2013 Bi-Weekly Market Briefings
November soybeans began the week with huge gains on concerns about the yield potential for the crop. Hot, dry conditions across the country will likely impact the crop. With 84 percent of the crop setting pods at the end of last week, this crop isn’t quite made just yet. USDA said that at the end of last week, 58 percent of the crop was still in good to excellent condition, 29 percent was fair, and 13 percent was in poor to very poor condition. That shows some deterioration from the previous week, and judging by the price action that began the week, traders are expecting to see further deterioration in subsequent reports. USDA still says the national average yield will be 43 bushels per acre, but that is becoming less likely by the day. With tight supplies heading into this year, losses in production will force addition rationing, which could potentially reduce U.S. competitiveness in the international market. November soybeans ran out of buying interest when prices moved above $14. Resistance at $14.09 high charted back in September has so far proven to be solid.
Wheat also opened the week with strong gains. The strength was mostly related to carryover strength from soybeans and corn, but there was some positive fundamental news as well. A late frost has been reported in one of the major growing regions in Argentina and is likely to reduce the size of their crop. This could result in increased demand for U.S. wheat from Brazil. Monday’s highs of $6.76 and $6.89 will be the first level of resistance for December and July, respectively.
Corn prices look to be confirming a bottom. December has broken out of the long-term downtrend and is building solid support near $4.50. Continued dry weather is expected to cause crop conditions to continue to deteriorate in key growing regions. USDA confirmed deterioration in the crop last week, with 58 percent now rated good to excellent. This comes as the crop continues to trail the five-year average for where it should be maturity wise. While the crop in the Midwest remains a question, we are beginning to get a look at our crop here. The USDA forecasts Arkansas corn yield at 170 bushels per acre, and in early reports, yields over 200 bushels per acre are common.
Cotton futures have been on a roller coaster ride over the past few weeks. December charted an impressive rally, putting about 9 cents on the market. However, it only took the market two days to give it all back. It appears the market is now attempting to reestablish the consolidation pattern of the past few months. The USDA crop condition report showed crop conditions improving to 47 percent good/excellent last week, compared to 46 percent the week prior. Hot, dry conditions this week, though, have tempered the market’s reaction to the report. That improvement could turn around quickly. Export sales were surprisingly brisk at the higher price levels earlier this month, so we should expect demand to be even stronger now that prices are back down around 84 cents. The market is establishing support at 83.91 cents, with solid support near 82 cents.
September rice futures have shown strength this week, with prices testing the waters near resistance at $16.47. November, on the other hand, stalled near resistance at $16 and has given back a big portion of the gains charted on Monday. The condition of this year’s rice crop continues to look good. USDA says 70 percent of the crop is in good to excellent condition, 25 percent is rated fair, and only 5 percent rated poor. Extremely hot weather this week, though, could impact the quality of the crop during grain fill. Extremely low prices for Vietnamese rice continue to weigh on the world market. Thailand is still trying to reduce government stocks of 17 million metric tons, but their prices are 21 percent above Vietnam. That means that even lower prices will be needed to move that rice off the market.
Cattle futures are technically trending higher. USDA says the total on feed inventory is only 94.1 percent of last year’s total. That was smaller than expectations and, overall, supportive for prices. December live cattle currently have trendline support near $128. Strong wholesale beef prices have been supportive but could weaken after Labor Day needs are met.
Hog futures have been on a bit of a wild ride the past couple of weeks. Cash hog and wholesale pork prices have been weaker, and that has carried over into futures. Supplies have begun the typical seasonal increase, and that has forced prices lower. Technically, December charted a bullish reversal on Friday and has shown good follow-through this week. The market will find resistance at $84 and then at $84.80 on continued strength, though.
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