Dairy takes a rest within long-term uptrend
Models favor milk futures and cheese to trade sideways into March. Within that range cheese is due for a top now or next week and a bottom is due late this month into early March. The trading range suggests the market is debating high milk production and pre-spring flush inventory liquidation against high production cost and potential for weather based crop risk.
My forecast suggests there has been concern over U.S. demand and that such sentiment should dissipate in a few months. The forecast calls for still higher production cost for summer months if not for 2008, improving demand mid-year into yearend if not into 2009 and potential for a weather impact. The forecast calls for a record new high price for cash milk. Consider $23 for JUL futures.
The models had forecast a rally for corn price from November into January. A price chart now shows the model trend was worth $.80 to $1.00 per bushel dependent upon future contract month. This was historical performance for the intermediate model trend. There was a celebration by some at the end of that trend. Models now assume a correction trend has come to an end as of this week and market should rally into late-March. Still larger trends are forecast to support market into summer months. There is potential for $5.54 to $6.80 per bushel this year. The CSA model is price only and the Fusion model includes CSA plus fundamental research such as weather. My weather research suggests 2008 is a high-risk year for growing corn.
The current model forecast expects higher price trend into late March or early April. I think spot meal futures can trade to $380 to $400 during this time. The long term trend for 2008 allows for $500 to $350. Stay flexible but be involved.
The crude oil models suggest a long term business cycle top may have been placed this January but does not have to peak until summer driving season. A business cycle bottom is due early 2009 suggesting relief for the consumer late 2008 into early 2009. I think $100 oil is over valued oil for this year while $80 is under valued. I believe natural gas can out perform crude oil this year and remain bullish this market. In addition, the consumer should consider that even though crude oil models want to turn bearish into 2009 that still larger business cycle trends should support oil into 2010. I can visualize over $100 oil by 2010 but feel this market should consolidate for 2008.
Last year the long term forecast called for stable to higher price into early- to mid-2009 for the stock market in terms of the Dow index. Late 2007, I warned subscribers of chance for an earlier than expected top. At yearend the analysis suggested a failed long-term cycle top had occurred. And on 1/2/08 I issued a BC3 program sale of the Dow index. A gain of seven percent was taken (no leverage). The goal is to wait until early 2009 for the next business cycle bottom but I am considering chance that the true low may occur during the seasonal weak months of September and October of 2008. The models for the Russell 2000 index allow for a business cycle bottom as soon as July 2008. This index has been known to bottom several months ahead of a bottom for the Dow index.