Bi-Weekly Market Briefings for 04-05-07
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Corn has taken a nosedive. March 30's Planting Intentions Report sealed the deal, at least for the near term.
Farmers indicated they would plant 90.45 million acres when the survey was taken in early March. Weather across the South has encouraged farmers to complete their plans and in many cases, farmers may plant additional acreage.
Although only a small part of the whole, states such as Arkansas, Louisiana and Mississippi with a combined increase of 1.38 million acres added significantly to the total. Good weather could have boosted that.
The Midwest has yet to start planting. Therefore, over the next four-to-six weeks, weather and the current price adjustment might shift plans.
Technically, the market left an 11-week, island-reversal formation, with a locked limit-down gap-lower move following the report. Another limit down on Monday has September near the 50-percent "retracement" of $3.57. The next downside objective is $3.37.
The market should begin a rebound from here, with key resistance near $3.75. Note that production will still be about 12.5 billion bushels, with a national-average yield of 154 bushels an acre and normal abandonment.
Soybeans have shown good resiliency. Only 67.14 million U.S. acres were expected to be planted this year. Although corn has declined sharply, November beans have held this ground after they bounced off trend-line support.
The 11-percent decline in plantings equals 8.4 million fewer bean acres in '07. With corn sliding and beans holding ground, the days ahead will see some unpriced '07 production moving back to beans.
Arkansas had declines of 210,000 acres in beans, 340,000 acres in cotton and 185,000 acres in rice, for a total drop of 735,000 acres. Corn and grain sorghum acres rose just 500,000.
Some of that extra 235,000 acres, currently in wheat, may still go to beans.
Key November support is the trend line near $8, then former resistance at $7.80. Resistance is the recent $8.21½ high and $8.43 contract high.
Remember, weather can be a big equalizer in terms of how much corn actually gets planted.
The Wheat decline signals a market top. July wheat traded near major support for the three weeks leading to last week's reports. No doubt, big corn acreage and the subsequent price slide contributed to a huge wheat decline.
Initially, July gapped below major support at $4.60. That decline continued early the second day after the report.
The market finally stabilized and recouped part of the drop. Smaller-than-expected declines in projected spring wheat plantings, and rapid improvement in winter wheat crop conditions, added to the negative undertone.
The initial downside objective is likely to be $4.20–$3.87. Resistance starts at $4.60.
The Cotton acreage decline has reached 20 percent. We expect a cut from 15.3 million acres to 12.15 million for '07.
Every cotton-producing state will probably cut acreage, with 40 percent less in Louisiana, Mississippi and Missouri. Arkansas will plant just 830,000 acres, a 29-percent cutback from 2006's 1.17 million.
Good corn-planting weather may have pulled even more land from cotton since the USDA took the original survey. This suggests a 18 million–19 million-bale crop, which should allow for stocks to reduce some and prices to improve.
Resistance for December is the February high of 60.7 cents.
Rice acreage will decline for the second year in a row. Expect overall rice plantings to be down 7 percent, to 2.64 million acres. Texas, Louisiana and California will increase acreage, 26,000 acres between three states. At the same time, Arkansas will cut 185,000 acres.
Small declines were indicated for Mississippi and Missouri, as well. Nationally, long-grain acreage will be down 8 percent and medium down 3 percent.
Production will be in the 180 million–185 million hundredweight range, with stocks dropping back to the 20 million-to-25 million hundredweight range. Futures have made a strong recovery, based on the smaller acreage and may retest resistance at contract highs: $11.58 for November and $11.38 for September.
Upside potential is limited by continued poor milled export movement.
Falling corn prices are good news for Cattle. After mixed trading most of the week of March 25–31, nearby cattle are again approaching the $100 level.
Mixed trading then was the result of a weak wholesale beef market and a low-inventory cattle report. The market saw choice-cut values drop nearly $12 a hundredweight over the past two weeks, and the report had inventories down almost 4 percent from last year.
Increased demand heading into the spring and summer grilling months should support Live Cattle prices. This is likely to improve choice-cut prices and help improve packer margins, and that'll remove some of the major concerns holding back cattle prices.
After falling from a high of $68 a hundredweight in early March, Hog prices lately have been trading at around $63 a hundredweight. However, since Friday's Hog Report showed a smaller-than-expected herd, prices seem to be getting stronger.
Keep in mind, though, that March slaughter was up about 6 percent from year-ago levels and created some backlog in supplies. While this may pressure hog prices downward in the near term, a strong export market should offset these concerns.
Worry about the smaller herd, combined with action in the corn and cattle markets, should continue supporting prices in the near term.
Poultry trade sentiment was mixed this week, but overall mostly steady. Retail and food service demand following the March 30–April 1 weekend was light-to-moderate, with few features.
Supplies of all sizes Broilers and Fryers were usually sufficient to handle trade needs.
Processing schedules for the week were mixed, with some plants down Good Friday in observance of the Easter season.
Movement was light to moderate in the parts structure. Breast items were sufficient, but close balanced-to-short for tenders and boneless/skinless.
Wings were adequate, with cut wings moving satisfactorily and dark meat available. In production areas, live supplies were moderate at mostly desirable weights.
Contact:
• Gene Martin (501) 228-1330, gene.martin@arfb.com .
• Brandy Carroll (501) 228-1268, brandy.carroll@arfb.com .
• Bruce Tencleve (501) 228-1856, bruce.tencleve@arfb.com .
• Matt King (501) 228-1297, matt.king@arfb.com .
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