Outlook Briefs - 2/21/2000
Wheat Market Update. The rally in July 2000 wheat futures ran into resistance at the 50% retracement level of the long down trend from last year. Prices for new crop rallied from a low of $2.56 in mid-December to a high of $2.90 on January 24th before turning slightly lower since. This rally gives us an opportunity to begin selling our new crop at price above the likely season average price. Its difficult to make sales into a rally but this one has shown fatigue and may be nearing its end.
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Corn Market Situation. December corn futures are trading at nearly a 30 cent premium to nearby futures so we need to keep our eye on the correct ball as we try to hit a home run in the new crop game. New crop prices have rallied sharply since late November and have surpassed the $2.50 level for the first time since last summer. This rally has met most all technical targets and now needs a further boost from the fundamental side to keep going higher. Now is a good time to begin forward pricing 2000 corn that needs to be sold off the combine. Price may go higher but the odds favor lower prices this fall.
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Soybean Market Overview. November soybean futures are behaving like the market needs to attract acreage this fall! Hardly the case. The world is awash with oilseeds including the large U.S. stick pile and big European and Canadian rapeseed crops. The crop in South America will be near the last three year average but down slightly from last year. None-the-less we will still have plenty of oilseeds to meet projected use during the 2000-2001 marketing year. The plentiful supplies coupled with projections of increased U.S. soybean acres point toward weaker prices this fall. Selling into the current market strength assures a good base price to average in with the rest of the crop sales.
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Outlook
Dairy Outlook. Milk prices ended the 1999-year at levels about $6 per hundredweight lower than the year before and 2000 will start with the lowest prices since 1978. Why? Commercial disappearance of milk and dairy products has been very good, up 2.4% for the first 10 months of 1999. But, milk production was also excellent. Preliminary estimates are that U.S. milk production for 1999 was 162.7 billion pounds, up 3.4% from the 157.4 billion pounds produced in 1998. This strong growth in production occurred primarily in the western U.S. For example, California produced 30.459 billion pounds, an increase of 10.3%. Idaho had an increase of 11.6%. These increases are much stronger than what was experienced in the South. Only Florida and Georgia had increases in production. Florida was up about 2% while Georgia had an increase of just 1%.
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Beef Cattle Numbers Decline - Good Times Are Here!. 1999 was likely the last year of declining beef cattle numbers. According to the latest cattle inventory report, we began the year with about 1% fewer cows than in 1999. Total cattle numbers in Georgia were estimated as increasing by about 1% with beef cow numbers the same as in 1999. The US beef cow decline began in 1996 as producers began to suffer through 3 years of poor prices. Beef cattle numbers are now lower than the 1990 numbers which provided the more than $1.00 per lb. prices of the early 1990's. As producers begin to rebuild their herds in 2000, beef supplies will drop even further, setting the stage for several years of good prices.
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