For the week, July wheat gained more than six cents, while the nearby corn contract lost nearly a nickel.
The rally continued in the soybean pits this week with the November contract closing above $8.50. For the week, the nearby contract moved four cents higher. The July meal contract gained $4.80.
In the fiber market, cotton trended higher this week with the December contract posting a gain of 72 cents. (nearly six bits?)
In livestock, the June live cattle contract was down $1.08. Nearby feeders were off $2.05. And the June lean hog contract followed suit giving up $2.00.
In the financials, Comex gold was down $28.50 per ounce. Nearby crude oil prices lost 32 cents per barrel. The Euro lost 86 basis points against the dollar. And the CRB Index gained more than one point to close at 314.25.
Here now to lend us her insight on these and other trends is one of our long-time market analysts, Sue Martin. Sue, welcome back.
Martin: Thank you, Mark.
Pearson: Well, let's talk first about what happened in the wheat market, a little bit stronger there, we're coming into, you know, wheat harvest picking up in a big way and yet this market is responding higher.
Martin: Well, I think even the last time I was on the show I mentioned I thought our harvest lows were actually in. You know, you look back and in the first quarter of the year wheat was starting to sell off from the February highs in through March and then we got in and, you know, we looked like we had one of our best wheat crops that we had had in years and then we got into the first weekend in April and that hard freeze hit the hard red winter wheat and the soft red and that created a whole different thinking in progress for what this crop was going to look like. Everyone was up in the air, didn't know what to expect, but I think what's happened is now because of that all of a sudden, you know, at that time wheat was focused on becoming a feed for the cattle feeder because corn was so expensive and what they found was it that as time progressed the Ukraine, Russia having weather issues with their wheat crops, banning exports all of a sudden those traditional buyers from their wheat now comes to the U.S. as our buyers. And now all of a sudden we've got wheat thinking oh my goodness we have an export market and now wheat is moving up and corn has been sitting and all of a sudden we're thinking wheat maybe is pricing itself out of the feed market too.
Pearson: That's right and, of course, residual value is certainly there. What should a producer be doing, Sue, on wheat?
Martin: Well, I think we're into an intriguing year for wheat. You've got world stocks extremely low so we can't afford to have problems around the world. And so now with the U.S. having some issues as well and as we're harvesting we're finding the yields maybe aren't as good as what we had hoped and everybody for a while thought well we got by it, you know, we caught some rains, the crops started to green back up and then they found that the heads aren't filled out as nicely and so they're finding that the yields aren't going to be as good. I think that we're going to see a wheat market this year, you know, KC and Chicago both that will make, of course, we've already made higher highs for the year and even in the contract in the month of June, I look for a year where you'll set back and you'll come back up in July, make higher highs, set back, come back up in August, make higher highs, set back and we do this all the way into October.
Pearson: Alright, so producers plan accordingly.
Martin: I think so, you know, these are beautiful prices and I think that as we go forward here, you know, take some, if you've got some crop that you need to sell go ahead and take advantage of it but you'll get some breaks to maybe price back if you need to.
Pearson: Alright, you see it's coming in like 20 cent increments? Is that what you're kind of looking for, Sue?
Martin: I think 20 cents. I'm wondering if we won't see, by the time we get into October if we won't have seen some six dollar wheat.
Pearson: Alright, let's talk about corn. We still look at the big picture, demand, ethanol demand, U.S. demand, good export demand, we're going to have to buy more corn acres next year, corn backing off a little bit, really backing off since that planting number. Here's what I'm hearing now, I'm out talking to a lot of producers, I'm hearing this stuff, these rumblings about there could be more than 90 million acres planted to corn is what the USDA predicted, that's floating around. There's a lot of holes out there that need to be filled. what is your take on the corn market, Sue? And should we be doing anything at this point?
