2012 Bi-Weekly Market Briefings
Soybeans extended losses following the February report and could be headed even lower. On the surface, the U.S. supply/demand report was neutral to positive, with the only change being an increase of 10 million bushels in crush, which dropped ending stocks to a tight 125 million bushels. However, a more positive outlook for the South American crop coupled with sharp declines in corn sent the market reeling. Old crop March failed on several attempts to top $15 and could be headed toward support at recent lows between $13.70 and $13.80. New crop November broached resistance at $13.50 but didn’t have enough support to move higher and is dangerously close to key support between $12.55 and $12.60. Recent changes moved the soybean/corn price ratio toward soybeans, possibly encouraging some acreage shifts.
Corn has moved lower for seven consecutive days with dips below key support accelerating technical selling. A 50 million bushel downward adjustment in projected exports was partially offset by a 20 million bushel increase in the residual category. The net result raised projected ending stocks to 632 million bushels. The key concern remains declining demand as ethanol use continues below expectations. Big South American crops and potentially large U.S. plantings are looming over the market. Inability for March to hold above $7 could see a dip toward retracement objectives at $6.80 or even $6.40. December erased support at $5.70 and only has support at $5.40 before heading toward the mid-June low of $5.11.
Wheat's penetration of support at $7.50 suggests a possible move to support at $6.85 to $6.70. Recent rains in the Plains have offered some relief to a bedraggled crop. While the crop isn’t out of the woods, it is showing improvement. Coupled with a potentially large corn crop, that would likely swing feed demand from wheat and you have what might be an abundant crop.
Cotton continued higher with new crop contracts leading the way. No doubt the National Cotton Council’s planting intentions report showing just 9 million acres for the U.S. in 2013 got the markets attention. The Mid-South showed a whopping 51 percent decline in projected plantings, with Arkansas leading the downturn with a 63 percent cut. Just 221,000 acres are projected for Arkansas. The Southeast was down 18.5 percent, the Southwest 24.4 percent and the West 25 percent. Texas was down 1.64 million acres. New crop December appears headed to 85 to 86 cents.
Rice futures failed after moving just about resistance at $16.30. What followed was a sharp limit decline reversal in all the old crop contracts. The big upturn was the result of technical buying, which collapsed when buyers decided to take profits. This likely established near term highs that could exist for a while. Downside retracement objectives are $15.80, $15.63 and $15.46.
Cattle futures charts have taken on a negative appearance. The sell-off of the past two weeks has taken the market into oversold territory, but it looks like a bottom has yet to be found. Winter weather forecasts for the Texas panhandle, Oklahoma and Kansas could limit marketings and force cash bids higher, providing some support. April could be headed for a retest of support at $127.15. Feeder cattle have moved to six-month lows with further weakness likely. March currently is testing support at $142.
Hog futures have weakened in recent weeks. The charts have taken on a very negative appearance. June moved to a six-month low and looks to have broken out of a bear flag formation, setting a downward objective of $93.15. The market is focused on negative packer margins and further declines in product values.
In dairy, grade AA butter closed at $1.5550. Advertised U.S. butter prices from the National Dairy Retail Report showed a weighted average price of $2.80 per pound compared to $2.63 two weeks ago. Cumulative 2012 butter production at 1.8 million pounds was 2.6 percent above 2011 production. Cheese barrels closed at $1.5600 and 40-lb. blocks at $1.6500. Cheese prices began showing some strength this week after a month of lower prices. There continues to be a large spread between barrel and block pricing as barrels are trading more than blocks at the exchange. Cheese production is higher than year-ago levels across much of the U.S. Export sales are being assisted through the CWT program as bids for 4.7 million pounds of cheese were accepted this week.
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