Bi-Weekly Market Briefings for 04-20-07
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The Cotton outlook is dreary. The latest USDA report and subsequent weather have done little to offer producers relief.
The USDA reduced China's projected import needs and simultaneously adjusted U.S. exports and domestic use. That raised projected U.S. ending stocks to 9.2 million bales.
Meanwhile, a severe cold snap following an unusually mild March severely damaged early corn and potentially pushed some acres back toward cotton. Even 12.2 million acres in projected U.S. plantings didn't offer much relief, with many anticipating further upward adjustments in the expected carryover.
Possible U.S. challenges in the WTO on Chinese piracy issues may mean less cotton exports as that nation finds ways to retaliate.
Talk about losing both ends, Brazil wins a WTO case against U.S. cotton, and China uses cotton to retaliate for our WTO challenges.
Old-crop cotton has dropped to new contract lows and has little support until just below 48 cents, the October '06 low. December finally has penetrated support at 58 cents and might retest support at the 56.27-cent contract low.
Rice has a potential technical upside. This month's USDA reports have provided little fresh information for the market. A 1 million-hundredweight rise in imports resulted in the same increase in U.S. projected ending stocks.
World numbers were virtually unchanged, as well.
The Easter cold snap may have caused some damage, but overall it's probably minor. Milled exports remain slow, and mills are generally operating well below capacity.
A negative is that inspectors found a shipment of bagged rice for Sweden to contain traces of biogenetic material. So all in all, fundamentals have a bearish hint, especially old crop.
However, new-crop November has a possible developing head and shoulders bottom. If completed, it will have an upside objective at $11.80.
Support is at $10.96, then at the recent $10.65 low.
Corn use has declined. The April USDA Report quantified, to some degree, price's impact on corn use the first quarter of '07.
While expected, the April report trimmed use by 125 million bushels and boosted carryover to 877 million — not a lot when you're looking at a potential demand in the '07–08 marketing year of well over 12 billion bushels.
It did stop the rally that had retraced most of the late March planting intentions slide.
The extreme Easter weather has caused some damage to early March corn and can trim acreage, since seed corn is scarce. In the Midwest, cold, wet weather can affect overall acreage if it doesn't improve immediately.
September resistance is at $3.90–$4. Support is $3.60–$3.70.
Big Soybean stocks have tempered upside potential. The USDA had a little surprise for the market in its April Report.
Smaller U.S. crush and slowing exports, combined with a growing South American crop, resulted in a 20 million-bushel rise in expected ending stocks, to 615 million. Times past, that would've been enough to push beans sharply lower.
Now, the world needs the beans, however, and the market has dropped to a prior point of resistance just below $7.80. That support continues to hold, because improving long range weather forecasts can see substantial corn planted in the coming weeks.
If that doesn't happen, acreage probably will move back to beans — and that might lead to more pressure on soybeans. Next key support is $7.45, the top of the January report gap.
˜Wheat has sustained freeze damage. Although the damage to soft red wheat in the Mid-South and Southeast appears extreme, the jury is still out on actual damage in the major hard wheat producing areas.
That grain was damaged, but it was not as far along and might still do well.
Many experts point to the 1996 freeze, when the crop was thought to be documented, yet recovered to make near-record yields. No doubt, the market will remain on point — and any indication of more weather problems may send price higher.
For now, July Futures seem to have adjusted. We might see a retest of the $5.18 contract high, but moving above $5 will be tough.
Support starts at $4.65.
In the Dairy sector, Milk's uniform blend price is higher. It was $16.54 a hundredweight at 3.5 percent butterfat for March.
The blend price is 86 cents higher than the previous month and $2.77 higher than March '06.
This past March is the ninth consecutive month that the uniform blend price has risen.
Class I utilization was 58.78 percent in March, a slight 0.14-percent increase, compared to the month before and 4.67 percent higher than March 2006.
The Milk-Feed Price Ratio, how many pounds of 16-percent mixed dairy feed equal one pound of whole milk in value, was 2.41:1 in March. That is an increase of 0.10 from last month, but 0.29 less than March 2006.
Cattle prices have seen a lot of volatility over the past few weeks. June price declines are now toying with support levels at $91.
If prices break this level, the next support is at $87–$88.
Hog prices have been choppy the last few weeks. They've found support on the notion that supplies are tight. Demand for hogs has continued to rise as summer approaches.
However, given the situation in the grain and cattle market, prices are having a hard time gaining momentum.
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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