2013 Bi-Weekly Market Briefings
USDA’s monthly supply/demand report for soybeans presented several adjustments following the higher-than-anticipated quarterly stocks two weeks ago. Crush was increased 20 million bushels to 1.635 billion bushels, while exports were increased just 5 million bushels. Residual was reduced 25 million bushels. Those adjustments left ending stocks unchanged at 125 million bushels. Initial market reaction was negative. Old crop May reversed after moving above $14 to close lower. New crop November hit resistance at $12.50, setting up a potential retest of support around $12.20 to $12.25. From a technical perspective, there is substantial down potential.
Corn numbers were adjusted in today’s report, but only a portion of the “bigger than expected stocks” showed up in projected ending stocks. Feed use was cut 150 million bushels, while ethanol use rose 50 million bushels, reflecting a slight upward creep in weekly use numbers. All in all, ending stocks were projected to be 125 million bushels higher, or a total of 757 million bushels. Market reaction was mixed following the report. At the end of the day, the market ended mostly higher. The possibility of the market moving to the stocks gap of $6.80 does not seem very promising, but it does exist. New crop December moved above resistance around $5.40, but remains in a long-term downtrend.
Rice was slightly weaker following the April report. USDA lowered domestic use 5 million cwt, with 4 million cwt coming from long grain. Projected ending stocks were increased a like amount. Overall demand for U.S. rice remains good. The question hanging over the Asian market is what Thailand is going to do with their huge stocks and how that will impact trade.
Cotton shrugged off the upward adjustment in yield and production for 2012. An increase of 14 pounds in yield led to a 280,000-bale increase in production, which was largely offset by a quarter-million bale increase in exports. That left projected ending stocks unchanged at 4.2 million bales. World ending stocks moved back above 82.4 million bales, largely the result of adjusted beginning stocks in India. China is projected to hold 45.6 million bales of stocks, or 55 percent of the total. Their projected imports for the year increased by 1.5 million bales, accounting for a higher U.S. export projection. Cotton futures moved higher but will find recent highs to be stiff resistance.
Wheat was under selling pressure early, and the April reports offered little relief. Changes in the U.S. numbers were minor, with feed use lowered 15 million bushels and a like amount added to projected ending stocks. World numbers resulted in an upward adjustment of 2.3 mmt in projected ending stocks, which now total 182.3 mmt. July futures have long-term trendline resistance at $7.25. Support is the $6.65 low that occurred following the March quarterly stocks report.
June live cattle futures appear to have bottomed near $120 in mid-March. It has been difficult, however, to build much upward momentum. Weak beef prices and negative packer margins continue to limit the upside potential of the market. May feeders appear to have bottomed at the same time at $138.52. That market, too, has run out of steam and now has resistance between $147.75 and $147.85.
June hogs also bottomed in mid-March, but failed at the 38 percent retracement level of $92.66 on the subsequent rebound and have since fallen back below $90. The fundamental situation for hogs is not great. Cash markets are lackluster at best with packer margins in the red and product values disappointing.
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