Weekly Purcell Agricultural Commodity Market Report
Wayne D. Purcell
Agricultural and Applied Economics
Virginia Tech
May 3, 2005
November soybeans reached $6.42 last Monday and that looks like the best effort to challenge the high near $6.50. There was aggressive selling to turn the market back well below the $6.50 resistance plane. Since then we have seen moves below the trend line but no close below it through Tuesday, May 3. It is time to be aggressive in this market with corn making new lows and few reasons to support rallies in soybeans. Sell around the $6.42 high of last week or on a close below the trend line if that comes first.
Corn is making new lows with the new crop December as slow as $2.22 1/2 on Tuesday and at a new contract low. We will see prices below $2.00 in this market if the crop gets planted in a timely fashion and the weather is good. Hold short hedges if you have them and I would wait on signs of a short term bottom to buy back short hedges in a selective hedging program and to place or replace long hedges. May corn is now below $2.00 and I expect that level to give way on the July and then the new crop September and December corps unless we get a drastic change in the weather during planning or later during the growing season.
The July Kansas City wheat quit on the recent rally just above $3.40 and the July Chicago quit in the chart gap just below $3.40. We are now well off those levels and I epact to see this market sink toward the $3.00 level and that will happen first in the Kansas City trade. There is nothing in the crop conditions and progress for the hard red winter wheat that is bullish to these markets and we hold short hedges in both Chicago and Kansas City until we see signs of support. This is one time I would be careful just putting a buy order just above contract lows since I believe the markets have more downside to work through as we move toward early harvest in the Southwest.
Fed cattle finally sold at $93 late last week after a full week of bids and offers that were up to $3.00 apart. Choice boxed beef is now close to $164 and that helps the packers pay better prices, but their margins continue to be sporadic and they are struggling to maintain profitability. You have a good trend line on the June cattle and I show it this week. Sell this market on rallies above the $87 level or on a close below the trend line if that happens first. I do not think we will see June go above $90 and stay there. There will be some increase in supply side numbers coming to market-ready status in the next few weeks.
August feeder cattle made a new high at $109.75 on Tuesday. Look for this market to correct down $2.00 or so within the next few weeks and give us a set of lows to use for a trend line on this chart. When the short term top is put in around $110-111 and then the correction down starts, I think the new top will be a good level to sell against on subsequent rallies. And when a rally starts again, we will have a trend line for protection if the market does not rally back to the highs.
June hogs will find support again in the $74-75 area and then try to rally. If we see the $81-plus levels again, this market needs to be sold to set very attractive prices. I am not sure the June has any potential above that level but the July might make still higher price on the next rally so we can wait a bit on the July and August contracts to see how the June performs.
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