2013 Bi-Weekly Market Briefings
Nearby corn prices made their first move above resistance at $4.35 this week as prices began a run at $4.50. With support from strong export demand and continued strong domestic demand, the market has begun considering that the U.S. Department of Agriculture might raise its corn export forecast. While we have seen strengthening in nearby corn, the new crop corn for this fall has also moved higher and is testing resistance near $4.60. While corn and soybeans continue to fight for acreage this fall, it seems the market is getting used to the idea of at least five million acres less corn in 2014. While this sounds like a huge decrease, with a trend yield, the United States could still build stocks in 2014-2015. New crop corn continues to consolidate between $4.40 and $4.60.
Nearby soybean prices moved back above $13 this week as the market moved its focus from impressive U.S. exports to South American weather. As drier weather moved into Brazil and Argentina, some traders began worrying that this might reduce yield on second-crop beans. While there remain competing forecasts, private trading firms began reducing their estimates this week, which provided strong support for gains in the nearby contract. If these reductions are realized, they also could provide long-term support for new-crop beans as that would mean less supplies in the fall. After putting in new contract lows last week, the November contract has been moving steadily higher since these concerns arose. Unfortunately, these types of concerns are quickly erased as a timely shower can make all the difference. With the strength in both the corn and soybean market, the price ratio between the two crops has remained fairly consistent in recent weeks between 2.4 and 2.5, which still heavily favors more bean planting. If the market can maintain current prices, look for crop insurance prices this spring to be close to $11 for soybeans and $4.50 for corn.
Nearby cotton prices have moved higher and are working to establish a new trading range between 84 cents and 88 cents. Strong U.S. exports in recent weeks have allowed this market to maintain strong gains since November and will likely help them maintain these price levels in coming weeks. Unfortunately, new-crop cotton has not been able to maintain the same type of gains as December cotton continues to test support at 76 cents as it moves toward contract lows at 75.77 cents. New-crop cotton prices continue to be driven by large global supplies and uncertainty in China’s cotton policy.
Rice prices continue to maintain support at $15.25. While domestic consumption of rice remains supportive, U.S. rice exports remain weak. With large supplies in other major exporters and changes in their government policies toward rice, U.S. rice remains uncompetitive in the global marketplace. Despite weak exports, new-crop rice is still at more than $13 per hundredweight as tight U.S. supplies continue to support domestic rice prices. The current forecast is for rice acreage to rebound in 2014 and recover some of the acres it lost in recent years. If this occurs, the market will need to become more competitive in the international market to prevent substantial building of stocks.
Wheat prices have been on a steady down trend in recent weeks as global supplies continue to outpace consumption, leading to a large buildup in global stocks. Strength in the corn market combined with good exports has caused the market to pause its decline, but look for prices to continue to move lower and likely test the $5 level before the Arkansas crop is harvested in June.
While cattle prices have begun to trend lower, they remain at historic levels. Tight cattle supplies and strong boxed beef prices remain supportive of cattle prices. Recent losses have caused the market to retrace about 38 percent of its recent gains. These large losses may be coming to an end as the market looks to move sideways as it moves out of overbought territory.
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