Has the Acreage Rally Began?

December 14, 2008 06:00 PM
 

Julianne Johnston Pro Farmer Senior Markets Editor


From Pro Farmer

Updated as of 7:00 a.m. CT

Corn responds Friday to Informa acreage survey... Corn futures rallied sharply on Friday thanks to Informa acreage survey data, noting corn/soybean price relationships have continued to shift in greater favor to soybean production in 2009 since their November update.

Informa acreage survey results

Informa 2009

USDA 2008

change

in billion bushels

Corn

82.288 

85.889

-3.601

Winter wheat

44.080

46.181

-2.101

Soybeans

81.455

75.878  

+5.577

Cotton

7.480  

9.239 

-1.759

The sharp response in the corn market to even the suggestion acreage could decline this sharply in 2009 signals the market is concerned about 2009 acreage. Is this the start of the "real" acreage battle? It might be. At least the Informa data puts some concern in the market about what corn carryover "could" be if we sliced more off of acreage in 2009.

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Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 7 to 9 cents higher. Futures were higher overnight on help from outside markets and spillover from Friday's gains. March corn futures gained nearly 70 cents last week. The move off the Dec. 5 lows has been impressive, especially as gains late last week came in the face of bearish USDA data. To build upside momentum this week, outside markets must provide some support. Otherwise, the market is susceptible to profit-taking.

Soybeans: 14 to 18 cents higher. Futures were higher overnight on help from outside markets. Futures rose off session lows into Friday's close, but remained under pressure due to Informa's acreage data. But for the week, January beans posted around a 72-cent recovery as outside markets were supportive for most of the week and USDA's December Supply & Demand Report wasn't bearish. Look for choppy price action to be the norm given light holiday volume. The technical situation improved somewhat for soybeans this week (island-bottom and move above downtrending resistance).

Wheat: 9 to 11 cents higher. Futures were higher overnight on spillover from neighboring pits. Futures finished higher in all but the front-month Minneapolis contract on Friday, and for the week, March Chicago wheat finished about 37 cents above the previous week's contract-low close, as futures saw some short-covering support and were supported by weakness in the dollar and Informa's acreage survey results. How outside markets perform next week will likely drive price action.


Cash cattle expectations: $1 to $2 higher. Cash cattle traded at $84 in areas of the Plains Friday, but Texas feedlots resisted those prices late into the afternoon. As a result, this week's showlist numbers will be uncertain until it's known for sure how many cattle moved last Friday. If there are animals carried over from last week, which is expected, it would give packers an advantage in cash negotiations.

Futures call: Mixed. Futures are expected to see a choppy start amid spreading. Upside potential will be limited by last week's disappointing cash cattle trade. Beef prices dropped sharply last week and could continue to decline over the next month. The holiday timeframe typically isn't a strong period for beef demand. Plus, economic conditions continue to worsen and could reduce consumer spending on beef.

Cash hog expectations: Mostly steady. Cash hog bids are expected to start the week steady to lower at most Midwest locations as many packers are thought to be well bought ahead on this week's kill needs. Cash sources signal some packers are starting to scale back purchases as slaughter runs the two weeks after this will be shortened by holiday schedules.

Futures call: Weaker. Last week, February hogs closed $1.93 below the pervious week's finish to weaken the technical outlook again. Futures now have contract-lows support in reach. If focus remains on narrowing the premium futures hold to the cash market, hogs face followthrough pressure this week. With the expiration of December hogs, February hogs will now be more closely watching the cash index, and currently hold around a $6 premium.


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