Bi-Weekly Market Briefings for 05-04-07
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Corn has continued its Planting Intentions Report slide. That report has indicated 90.5 million acres were to be planted in corn this year.
September Futures gapped lower over the next two sessions, stabilized and retraced to the breakout point.
Since then, the trade has been sideways-to-lower and stayed below a down trend drawn off the contract high and other rebound highs. At this point, September has completed a 50-percent "retracement" of earlier gains and has been getting good support just below $3.60.
Projecting where the market goes from here is like forecasting the weather. In fact, weather, weather, weather will be the key over the next three to four weeks.
Cool, wet conditions restricted planting to only 23 percent planted through April 29. That compares to 48 percent last year and 42 for the last five years. Good weather is needed to keep acres in corn.
Watch forecasts for the Midwest to get an idea about how much progress is being made. Your futures charts will be a quick monitor.
Good planting conditions will likely shove corn below $3.60 and towards the $3.37, 62-percent retracement objective. Poor planting conditions will likely push September corn above $3.80 and potentially above $4.
Soybeans have been holding above $7.50 as futures have reacted similarly to corn and slid lower in the past few weeks. The difference, though, is beans have held above the January Report gap.
In the last two weeks, the market has traded sideways with support at $7.50. This was surprising, considering: a) the rising projected stocks in the monthly Supply/Demand Report; b) the huge South American crop; and c) a subtle shift of export sales to the south.
As in corn, weather obviously is the key. A substantial 10–14-day planting window will reduce the chance of acres moving back to beans. This will put beans in a tightening stocks situation in '08.
A November close below $7.45 will bring $7.21 and $6.92 retracement objectives into play. A close above $7.80 will indicate further upside potential.
As we've discovered more and more damage to the Wheat crop from the Easter freeze, July Futures have moved more than $1 higher to a $5.30 contract high. Since then, improved world conditions have keyed a partial retracement of those gains, and a recent close below $5 has suggested that further declines are probable.
Retracement objectives are $4.90, $4.78, and $4.66. The latter was major support during the life of this contract.
Time will tell the full extent of the freeze damage. There is little question, however, that Arkansas was hit hardest.
˜The Cotton decline may be ending. Technically, it's showing initial signs of a rebound.
A Relative Strength Index value near 20 and a price/RSI diversion for the July Contract both indicate the market is oversold. That is, price has set a new low, and the RSI hasn't. That's not much to hang our hats on, but we're seeing subtle shifts in fundamentals.
China's buying is increasing, but won't be enough to reach the latest USDA estimate.
We'll see further upward adjustments in ending stocks in subsequent reports. Some suggest those stocks will be 10 million bales-plus.
A slow start to a much smaller planted acreage hasn't boosted the market, but it should in time. Old crop is testing key support at 46½ cents as May expires. New-crop December may find support around 52 cents, and that will provide 55–57-cent rebound objectives.
Rice export demand is slow. While mills are shipping against prior sales to Cuba, Haiti and Africa, most are operating well under capacity. Without new sales, this'll get worse as summer approaches.
However, smaller 2007 U.S. plantings will lead to smaller long-grain stocks and, barring further GMO issues, should mean a rebound in new-crop futures.
November has honored a downward trend in the past six weeks, but has support at $10.90. If that falls, the next support is the $10.65 late-March low.
A close above $11 will open the market to retest resistance at 20-cent intervals up to the $11.58 contract high.
Information from Alan Levitt. Futures for all Dairy commodities are significantly higher.
June '07–March '08 Class III Futures have closed at record highs, and August and September briefly have traded above $18. With Non-Fat Dry Milk Futures for September–November topping $1.80, October Class IV Futures were bid to $19.75.
Spot Butter has topped $1.40 for the first time since January '06. Blocks are now 36½ cents, about 32 percent, higher than a year ago.
Whey Futures have continued to climb, despite Dairy Market News warning that the market had been weakening. DMN reports that Central states dry whey traded for 72¼–78¼ cents as this is written, down 3 cents from a week ago.
Demand from feed users has diminished, alleviating some tightness that has driven the market the last few months.
Live Cattle prices have been trading sideways in the past few weeks, flirting with $91-$92 support levels, but never breaking that support.
Strong cash prices have helped hold up prices and keep them above support. However, negative packer margins have worked against prices.
Packer margins are improving this week, adding some much needed support to the market.
Lean Hog prices have come under pressure this past week, as National Agricultural Statistics Service reported higher frozen pork stocks. However, these stocks should begin to lessen as demand rises during the summer grilling season.
Prices still are finding support in a robust export market. Considering the large export demand and the seasonal increase in the U.S., hog prices are likely to begin strengthening in coming weeks.
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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