ARKANSAS FARM BUREAU ELECTRONIC NEWSLETTER
Bi-Weekly Market Briefings for 05-29-2009
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Following a three-day weekend, SOYBEANS staged a significant rally that pushed November above key resistance at $10.38. Strong old crop demand now has analysts suggesting ending stocks will fall below 100 million bushels. China continues to buy, even as prices rise. At the same time, crush margins remain profitable and are encouraging domestic mills to continue purchasing. New crop is riding the wave of this demand as well, but expectations for increased ’09 plantings are limiting upside potential. Early indications suggested slow corn plantings would bring more bean acreage, but that now appears unlikely. The best bet: soybeans get planted late on some of the uncommitted acreage. Yield may be compromised, and total production could be a little less than projected.
The market appears top heavy and could move lower at anytime. According to seasonal studies, the market tops between May and July about 60 percent of the time. Be prepared to make some marketing decisions during the next 60 days. Gulf basis levels have risen to +$1.10 for delivery in the first half of September, so any early beans should find a ready buyer.
A break in the weather allowed CORN producers in the eastern Corn Belt to make good planting progress. However, because of the late start, yield and weather issues might still be factors. December is holding above the key $4.50 level. A close below $4.37 would confirm a top in the market.
WHEAT is following the lead of soybeans and corn. If those crops rally, wheat rallies. If they stall, wheat stalls. While there are definitely weather-related problems in all U.S. wheat sectors, world supplies are more than sufficient, and the export market remains highly competitive. Technically, the July close above $6 is positive and gives the market a potential upside objective between $6.34–6.70, but getting there may be difficult.
RICE is still in a tight sideways trading pattern. For much of the last three months, futures have moved in a very limited range, generally between $12.50–11.85. Increasing world supplies and the prospect of slightly larger U.S. acreage are limiting upside potential. The questions are: how much of that projected acreage will actually get planted, and what kind of impact will the lateness have?
COTTON's failure to follow equities higher after Memorial Day is troubling, particularly considering the state of this year’s domestic crop. Drought will reduce planting in Texas, and wet weather has delayed a significant portion of the already small Mid-South crop. With May almost gone, the probability of some acreage not being planted is high. For now, economic conditions do not bode well for cotton. However, if the size of the crop does shrink, prices will rise. Current support is 57.2–58 cents, with resistance at the recent high of 63.75 cents. Eventually, the 50 percent retracement value of 69.2 cents could become the upside objective.
The CATTLE markets are unable to establish any significant upward movement. This month’s Cattle on Feed Report indicated a 4 percent increase in placements, but total numbers were down 3 percent from a year ago. In addition, placements of heavier cattle declined, so we might see a tight supply of market-ready animals this summer. For now, economic conditions are reducing demand. Consumers are more apt to buy hamburger than steak, which limits upside potential. Tighter supplies will limit downside. The sideways pattern continues.
It appeared the HOG market had recovered from the H1N1 fiasco; however, that isn’t the case. Carcass values are down 25 percent from last year despite a 5-percent-smaller slaughter. Short term, negative packer margins don’t bode well. Long term, improving economic conditions should provide for a long overdue rebound.
In POULTRY, commercial hatcheries set 204 million eggs in incubators last week, down 6 percent from the corresponding week a year earlier. Average hatchability for chicks hatched during the week was 85 percent. Broiler growers placed 168 million chicks for meat production last week, down 5 percent from the comparable week a year earlier. Cumulative placements from Dec. 28, 2008 through May 16, 2009 were 3.36 billion, down 6 percent from last year.
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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