tenders. Producers should view any rally off the $8.25 support toward the $9.00 resistance as a 2013 crop pricing opportunity.
Old crop March corn is teetering between $7.60 and $7.09. At this point the market has pushed back toward the bottom of the trading range. A close below $7.09 would likely see a move to at least $6.68, which is bottom of the early July breakaway gap. That area is also long-term support on the continuation charts. Weak demands for ethanol and in the export market continue to weigh on the market, while concern about drought conditions in the Plains provides support. Corn continues to hold a price advantage over soybeans relative to 2013 plantings. Early surveys suggest corn will increase while soybeans decline.
Cotton has shown modest improvement since Thanksgiving, bouncing off support just under 70 cents earlier this week. Good demand is seen when the market trades lower. With a large cotton stockpile available, buyers are expected to be selective in purchases. Early thoughts suggest world production will decline 10-15 percent, and world use will increase less than 5 percent. Cotton must build demand and reduce stocks. The process has begun but will take time to complete. China now holds almost 50 percent of projected world stocks, enough to supply their mills one year. Dec. 2013 has resistance between 79.25 and 81.25 cents. Crop problems and/or smaller-than-expected plantings will be needed to move the market higher.
Rice futures have been up and down for no apparent reason. Holidays and hunting are predominate market features, so don’t expect a clearer picture until after Jan. 1. Overall demand for U.S. rice appears firm, and recent meetings with Iraq could bear fruit. The South American crop is planted and expected to be down slightly from last year, but not as much as thought earlier. January futures topped at $15.59 two weeks ago and have moved between $15.10 and $15.50 since.
April live cattle charted a huge key reversal to the upside in recent days, opening the market to possible retesting of resistance in the $138-$140 range. Ideas that cattle supplies will continue tightening into 2013 are supporting the rally, as are forecasts for colder temperatures and winter precipitation through much of the U.S. Depending on the storm’s outcome, it’s possible gains have been overdone.
Hog futures have been on a roller-coaster ride the past two weeks. Packer demand is weakening as margins have fallen, and could remain under pressure through the holidays. But winter weather could limit marketings and force bids higher. Strong exports will likely support prices as well. February’s move below $85 could signal a move toward support at $83.20 or below that to $82.55.
Manufacturing milk supplies are increasing. Class II demand has slowed as many holiday products have been shipped. Manufacturers are reluctant to take additional loads unless discounts under class are offered. Processors are preparing for increased offerings over the holidays. Milk volumes in the West are slowly increasing but often below year-ago levels. Dairies are finding it difficult to maintain profitability. U.S. cheese production is increasing as more milk finds its way to Class III plants and plant expand their schedules. Holiday sales/shipping have slowed. Lower wholesale prices the past month allowed plants to put more cheese in aging programs. Cheese imports for Jan.-Nov. 2012 total 160.5 million pounds, up 6.6 percent from a year ago. Exports of cheese for Jan.-Oct. 2012 total 486.6 million pounds, up 20 percent from a year ago. Exports account for 5.4 percent of U.S. production. Cheese prices at the CME Group this week were lower. Barrels closed at $1.6250, down $.0350 from last Friday. Blocks closed at $1.7250, down $.0350.
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