ARKANSAS FARM BUREAU ELECTRONIC NEWSLETTER
Bi-Weekly Market Briefings for 08-24-2007
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Soybeans have hit a critical stage in more than one way. They’re in the final push for yield, with conditions improving in parts of the Midwest. At the same time, overall crop ratings have dropped two points in the good-to-excellent category. That’s a supporting factor.
However, it may not hold the market because major technical damage occurred in the recent decline. Everyone knows this will be a small crop, and stocks will be depleted dramatically by the end of the ’07–08 marketing year.
That probably will set the stage for an acreage bidding war in ’08. Meanwhile, beans are probably overpriced relative to this year’s anticipated supply. Seasonally, they typically slip into November, and that likely will be the case this year.
The stock market swoon also is influencing the commodity markets as index funds with big margin demands find themselves in a losing position. Their exit from commodity positions precipitated beans’ gap-lower move last week that finished a potential head-and-shoulders top projecting a downside move to $7.25 for November. That’s close to the $7.20, 50-percent “retracement” of the September ’06–July ’07 up turn. Resistance on any rebound starts just above $8.50.
Corn is rebounding from a sharp decline. Like beans, corn has felt the wrath of bailing index funds. The slide is smaller, though, and the rebound quicker. Crop ratings improved this week, but the question is, does that really mean anything at this stage of crop development? The biggest weather threat may come from flooding as the remnants of the tropical storm make their way across the Midwest.
December Futures have the makings of a double bottom at $3.25. However, that may be a little improbable as harvest nears. A close below that support can push the market to the next level at $3. Upside, resistance starts at $3.60–$3.65, with a potential 50 percent retracement objective at $3.75 as an outside target.
The Wheat market has further support in historically tight world supplies. We don’t know, however, if the slide in world stock markets will affect buying power. For now, price isn’t halting buying, as many mills have limited supplies available and must continue to buy to keep operating.
December Futures have traded above $7 several times, and that’s not far off the April ’96 record price. July ’07 can’t yet break $6, but has made several moves to $5.85 before hitting the $5.93 contract high.
Growers, look at pricing some ’08 production, but because of the wide basis; consider using either futures, a hedge-to-arrive contract or options. This can allow for basis improvement at some point.
The Cotton market remains vulnerable to outside influence. Outside forces affect all the commodity markets, but cotton seems to be the most susceptible.
Worldwide economic troubles hit cotton hard last week, when funds liquidated positions. A limit decline carried December below critical support at 59 cents and left the market vulnerable to further slides.
The market seems more stable with small gains in recent days. The ’07 U.S. crop will be smaller, but overall supplies are ample. That likely will limit upside potential near term — but can cotton enter the bidding war for ’08 plantings? For now, initial resistance is 60–61 cents; support, 57.
Rice is testing support at $10.50. Also hit by selling that pervaded the commodity markets, big losses put November rice within 2 cents of major support at $10.50. The market’s consolidating a little above there, as harvest progresses. Fundamentally, world stocks are still tightening, and the U.S. is one of a few sources of available rice.
For now, mill activity is limited, too, and we see little export movement. High freight added to higher price seems to make the U.S. an option of last resort — especially since rice, like wheat, is a food item that may change. Long-term support is $10.18, with resistance at $10.70 to $11.32.
As this Poultry report is written, the Georgia f.o.b. dock-quoted price for broilers and fryers is 81¼ cents, based on full truckloads of ice-pack USDA Grade A-sized 2½–3-pound birds. Eighty-one percent of loads offered are confirmed at 78–83 cents, with an 80.92-cent f.o.b. dock-or-equivalent preliminary weighted average. The market continues to be moderate. The live supply is adequate for a normal-to-good, mostly normal, demand.
Average weights are ranging desirable to lighter-than-desired in several cases. Estimated slaughter is 5,109,200 head, compared with 4,944,100 head Aug. 17.
Cattle Futures have been a wild ride over the past few weeks, December set a new-contract high and charted a key reversal Aug. 1.
Economic worries weigh on all the futures markets; cattle, too. However, sharp corn losses and smaller-than-expected placements in the monthly Supply-Demand Report provide strength this week.
The recent $96.50 low is the first level of support for December Live Cattle. October Feeders are chopping along mostly sideways beneath resistance at the recent contract high just below $119.
Hog Futures are trying to stabilize after losing almost $12 since Aug 1. Large slaughter and heavy market weights make it tough for demand to keep up with supply. China’s rejection/suspension of pork shipments from eight U.S. plants is another negative. October may be headed for a retest of the July low of $63.47½.
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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