It's Official: Recession

December 1, 2008 06:00 PM
 

Julianne Johnston Pro Farmer Senior Markets Editor


From Pro Farmer

Updated as of 7:00 a.m. CT

Government makes it official... According to the National Bureau of Economic Research (NBER), the U.S. has been in a recession since December 2007. The "official" declaration was made yesterday, although it just confirms what most had already believed was the state of the economy.

The NBER said the deterioration in the labor market throughout 2008 was one of the key factors, as well as a decline in real personal income, industrial production and wholesale and retail sales. Many people believe a recession is defined by two consecutive quarters of declining economic activity, but NBER says that has yet to take place in this recession. The NBER defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production,
employment, real income, and other indicators."

The last two recessions (1990-1991 and 2001) lasted eight months, and only two of the 10 previous post-Depression recessions lasted a whole year, states NBER. How long will this recession linger? That's a tougher question to answer, but economists yesterday afternoon didn't paint a very optimistic picture we would be out of it in less than a year. The stock market was under sharp pressure yesterday, but is set to post a slight recovery today.

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

Corn: Narrowly mixed. Futures were narrowly mixed overnight, with nearbys slightly firmer. Futures closed sharply lower yesterday, pressured by outside markets. March corn gapped lower on the open and extended losses to post a fresh contract low. Futures violated support at the November low, which points the market even lower.

Soybeans: 3 to 5 cents higher. Futures were slightly higher overnight amid short-covering. Futures closed sharply lower yesterday on pressure from outside markets. January soybean futures moved to the bottom of the extended consolidation range, but respected double-bottom support at $8.38. If this support is violated, it could trigger an active wave of selling.

Wheat: 4 to 6 cents higher. Futures were firmer overnight amid short-covering. Futures were sharply lower yesterday, pressured by outside markets. March Chicago wheat futures are hovering just above the bottom of the extended consolidation range. Support at the bottom of the range is at $5.16. A drop through that level would open the door for the contract to move another leg lower.


Cash cattle expectations: Sluggish start for beef. Boxed beef prices firmed 18 to 27 cents Monday, but movement was only 143 loads for the day. That's not the type of performance bulls were hoping for coming out of Thanksgiving weekend. While feedlot numbers are tightening, beef movement must be strong to support higher cash cattle prices, especially if cattle futures weaken.

Futures call: Mixed. Futures are called to open mixed based on the possibility of short-covering. Concerns the stock market will be forced to absorb more negative economic data in the coming weeks has traders concerned upside potential in cattle futures will be limited to short-covering. Traders feel very comfortable (for the time being) with futures at a big discount to the cash market.

Cash hog expectations: Steady to firmer. Packers are still in need of slaughter supplies for the week, which should keep cash hog bids steady to firmer across the Midwest today. In addition, the average pork cutout value was up 95 cents Monday and packer cutting margins remain solidly in the black, which gives packers incentive to raise cash hog bids.

Futures call: Mixed. Futures are called mixed following yesterday's decline, on thoughts of short-covering. But if the stock market continues to weaken, it will be difficult for the hog market to generate very much upside potential. February lean hog futures dipped below resistance-turned-support at $65.35, but closed right on that level. A close below $65.35 would signal a short-term top and would point to at least a multiple-day pullback.


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