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Market Insider: Demand For Corn To Outpace `08 Supplies
By BRIAN HOOPS
Yankton
CORN
In the month of October, I projected December corn could trade as low as $4.00 to $4.20 and as high as $4.85 to $5.00.
The low for the month was $3.68 3/4 and the high was $4.96 1/2.
Now, what to expect in the month of November. As harvest is winding down in the month of November and with the second largest corn crop in history safely tucked away in storage, the market will now have two jobs until next spring. First, the market will seek a price level that will ensure the U.S. will not run out of corn until next year’s harvest begins in September.
It has been well-documented previously, but demand for U.S. corn remains strong as demand will outpace supply this year by over 550 mb. The huge demand base for corn, currently estimated at 12.585 bb; is slightly lower than last year, but is the second largest on record. Secondly, with the smaller seeded acres in 2008 and declining ending stocks, the corn market will need to bid for acres this spring to rebuild the ending stocks at a more comfortable level. In November, we can’t expect to repeat the huge gains that we made one year ago, however weakness in prices will be used as a buying opportunity for end users.
During November, December corn values could fall as low as $3.65 to $3.80 with highs projected at $4.50 to $4.65.
SOYBEANS
During the month of October, November soybeans were projected to fall as low as $9.25 to $9.50 with upside objectives of $10.40 to $11.30. Soybeans made a low of $8.34 and a low of $10.74.
For all intents and purposes, the 2008 soybean harvest has been completed. Good yields have been recorded in 2007, however final yields should come in well below a year ago. With harvest behind the market, the market focus will now shift from the supply fundamental to the demand fundamental. Similar to the corn market, demand for U.S. soybeans is forecast to be near record large. The huge demand base for soybeans, estimated at 2.945 bb, comes in the form of strong export demand and increased consumption of oil for soy bio-diesel usage. Ending stocks are forecast to remain very tight at 205 mb. The market must rally enough to ration soybean usage and to ensure soybean producers plant enough acres to
satisfy demand. In 2008, U.S. producers seeded a record amount of soybeans, and yet ending stocks actually declined by 10 mb. Therefore, the soybean market will again need to bid up for soy acres in 2009 to rebuild ending stocks. The soybean market will also need South America to produce a large crop to help meet the growing world demand. Weather during the South American growing season will be closely watched. Also being watched closely is the crude oil market which competes with the soybean oil market and a surging crude oil market means higher soybean oil and soy complex.
During November, January soybean values could fall as low as $8.50 to $8.80 with highs projected at $10.00 to $10.30.
WHEAT
During the month of October, December KC wheat was projected to trade as low as $6.30 to $6.50 with upside objectives of $7.10 to $7.40. The low occurred at $5.33 and the high was $7.15.
The main fundamental driving force for wheat prices will continue to be the growing supply of world wheat stocks. World wheat stocks have risen from 30 year lows in 2007 at 120 mmts to a more comfortable level of 144 mmts. Foreign countries continue to be strong buyers of wheat as wheat is consumed for food, however U.S. wheat now has to compete with other countries to export their wheat supplies. U.S. wheat exports are forecasted to be 250 mb below last year due to
the increased foreign demand. Winter wheat seeding is nearly completed in the Plains and good to excellent ratings are ten percent year. Ample moisture across these states has given the winter wheat crop a great start to the growing season.
The technical picture of the market remains lower, however if the trend can be broken; a short-covering rally can develop which should be sold into given the bearish fundamentals.
During November, December KC wheat prices are forecast to trade as high as $6.00 to $6.25 and as low as $5.35 to $5.50.
LIVE CATTLE
Live cattle ended the week $5.90 higher while feeder cattle ended $2.42 lower. The cash trade occurred last week at steady to higher money. Cash traded in the North at $138 to $143; steady to as much as $4 higher compared to the previous week. Live trade in Kansas and Texas occurred at $91 to $92, steady to $1 higher than the previous week. The stock market remains volatile, but has shown signs of stabilizing. This should have a calming effect on the cash and futures markets as traders will anticipate the worst is over for the economy.
If the stock market can stabilize and recover, look for the cattle market to find support and shorts will cover positions, giving the market a much needed short-covering rally. Technically, the charts remain in a downtrend and to the technical trend following funds, this means to continue to sell major rallies. December needs to close above $92.70 to turn the technical trend higher.
LEAN HOGS
Lean hogs closed the week $3.70 lower. The hog market is similar to the cattle market in terms of anticipating the sluggish economy will have a negative effect on consumer demand for pork. Demand, particularly export demand has slowed over the last six months, while the supplies of pork have remained large. As the economy continues to struggle, it is likely demand for pork will remain soft until next spring when the grilling season begins and will stimulate fresh demand. Technically, weekly charts are finding support for prices between $50-$55. If the stock market can stabilize, this support level should hold and provide a tradeable bottom. Charts posted a new low close to end the month, a bearish monthly close.
———
The Market Insider is an opinion only; expressed with the best intentions, but not guaranteed. The thoughts expressed and the data from which they are drawn are believed to be reliable but cannot be guaranteed because of their complexities and their reference to the future. The risk of loss in trading commodity futures may be substantial and therefore may not be suitable for the recipients of this information. For more information, call (866) 203-9655 or e-mail bhoops@midwestmarketsolutions.com.
