In the Market: July 18, 2013
Biweekly analysis and commentary from Arkansas Farm Bureau's ag economists
7/18/2013 at 12:00 a.m.
• SOYBEANS have seen strength this week. An unexpected drop in the crop conditions ratings was a big plus for prices. However, USDA still says that 65 percent of the crop is currently in good to excellent condition, 27 percent is fair, and only 8 percent of the crop is in poor to very poor condition, so the crop is still faring well. Strong domestic and export demand are providing support. Meal futures have moved to new contract high levels with August trading to $15.30 amid tight supplies and good demand. Expected imports in the coming days will limit the upside, though. November has failed at resistance at $12.94 ½ in the recent rally. Further resistance is at $13.19 and $13.33, but without major weather problems, it is unlikely futures will retest those levels. In fact, USDA still estimates the average on farm price for soybeans to be between $9.75 and $11.75, so this rally could be seen as a pricing opportunity.
• WHEAT futures are finding some support from outside markets despite harvest pressure. Export competition from cheap Black Sea wheat is also limiting the upside potential. USDA’s wheat outlook report released this week provided additional information into the class breakout of the recent supply/demand report. The soft red winter wheat crop is now forecast at 539 million bushels, a 30-million bushel increase from the June estimate and 119 million larger than last year’s crop. September futures have support at the recent low of $6.52. Resistance begins at last week’s high of $6.93.
• CORN futures have been on a bit of a roller coaster ride in recent weeks. A larger-than-expected acreage report sent the market into a near free-fall. December found support at $4.90, though, and prices have recovered a bit. The weekly crop condition report from USDA lowered the percent of the crop rated good to excellent by two percent, and that gave the market another bump. The condition of the crop was lowered as drier weather enters the western parts of the Midwest. Continue to expect volatility as we move forward in the year. This year continues to trail previous years, with only 16 percent of the crop silking. The next two to three weeks are vital to this year’s crop. Hotter temperatures and dryer weather will reduce the plants’ ability to pollinate.
• COTTON prices remain locked in the same sideways pattern that has held the market for the past four months. December charted a bearish key reversal on Monday in reaction to rain in the very dry West Texas production area. There has been little follow-through so far, as the market has found support at Monday’s low of 83.91 cents for the time being. Key support remains the June low of 81.72 cents.
• In RICE futures, the bleeding has stopped for the time being. September took about $1.70 off the market between mid-June and mid-July. While the USDA report reduced production 10 million cwt, milder temperatures as we move into pollination will help yields despite the later crop. USDA said this week that 69 percent of the crop nationwide is in good to excellent condition, 26 percent is fair, and five percent is poor to very poor. September has support at $14.73 and then $14.60. Upside retracement objectives are $15.40 and $15.60.
• CATTLE futures are trading in a mostly sideways pattern. Strong packer margins, estimated to be $40.40 per head this week, are providing some support. However, reduced demand during the “dog days” of summer could cut into margins a bit. October live futures have support at $125.40 and resistance just below $127.
• HOG futures are receiving support from improving packer margins. August continued to recover after Friday’s move to $94.40 and is currently working to establish support at $95.