Martin: Well, I've been hearing those same comments and I think that bottom line I'm passionate about corn. I think corn prices are going higher. You know, we've got a corn market that is inelastic with demand. In other words, with this ethanol situation going on where we're increasing production of ethanol all the time or drawing on needs for corn and we're tight supplied on corn as we go into summer, farmers may be holding 20% of the crop left and the basis remains firm. That's telling you that the farmer doesn't have a lot in his holdings. But I think that you've got a market that is softening a little bit in export maybe for the moment but all of a sudden corn looks advantageous to start feeding it again as opposed to wheat so that was a demand that domestically we didn't think we would have to worry about and you've got wheat issues around the world that, you know, corn is a food, it's a feed and it's an energy. And now that you've got crude prices moving higher after the tropical storm that you had around Oman and in the Straight of Hermas you've got a situation here where I think the corn prices have been basically killing time, moving sideways. Just this week we made new highs over the month of May in June and I look for us to move higher. Yes, we've got these acres. And do we have 92 million acres? We'll see. I'm hearing of acres that are not getting planted. And so it's going to be a real interesting thing. I don't think we have any more than 91 million acres. So, I think what we're going to see is a market that while it will move up it'll sit back and then it'll come back up higher and I think our lows were in, in the month of May and I think each low is going to start to present itself a little bit higher in trend. And then when we get into the month of July I think that we're going to see this market more enthusiastic and we'll be seeing new contract highs which will be new historical highs on Dec. corn, I look for $4.40 on the Dec. corn, maybe if the right things happen with the weather forecasts, who knows, we could stretch to $4.68. That would be my brick wall or my line in the sand, that's all the further I think it goes. And if I'm right on that and we're going to move higher into July then we're already at $3.92, $3.89, well, we don't have that far to go and you can't handle too many 10, 12 cent days, you'll be there in five, six, seven days. So, the market is killing time and that's all this market, I believe, is doing. And in the meantime the bean market says, not that I'm switching to beans on you, but the bean market says, you know, how can we keep pushing, we've rallied $1.10 and corn has gone sideways in a 40 cent range. If corn is not going to go higher then beans can't, I don't think will continue on. So, I think corn is starting to show its colors and we're going to start to move higher in a trending fashion and then when we're in July we'll become more dicey. Once they know that this pollination is set because that's 90% of your yield, watch out, the funds are probably going to dump their positions and they're heavy long in this market so you have huge positions. So, I'm saying to the farmer be prepared, use that month of July and get some marketing done.
Pearson: Alright, so producers beware. Now, you slid into soybeans which is fair because it's so interrelated. A year ago soybeans were a little over $5 a bushel. You said on this show at that time that we'd see soybeans at $8.50. We did it this week, we're at $8.50 so what's next Sue Martin?
Martin: Well, I think you're going to see a 9 in front of beans and, of course, new crop will probably do it first. But we have to be careful now because you're over $8, we've made new contract highs for the year and in years when this occurs, you know, you have a tendency to push higher on the July contract when you have February highs made in July beans, they make new contract highs, it's happened every time since 1970. Well, we did it again this year. But we've just barely don it. $8.22 was the old high, we've been to $8.35 and three quarters on the night session. So, I think that we'll try to go higher but the market's eyes are looking over at corn and you've got a lot of technical retracements from 1973, 1988 and 2004 on Elliott wave that are all coming together here in this $8.30 to $8.48, $8.50 level basis July beans. So, there is going to be sellers in this market trying to stall the market out. But in the meantime longer term I believe we're headed higher. Now, you know, a lot of years June can be a bad experience for the bull in beans. But I think we recommended on our radio broadcast this past week to start selling 30% of the old crop beans you're holding, maybe move to 20% in your cash sales for new crop, let's get started. And then as we go into the month of July we want to become a little more aggressive because yes, I am very bullish beans, in fact, Mark, if the right things present themselves this year into next year because our stocks are going to be dropping in more than half as we go into next year and we've got a biodiesel industry that is growing by leaps and bounds not only across over in Europe but also here in the U.S. and you've got a rape seed crop that is having issues around the world. So, and palm oil at historic nine year highs and then on top of it Indonesia slowing down their exports because Indonesia and Malaysia both are increasing their biofuel industry. So, now you've got Malaysia looking at, ah-ha, I'm getting all the export business but palm oil and bean oil account for over 50%, maybe 52% of the world's usage in veg. oil. Therefore bean oil is catching that limelight and I look for soybean oil to get up to 42, maybe 43 cents before it's finished.