© 2008, Midwest Market Solutions, Inc.
In the month of October, I projected December corn could trade as low as $4.00 to $4.20 and as high as $4.85 to $5.00.
The low for the month was $3.68 3/4 and the high was $4.96 1/2.
Now, what to expect in the month of November. As harvest is winding down in the month of November and with the second largest corn crop in history safely tucked away in storage, the market will now have two jobs until next spring. First, the market will seek a price level that will ensure the U.S. will not run out of corn until next year’s harvest begins in September.
It has been well-documented previously, but demand for U.S. corn remains strong as demand will outpace supply this year by over 550 mb. The huge demand base for corn, currently estimated at 12.585 bb; is slightly lower than last year, but is the second largest on record. Secondly, with the smaller seeded acres in 2008 and declining ending stocks, the corn market will need to bid for acres this spring to rebuild the ending stocks at a more comfortable level. In November, we can’t expect to repeat the huge gains that we made one year ago, however weakness in prices will be used as a buying opportunity for end users.
During November, December corn values could fall as low as $3.65 to $3.80 with highs projected at $4.50 to $4.65.
SOYBEANS
During the month of October, November soybeans were projected to fall as low as $9.25 to $9.50 with upside objectives of $10.40 to $11.30. Soybeans made a low of $8.34 and a low of $10.74.
For all intents and purposes, the 2008 soybean harvest has been completed. Good yields have been recorded in 2007, however final yields should come in well below a year ago. With harvest behind the market, the market focus will now shift from the supply fundamental to the demand fundamental. Similar to the corn market, demand for U.S. soybeans is forecast to be near record large. The huge demand base for soybeans, estimated at 2.945 bb, comes in the form of strong export demand and increased consumption of oil for soy bio-diesel usage. Ending stocks are forecast to remain very tight at 205 mb. The market must rally enough to ration soybean usage and to ensure soybean producers plant enough acres to
satisfy demand. In 2008, U.S. producers seeded a record amount of soybeans, and yet ending stocks actually declined by 10 mb. Therefore, the soybean market will again need to bid up for soy acres in 2009 to rebuild ending stocks. The soybean market will also need South America to produce a large crop to help meet the growing world demand. Weather during the South American growing season will be closely watched. Also being watched closely is the crude oil market which competes with the soybean oil market and a surging crude oil market means higher soybean oil and soy complex.
During November, January soybean values could fall as low as $8.50 to $8.80 with highs projected at $10.00 to $10.30.
WHEAT
During the month of October, December KC wheat was projected to trade as low as $6.30 to $6.50 with upside objectives of $7.10 to $7.40. The low occurred at $5.33 and the high was $7.15.
The main fundamental driving force for wheat prices will continue to be the growing supply of world wheat stocks. World wheat stocks have risen from 30 year lows in 2007 at 120 mmts to a more comfortable level of 144 mmts. Foreign countries continue to be strong buyers of wheat as wheat is consumed for food, however U.S. wheat now has to compete with other countries to export their wheat supplies. U.S. wheat exports are forecasted to be 250 mb below last year due to
the increased foreign demand. Winter wheat seeding is nearly completed in the Plains and good to excellent ratings are ten percent year. Ample moisture across these states has given the winter wheat crop a great start to the growing season.
The technical picture of the market remains lower, however if the trend can be broken; a short-covering rally can develop which should be sold into given the bearish fundamentals.
During November, December KC wheat prices are forecast to trade as high as $6.00 to $6.25 and as low as $5.35 to $5.50.
LIVE CATTLE
Live cattle ended the week $5.90 higher while feeder cattle ended $2.42 lower. The cash trade occurred last week at steady to higher money. Cash traded in the North at $138 to $143; steady to as much as $4 higher compared to the previous week. Live trade in Kansas and Texas occurred at $91 to $92, steady to $1 higher than the previous week. The stock market remains volatile, but has shown signs of stabilizing. This should have a calming effect on the cash and futures markets as traders will anticipate the worst is over for the economy.
If the stock market can stabilize and recover, look for the cattle market to find support and shorts will cover positions, giving the market a much needed short-covering rally. Technically, the charts remain in a downtrend and to the technical trend following funds, this means to continue to sell major rallies. December needs to close above $92.70 to turn the technical trend higher.
LEAN HOGS
Lean hogs closed the week $3.70 lower. The hog market is similar to the cattle market in terms of anticipating the sluggish economy will have a negative effect on consumer demand for pork. Demand, particularly export demand has slowed over the last six months, while the supplies of pork have remained large. As the economy continues to struggle, it is likely demand for pork will remain soft until next spring when the grilling season begins and will stimulate fresh demand. Technically, weekly charts are finding support for prices between $50-$55. If the stock market can stabilize, this support level should hold and provide a tradeable bottom. Charts posted a new low close to end the month, a bearish monthly close.
———
The Market Insider is an opinion only; expressed with the best intentions, but not guaranteed. The thoughts expressed and the data from which they are drawn are believed to be reliable but cannot be guaranteed because of their complexities and their reference to the future. The risk of loss in trading commodity futures may be substantial and therefore may not be suitable for the recipients of this information. For more information, call (866) 203-9655 or e-mail bhoops@midwestmarketsolutions.com.
© 2008, Midwest Market Solutions, Inc.
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