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It takes grain to make milk

Agriculture.com Staff 04/23/2012 @ 2:15pm

March US milk production was up 4.3% from previous year. The trend of higher production for the past 10 years remains intact.  And even though model research allows for higher production this year, it suggests this year to be an up year for price in the smallest of long term business cycle model trends. The 3-year pattern bottoms this year, and can trend higher into 2013. 

Model research leaves me of the opinion that milk is undervalued.

Within long term trends are intermediate intra-year trends and milk is due for such a bottom now. And for the next two weeks, that price should be higher for May. The next larger trend could propel price higher into August to September. The $14.00s should be support, and objectives range from upper $15.00's to $17.00.

The macro and micro economic picture, including conditions of fundamentals and technical with bias of the cyclical concept, suggests demand is about to rise to press price higher.

Feed costs

Corn model research suggests corn bottomed last week, or will bottom by end of this month for the most important intra-year type of trend. The forecast calls for May to be an up month for price, that still larger trends can lead to a still higher price July through September, and dependent upon weather and crop production. Current research leans toward a crop problem this year, but subject to weekly revision. A long term trend turned up during December of last year, and is set to be up into 2013, but this does not rule out range trade, but it does leave the door open for a significant problem for producing corn, while economies improve, and objectives range from $7.00 to $12.00.

Soymeal rallied better than anticipated and may now slow the pace as corn becomes the leader, but the new high this year compared to last year, also leaves the door open for a trend higher into 2013, or explosive move higher only for this year, and objectives of $440 to $680. But with this comes a script that allows for slightly higher price into summer, and a correction into harvest. Again, it is all about the weather. See economy comments.

Energy cost

Best crude oil model script calls for a higher price by May, and that trend can extend into July to September. Potential for $120 to $153. Natural gas may place a once in a lifetime longterm bottom this year.


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