ARKANSAS FARM BUREAU ELECTRONIC NEWSLETTER
Bi-Weekly Market Briefings for 08-07-2009
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Just when it seemed soybeans were set to resume a downtrend, outside markets stimulated prices. A strong upturn in equities and crude oil, coupled with a weakening dollar, provided the underlying support for the turnaround. At the same time, tight ending stocks and strong Chinese buying overpowered the prospect of an excellent 2009 crop. Beans will continue to follow outside markets as long as investment funds remain aggressive. As the dollar weakens, fear of inflation has sparked fund investment. However, this can and will change, so be aware of the market and be prepared to price aggressively. Technically, November broke trend- line resistance and gapped higher. This puts the market just below resistance at $10.40–$10.50. Above that, is the early-June high, just below $11. On the downside, recent resistance at $9.40 becomes support.
Corn has bottomed, at least temporarily. Like soybeans, corn moved sharply higher on strong export sales and outside market strength. December corn registered a huge four-week island reversal, gapping lower in early July, then gapping higher a month later. This is typically a reliable bottoming or topping signal. December is testing resistance at $3.85. Above that, $3.90–$4 will offer additional resistance. Currently, fundamentals don’t support a substantial upturn. There are some predictions that next week’s Supply/Demand Report will lower acreage; however, yield is expected to rise. That would pile a huge crop on top of already ample ending stocks.
Wheat is still riding the waves created by soybeans, corn and outside markets. Right now — because of a 10-month island low in the dollar — prices are up. However, upside potential is hampered by large domestic and global stocks and weak export demand. At this point, exports are barely 50 percent of year-ago levels. A good spring crop will simply add a supply problem. The December contract recently moved above the July high, but it was short lived. On Aug. 4, the market closed below that level. The 38-percent retracement objective of $6.06 appears to be a pipe dream. Last week’s $5.33 low remains support.
The cotton rebound will need some additional help to move above the recent high of 64.98 cents. As this week started, first-of-the-month investing catapulted cotton to a near limit gain. It will take more of that to move cotton higher. Fundamentals remain negative. Stocks are large, and Chinese imports are small. The economy is still too recessed to encourage buying. Weather continues to take its toll on U.S. production. The well-known Texas drought will result in huge abandonment and a host of other problems. For now, look for December to trade between 55–65 cents. Long-term the 62-percent retracement objective of 70.5 cents might come into play.
The rice rally could be ending. After gaining more than $2 in the last four weeks, November rice futures have begun trading in a consolidation pattern. November started the week with a key reversal top, which is usually a reliable topping signal. If that’s the case, the initial downside objective is $13.38. The July rally was stimulated by smaller-than-expected long-grain acreage. Some people think those numbers will drop even further in coming days. If that happens, then long-term, the market might still have upside potential. On the negative side, Thailand has huge intervention stocks that could be dumped on the market.
In poultry, commercial hatcheries in the 19-State Weekly Program set 201 million eggs in incubators last week. This number is down 4 percent from the corresponding week last year. Average hatchability for chicks hatched during the week was 84 percent. Average hatchability is calculated by dividing the number of chicks hatched in the week by the number of eggs set three weeks earlier. Broiler growers in the 19-State Weekly Program placed 167 million chicks for meat production, down 2 percent from this week last year. Cumulative placements from Dec. 28, 2008 through July 25, 2009 were 5.05 billion, down 5 percent from the same period a year earlier.
Cattle futures are garnering support from stronger stock prices and a weaker dollar. In addition, tightening cattle supplies should provide a little boost this fall. The monthly Cattle on Feed Report had June placements down 7.1 percent from a year ago. Likewise, USDA’s Cattle Inventory Report showed the smallest U.S. herd in 30 years. In spite of all of this, prices won’t begin to increase substantially until demand improves. October live futures have support at the recent low of $88.85 and resistance near $92.
Hog futures have given back all their recent gains and are trading at new contract lows. Average weights are significantly larger than they were at this point last year, which suggests there’s a backlog of market-ready hogs in the countryside. Wholesale pork prices are down as well. In an effort to reduce supply and push prices higher, many processors closed last Monday. The weaker dollar should be supportive, but currently it’s being ignored.
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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