Pearson: Some exciting news producers need to be on top of. Like you say, need to be ready to pull the trigger you're saying in the next 30, 60 days on beans.
Martin: I look for the next 30 days and then maybe the next couple of weeks to be real whip selling, maybe we turn around, we move up to the $8.48 area or $8.40 level only to turn around and crash back tot he $8 level but $7.99 to $8 should be supportive in here. The nice thing about it is when I look at our timing, we have a timing indicator that once in a while I'll allude to and on the daily timing it's at 99.9%, doesn't go to 100% so it's saying it's overdone but the weekly is dirt low and that says that we're just going to get corrections here and then come back and take a look at things.
Pearson: Alright, let's talk about another one that's related to all this, especially the corn and soybeans and that's the cotton market, trending a little bit higher this week, it's been a fascinating one to watch here. We had the huge break through May and now it's been on a pretty much uncontested rally.
Martin: Well, it is and I had hoped that we could get down to 50 cents or 51 cents. Well, we got to 51.65 or 51.60 but it stopped there and that was I think a 1.618% retracement and the market turned and rebounded quite nicely. But cotton is cheap, we have good supplies just like we do in beans but that's going to change and, you know, the interesting thing is we're starting to see advertisements on TV about getting rid of your synthetic polyester type clothes and move over to cotton and I think that is good advertisement. But it's also showing that as we go down the road I think you'll see bigger exports going into Asia and that type of thing. So, I'm very positive towards cotton. Now, if you get a pull back, even if this market was to come back to the lows I wouldn't panic but I think that the funds, you know, there's so much money in the world, when you have a 4 acre lot in the Hamptons sell for 130 million dollars with no house on it there is money in the world. And you've got lots of Yuan's printed, you've got dollars printed, well they're trying to spend them and they're going to look for cheap items and cotton is one of them.
Pearson: That's right and I think there was a good example of that on Friday when the soybean market went down hard and then by the end of the day it had come back up. It's like the money just keeps coming. Has not been true on fed cattle lately. Talk about your outlook there, Sue, what you see for the livestock sector and the fed cattle market first.
Martin: Well, the cattle market is one market that I have been a little bit more price positive too even though seasonally as you get into June prices do have a tendency to sell off. But I had felt that our export market was going to pick up. Now, we're noting that the lightweight cattle are taking a little bit, as they were placed, were taking a little bit longer to put the weight on and so maybe those cattle start to hit us more towards June now, the last half of June into July. Another concern is that you've got Canada just this week in Alberta fed steers fell five dollars, up to five dollars and I think it's a sign, you know, when you looked at stats Canada placement numbers that they came out with they indicated that in June we would see a 30% increase in fed steers and in July I think it goes up to 55%. Well, they're going to be shipping beef into the U.S. even though the Canadian dollar is almost on par with the U.S. dollar. It's because they are oversupplied for what they have for demand. In the meantime our export market is looking good and I think it's going to just get continually better as we go through the summer towards fall. So, it's almost like we're over producing for the demand at the moment but I do like the long-term picture in cattle.
Pearson: Alright, real quick, about 30 seconds, this hog market what do you see there?
Martin: Well, I look at the hogs and I think that we have a hogs and pigs report coming out at the end of the month, I think it's going to show that we're not seeing the expansion, high price of corn is creating lighter weights to come to market and that the expansionary ideas that were maybe on target a year ago have been put on hold.
Pearson: Alright, as usual, some phenomenally good insights from Sue Martin about what's ahead in the livestock sector. Hopefully you've paid attention to Sue through the years, you know how accurate she can be. So, Sue, thank you so much. That will wrap up this edition of Market to Market. But if you'd like more information from Sue on where these markets just may be headed visit the market plus page. It's at our Market to Market Website. And remember you can download audio podcasts of our market analysis and our market plus segments free at our Website. And, of course, be sure to join us again next week when we'll learn more about the pitfalls and profits of non-pasteurized dairy products. Until then, thanks for watching. I'm Mark Pearson. Have a great week.