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| ARKANSAS FARM BUREAU ELECTRONIC NEWSLETTER Bi-Weekly Market Briefings for 07-13-2007 -------------------------------------------------------------------------- http://www.arfb.com Cotton has transformed from the “ugly stepsister” to “Cinderella.” In just seven weeks, December Futures have risen 15.7 cents and shown signs of further long-term gains. A big supply, coupled with slow exports and a declining domestic mill industry, has pushed the market sharply lower. As expected, China had used its domestic supplies and cheaper imports first, but eventually entered the U.S. market. Producers have reacted to low prices by planting 4 million fewer cotton acres than in ’06. Drought conditions in the Southeast and rain in Texas have reduced ’07 crop prospects even more. Once the “funds” discovered cotton, and we have a major turnaround. Put all these factors together, and next year the acreage battle — soybeans, corn, cotton — may be a doozy. For now, be aware the market is technically overbought and due a short-term downward correction at least, with December ’07 moving above 67 cents and December ’08 exceeding 72. October is now the lead contract. It has broken out of a three-year trading range, with the next resistance around 67½ cents. The market might move to higher objectives some 2–3 cents above the recent high. Growers, therefore, should consider buying options to set a price floor. Rice is holding support. The USDA’s recent Planted Acreage Report indicates producers have exceeded intentions, but not by much. However, with milled exports reduced to a trickle, it was enough to push November Futures back to the bottom of a five-month trading range. Initial support starts at $10.80, with an additional layer about 15 cents lower. Resistance is $11.55 to $11.58, the contract high. Internationally, the market has some bullish implications since demand is still strong. High freight rates and India’s re-entry into the export scene both are concerns. However, tightening world and U.S. stocks suggest the possibility of firmer market conditions. Soybean plantings set at just 64.1 million acres for ’07. With the trade looking for a slight rise from March intentions, a 3 million-acre decline was a major shocker. After the report, futures traded the 50-cent limit higher and have held those gains. November finally closed above $9. Big ’06–07 ending stocks are hanging over the market, but what happens down the line is a concern. Projections suggest stocks will drop to 300 million bushels or fewer within a year. Not an empty plate, by any means, but more acreage will be needed in ’08. Where will it come from? A big move in cotton and a substantially smaller ’07 crop suggests a three-way battle shaping up in the South — and corn isn’t ready to give acreage back in the Midwest. Technically, August, the lead month, is about 25 cents below the next major chart resistance at $9.03½. Above that is the ’04 high of $10.64. November has solid support at $8.40–$8.50. The Corn acreage shock has dissipated. Expecting a small increase above March intentions, the market was shocked by a reported 92.9 million, or an additional 2.5 million, acres. This likely put a near-term low in place, as futures finished a $1.05 free fall in just 12 days. The market will be less concerned about July weather, as the added acreage cushions yield concerns. One hundred fifty-two bushels an acre will produce a 13 billion-bushel crop and provide some leeway going into ’08. The market has an upside retracement objective $3.68, with resistance starting just below $3.60. Without major weather problems, the market likely will be mostly sideways-to-lower into harvest. Cash basis will widen as the system attempts to handle, transport and market a huge crop. A likely Wheat top has been signaled by a major key reversal. While the U.S. crop suffered dramatic losses to the Easter freeze and in recent weeks, heavy rains, the market looks to have made a major top. September Futures traded in a nearly 60-cent range and made a new contract high. Then, they closed sharply lower for the day. Traditionally, such a move is a reliable topping signal. Therefore, you should use rebounds toward the more recent $6.20 level to market any unpriced wheat. Cattle charts have a bullish appearance — and feeders are trading at contract-high levels, thanks to the recent rise in the USDA’s corn-plantings estimate. Live cattle are along for the ride, but fundamentals are limiting their upside. Composite carcass values are weak, and demand typically falls off nearer the “dog days of summer.” August has resistance at the $94.10 May high. Hog Futures seem to have stabilized after the recent sell-off. August has found support at $69.60 and is trading mostly sideways for now. Packer margins are weak, which is keeping a lid on cash bids. Pork demand also usually falls off between July 4 and Labor Day, so expect the upside to be limited near term. Looking ahead, the June Hog Report showed a 2-percent increase in the total inventory and 1 percent more in sow numbers. This is having a negative effect on deferred contracts, since the market has been looking for a smaller inventory due to higher corn. Dairy: Class I Milk price went higher than $24, to $24.01, for July. That was up $3.07 from June. June Class II price is $18.19, up $2.27. Class III is $20.17, up $2.57. Class IV is $20.76, up $2.28. Class I utilization still is around 50 percent — 57.36 percent, to be exact. Demand is steady, with September Class III Futures trading at $19.55. 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 . -------------------------------------------------------------------------- We promised you your own bank, and here it is - www.farmbureaubank.com Created by members who understand your financial needs like no other bank can. Backed by the strength, stability and leadership of Farm Bureau. Go ahead. See what better banking is all about. Call 1-800-492-FARM Personal Bankers are available Monday - Friday, 7am to 7pm CST -------------------------------------------------------------------------- QUESTIONS OR COMMENTS? If you have any comments or questions about this e-newsletter please e-mail us at: mktrpt@arfb.com -------------------------------------------------------------------------- ---------------------------------------- HOW TO UNSUBSCRIBE You are receiving this newsletter because you requested that your e-mail address be added to the Arkansas Farm Bureau Market Report. To unsubscribe or change your subscription information, go to http://www.arfb.com/commodity/daily_rpt_email.asp ---------------------------------------- QUESTIONS OR COMMENTS? If you have any comments or questions about this e-newsletter please e-mail us at mktrpt@arfb.com Arkansas Farm Bureau Copyright 2007  |
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