2013 Bi-Weekly Market Briefings
USDA’s soybean supply/demand report was unchanged, which was counter to expectations. Most thought use would increase and thus lower projected ending stocks. While that didn’t happen, the estimate for Argentina was lowered 1.5 mmt. Coupled with ongoing transportation problems in Brazil, it limited downside pressure, and May is trading just below resistance between $14.85 and $15. With the South American harvest moving rapidly, it will be difficult to move the market above this resistance unless there are planting problems in the U.S. New crop November presently is holding support at $12.50. A move higher to resistance at $13.07 and then $13.50 will come only with reduced planting expectations and/or problems getting the crop in the ground.
Corn received a boost from USDA’s increased feed usage projection in the March report. Traders were distracted, at least temporarily, from poor exports and ethanol use. While this keeps stocks very tight in the short run, the bigger question of acreage in 2013 remains. Estimates range from 96 to 99 million acres, and some forecasts are inching toward the higher end. Acreage is expected to jump in the Mid-South where cotton will decline, and even in parts of Texas. Historically this might have been labeled as lower yielding, but with irrigation, those areas produced strong yields in 2012. For now, December futures are holding above $5.50, but if the planters roll on time, corn could move toward support at $5.10 or perhaps lower if drought conditions don’t return.
Wheat made a brief upturn despite a 25-million bushel cut in projected exports. Improved moisture levels in the plains have raised expectations for the U.S. crop. Coupled with worldwide production increases, this has kept July futures under pressure. While declining price levels should increase demand, a stronger dollar has been an offsetting factor, leaving the market to struggle as harvest looms just ahead. July has chart support at $6.70, but must close above the recent high of $7.28 to suggest a change in the downtrend.
Cotton continues to inch higher on tightening of available stocks. While world stocks are projected to be just under 82 million bales, over 44 million bales will be held by China. That leaves just under 38 million bales for the rest of the world. Recent strong values for yarn have helped send the cotton price higher with both old and new crop approaching resistance at 88 to 89 cents. 2013 U.S. cotton plantings are estimated to be anywhere from 9 to 10 million acres. It will take further gains to pull acreage back from corn and beans.
Rice futures have declined sharply over the last six weeks, with May approaching support at the contract low of $15.23. U.S. demand continues good with USDA raising long-grain exports by 2 million cwt. in the March report and reducing projected ending stocks to just 16.4 million cwt. All rice ending stocks are projected to be 29.1 million cwt. The biggest thorn in the whole rice situation is the huge intervention stocks held by Thailand, and their approaching harvest. Storage is very tight, and there are concerns rice could be dumped on the market at some point.
Cattle continue trending lower. Live cattle futures are attempting to build on recent lows near $127 for April and $122 for June. Improving boxed beef values are indicating that demand is improving, at least for the short term. Feeders remain under pressure on recent improvement in corn prices and ideas that demand for beef will be a problem longer term. April feeders have support above $140.
The selloff in hogs has stalled for the time being. The market was oversold and due a rebound. April is building on support at the recent low of $78.27 ½. Futures are trading at a $3 premium to cash, however, and that will likely limit the upside.
Across the country, farm milk production is in varying stages of experiencing the spring flush. Milk processors indicate regional manufacturing capacities are still able to clear farm milk supplies on a timely basis. Fluid demand is steady in most areas, with some short-term customer buying spikes. Cream markets are generally weak due to ample availability within all regions. Cream demand for dips, sour cream, whipped cream and other higher-priced consumer products is slightly elevated ahead of the upcoming holidays, but that demand is short-lived and expected to be filled within the next seven to 10 days. Manufacturers where spring-like weather has appeared report ice cream production is ramping up. Grade AA butter closed at $1.6300. Cheese barrels closed at $1.5800, and 40-pound blocks at $1.6000.
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