2013 Bi-Weekly Market Briefings
Soybeans are moving higher on good demand and continued concerns about dry conditions in Argentina. Light rains provided relief, but hot, dry forecasts have returned, and yield losses are possible. The Brazilian crop is generally in good shape. The exception is early harvest delays in Mato Grosso because of too much rain. Old crop March futures broke a downtrend early last week, moving to $14.60 before retesting the breakout level Thursday. A close above $14.60 makes the mid December high of $15.01 a likely target. New crop November continues to gain relative to December corn. That key price ratio is 2.22 after holding near 2 much of the fall. A November close above resistance around $13.20 gives upside objectives from $13.40 to $13.60. Support is near $12.60.
Corn has firmed following the recent decline that trimmed more than 70 cents off the lead contract. March is testing trendline resistance around $7.30, helped by a week of big export sales and dry, hot conditions in Argentina. A close above $7.30 opens the market to upside objectives from $7.60 to $7.75. Overall weak demand for exports and ethanol use could be a limiting factor. Prospective U.S. plantings of 96 to 99 million acres add to the negative, with potential production of nearly 14 billion bushels and ending stocks greater than 1.5 billion bushels. Weather could alter the outcome, as it did last year. New crop December topped at just over $6.60 and found support at $5.70. A rebound is grinding sideways below $5.95, as the market appears reluctant to move above $6.00. Improved demand, harvest problems and yield losses in South America, or planting problems in the U.S., will likely be needed to move December higher.
In wheat, last week’s high of $8.13 now becomes key resistance to a continuation of the July futures rebound. Improving export demand for soft red wheat and continuing crop concerns for hard red resulted in a bottom just above $7.50, which becomes key support. Crop conditions in the western Corn Belt continue worsening. The Kansas crop is 39 percent poor/very poor, Oklahoma 69 percent, Nebraska 50 percent and South Dakota 66 percent. A July close above $8.13 would bring retracement objective of $8.27 and $8.45 into play.
Cotton surged to a seven-month high on renewed buying interest. Chinese spinners and others were opportunistic buyers as U.S. cotton was seen as a good value. China is projected to have 50 percent of huge world stocks, and that will curtail demand. March hit resistance at 84 cents, which coincides with resistance on long-term charts. At the same time, December 2013 went from a 4-cents-plus premium over old crop to more than 3 cents discount. December has been in a slow uptrend since bottoming just above 74 cents. A close above the Sept. 7 high of 81.3 cents would signal additional upside potential. Further gains depend on demand and U.S. 2013 plantings, which are projected as low as 9.5 million acres.
Rice continues to struggle with huge Thai stocks overhanging the world market. U.S. sales continue good with recent total export commitments reaching 2.01 million metric tonnes, about 14 percent above a year ago. Several cargoes have been sold to Iran, and more are possible. Iraq remains a possibility. U.S. acreage could decline as corn and beans claim Mid-South acres. March futures are struggling to move higher with resistance at $15.50 to $15.90. Support is seen at $14.90.
Cattle futures soared higher early this week. Japan has agreed to allow imports of beef from cattle slaughtered at 30 months of age and younger. The limit has been 20 months since 2005, when Japan limited imports due to BSE. The result of this decision is yet uncertain given the state of Japan’s economy, but the market reacted in a big way. Also positive this week was the monthly cattle on feed report, which revealed a drop in on-feed inventory of 6 percent from a year ago. April gapped higher and could build on support near $133. Feeder cattle have seen strength from gains in live futures. March futures are building on support at the recent low of $144.42.
Hog futures have been supported this week by poor weather conditions. Marketing has been light, and packers have had to bid higher to bring hogs to market. However, demand is uncertain, and packer margins are negative now, which could limit the upside potential. April has support at $88 and then the recent low of $86.87.
Farm milk production continues along seasonal trends in most areas, with processors noting fluid demand is mostly level except for intermittent small spikes. Cream is readily available across the country. The cost of feed inputs continues to nip at any profit margins for dairy operators using purchased feed, and the prospect of lower milk prices may push dairy farmers to reevaluate herd sizes and other possible changes in operations. The weekly average for Grade AA butter is $1.5050 (+0.0165). Cheese barrels closed at $1.5725 and 40-lb. blocks at $1.6450.
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