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| ARKANSAS FARM BUREAU ELECTRONIC NEWSLETTER Bi-Weekly Market Briefings for 05-30-08 -------------------------------------------------------------------------- http://www.arfb.com Cotton fundamentals remain bearish near term. With weather abating enough to let planters roll, there seems to be little reason to anticipate an upward move in cotton. Projected ending stocks of just under 10 million bales in the United States and 61.6 million bales worldwide indicate ample supplies, even with a short ’08 U.S. crop. A weakening U.S. economy generally doesn’t bode well for cotton, as domestic mills are projected to continue their trend of using less. While December futures have held support at 77 cents, penetration of a shallow uptrend suggests further declines are probable. That being the case, 74.3 cents appears to be the only support above the early December low of 70.79 cents. Resistance remains the recent high just above 81 cents. Rice faces downside pressure following Memorial Day. A weak opening for November rice suggest a retest of recent support at $18.23 isn’t out of the question. Overall fundamentals are unchanged, except for U.S. acreage, which has likely increased from March intentions. But that’s a drop in the bucket, as far as overall supplies are concerned. The international situation has calmed, but supplies remain tight for at least the foreseeable future. Limited offerings from Thailand are generally priced around $1,000 per metric ton, with a recent sale to Malaysia at $950. This situation likely will continue for 18 to 24 months, but don’t forget how quickly the wheat situation has changed. Soybeans are receiving a boost from good corn plantings. Less acreage in soybeans is likely, since corn plantings appear to be taking additional acreage. Combined with the ongoing farmer strike in Argentina, it has given soybeans a good boost. While the situation in Argentina is apparently nearing resolution, importers are leery and have looked to the United States. This has boosted November above $13.60. Further gains will need weather or continued strong demand to move toward the contract high of $14.66. Support starts at $13.15, with major support at $11.65. Wheat futures have fallen below $7.50. Not long ago, we were all rooting for wheat to move above $7.50. It did with July topping at $12.72 ¾. Last week’s dip below $7.50 was a reminder that what goes up comes down. In just 10 weeks, wheat has lost more than $5 per bushel and the end isn’t in sight. A good world crop spurred the downturn and even dry weather concerns in Australia and poor crop ratings in the United States haven’t stopped the steady downward move. Chart support lies between $6.94 and $6.50. Keep wheat in mind when thinking about pushing the envelope on corn, beans or rice. Corn continues to consolidate. With the exception of a brief 3-day interval, December corn futures have traded between $6 and $6.32. Currently December is testing trendline support, which if penetrated could see a move toward support at $5.85 or $5.50. Good planting progress suggests acreage may exceed the March intentions, but timing suggests yield will likely fall below trendline expectations around 156. So, at best it will take good crop development to keep production near projections. Downside pressure would seem to be limited, yet we have another unknown that might have more impact on commodity price levels than weather. That would be index funds, which currently have more than $260 billion invested in commodities ranging from oil and metals to corn and beans. Big earnings in oil on a month-to-month basis have brought regular end-of-month adjustments in grain purchases in order to rebalance their portfolios. Finally, the U.S. news media has sniffed out index funds as a likely culprit in rising food and energy costs. This, plus rumblings to the Commodity Futures Trading Commission (CFTC), is likely to bring action to close a loophole that allows index funds to control unlimited futures contracts. (Note: Individual speculators are limited to combined contract positions in corn of 11 million bushels.) If CFTC doesn’t do something then Congress probably will. This would make index funds shed positions which would put downward pressure on oil, metals, and yes, soybeans, corn, wheat, etc. Renewed strength in the cattle pits has carried August live cattle to new contract highs. Record-high crude oil prices are being given some of the credit for restarting the rally that stalled out last month. Strong domestic demand and good export movement are also supportive. August feeders are also trading at contract high levels, and that is keeping demand for replacement cattle strong despite high corn prices. The market is showing indications of becoming oversold, and a move by August to test recent support in the $97 area is not out of the question. June hog futures are attempting to consolidate in a $3 range. Supply-side concerns continue to keep a lid on this market. The monthly cold storage report showed a large jump in frozen stocks, but much is waiting to be shipped for export. Pork cutout values remain strong despite large supplies, and that is keeping cash values stronger than expected. June has support at $75.80 and resistance at $78.60. Boiler production is expected to increase only slightly in 2009, after an expected increase of 2 percent in 2008. With higher feed and energy costs impacting both growing and processing costs, integrators will have little incentive to expand production. Little or no growth in broiler production is expected in the second half of 2008 and the first half of 2009. Broiler production is expected to increase in the second half of 2009 in response to rising prices. Exports of broiler and turkey products are expected to hit record highs in both 2008 and 2009, benefiting from their enhanced competitiveness on world markets due to the decline of the dollar. U.S. broiler and turkey shipments were up in first-quarter 2008 from a year earlier. U.S. broiler shipments for the first quarter of 2008 totaled 1.5 billion pounds, up 18 percent from first-quarter last year. U.S. turkey shipments totaled 148 million pounds for the first 3 months of 2008, up 19 percent from a year earlier. U.S. boiler shipments for March 2008 totaled 544 million pounds, an increase of 28 percent from last year. March turkey shipments totaled 52 million pounds, an increase of 19 percent from March 2007. 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_marketing/email/ ---------------------------------------- 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 2008  |
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