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Higher milk prices ahead

Agriculture.com Staff 08/14/2007 @ 7:58am

My models forecast an intermediate trend higher for milk and cheese prices into late August or September.

Seasonal studies offer a new high for the year. The models are not against this but favor a retracement rally. This week the SEP futures rallied to 19.30 resistance and were short term overbought. Technical action such as this could cause a correction but if models are correct a correction is all that we should see on a short term basis. The best of intermediate trend objectives is 20.50.

Economic indicators that I use as input for commodity price long term forecasts still show the trend so far this year as one of positive economic growth and support of demand of commodities.

Hogs

My long term forecast has been bullish hogs since April 2006. I expect a record price for hogs at some point during the remainder of this decade. Current long term CSA (cyclical) forecast is bullish into 2008. Intermediate trend models have been bullish since early July. The intermediate trend can peak any time this month. In relation to the long term forecast, the trend should cause only a correction.

Cattle

I have been long term bullish cattle since Apr/May 2006. I believe we will see a record high price for cattle some time in the remainder of this decade. The intermediate trend rally from the Jun low may end this month.

Energy

Gasoline peaked in May for spot futures and for the annual cyclical trend. The models for crude oil and heating were correct for being of opposite opinion of the gasoline market, in that new highs for the year were seen in July and as correctly forecast. Models suggest lingering strength into September, but I will be watchful for and an end of this trend this month. Long term trends for energy should be bullish into end of decade but annual swings may now be more volatile. I feel per this decade's bull market trend that natural gas is under valued.

Dow Stock Index

Models correctly called for a final rally during July for the stock index, although I called the top too soon. None the less a second top signal was issued during the first half of the late July collapse. I expect the trend to remain down into September, with slight chance for a late August bottom. There is potential for the Dow to trade as low as 12,700 although I prefer 13,000.

The long term business cycle forecast continues to call for higher price of the index into early next year, but now allows for range trade. Also, there is a lower probability alternate forecast that allows for a top this year rather than next year. These forecasts, in relation to commodity index forecasts, suggest 2008 to favor commodities.

My models forecast an intermediate trend higher for milk and cheese prices into late August or September.

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