Slumping oil prices weighed heavily on the agricultural sector as well, and when combined with a stronger dollar, the correction proved to be too much for grain prices.
For the week, September wheat lost 47 cents, while the September corn contract moved 30 cents lower.
Soybean prices also trended lower as the September contract declined 22 cents. Nearby meal prices followed the raw commodity lower giving up $7.40 per ton.
In the softs, virtually all of the cotton trade now is focused on the December contract, which headed south as well with a weekly loss of $1.85 per hundredweight.
In the dairy market, August Class III Milk futures gained 69 cents, and the deferred contract moved 39 cents higher.
Over in livestock, cheaper grain prices were friendly to the August cattle contract which gained $3.30. Nearby feeders rose nearly $6. And the August lean hog contract settled Friday with a weekly gain of 35 cents.
In the currency markets, the Euro lost 138 basis points against the dollar. Crude oil's early week rally fizzled Thursday and settled Friday with a weekly loss of $1.85 per barrel. Comex Gold advanced nearly $40 per ounce. And the Goldman Sachs Commodity Index lost 16 points to close at 651-even.
Pearson: Here now to lend us his insight on these and other trends is one of our regular market analysts, Jamey Kohake. Jamey, welcome back.
Pearson: Jamey, we got the word from Senator Coburn, who is leading this charge against ethanol. That's taking a lot of wind out of the corn market sails. That's 40 percent of the crop that's being converted to ethanol. Granted we do get the DDG value out as a feed benefit, but it's been the driver for the last five years on what's been happening in the corn market, without question. The impact, as you see it right now and as the market looks in ethanol, should we be selling three year's worth of corn up at these levels?
Kohake: It almost makes sense longer term. I still think there's plenty of time yet to see pollination up north of Interstate I-80, see how big this crop actually is. I don't think it's all said and done and over with, but I would be an aggressive seller on rallies, back to where I've been on record with you several times on the radio 714, $7 corn, $14 beans. I still like 6.80, $7 new crop, fourth of July weather scare, sell into it. All this talk about ethanol, all this talk about Missouri River flooding, all this talk about late planting, it's in the market. It's old news. We're focused on weather short term. We have big, big report coming up this Thursday, acreage estimates, carryout estimates. Hopefully we get something going there to kind of get us out of this little rut that we've been in here short term.
Pearson: We didn't talk about it on the show tonight but, obviously, the stronger dollar has been an impact as well. The situation with Greece is continuing to weigh into Europe. And as we visit Friday night, there's concern about banks in Italy. There's concern about other exposure and more of a contagion over in Europe, which is what we've been hearing about now for over a year. What's your take on that and the dollar and its strength.
Kohake: It's going to be a crazy market Sunday night in these outside markets. Greece got their bailout. Germany caved in this past week, and they're going to get their money. Now they're going through austerity measures. Are they going to enact any or not; that's going to be the big news next week. Like were saying, Italian banks are shut down over the weekend. They shut down today and they're out of business through the weekend. I could see the bond market getting hit hard, going lower next week, ten-year note, just crashing off of that, the dollar staying firm, and just seeing that kind of spill over into more sideways type grains back to the ags. These markets are all macro, and they're spilling over, wrecking corn, wrecking beans, wrecking wheat. Off of the higher dollar pigs, Portugal Italy, Ireland, Greece, Spain just all having huge, huge influences with fund money coming out of the market. One day it's risk on. The next day it's risk off. And just pretty much nobody can symptom these big swings anymore.
Pearson: At some point we'll get to a resolution of all this, and hopefully it will be a benefit. We'll see the U.S. economy start to stir. Obviously production and fundamentals are going to be key. We've got a big report coming Thursday. Let's talk about some of the things that have been happening. We've been seeing some wheat coming into the Black Sea. Russian wheat, very inexpensive, causing a lot of turmoil in that world.
Kohake: That is what kind of caught the wheat market off guard about Wednesday, Russians moving wheat cheaper than us. So we're trying to find a price level that we can be competitive with. We need a weak dollar. See if that can trim back lower -- would help out. But I don't see the wheat market doing anything at all short term. We're trying to finish up the wheat with the Kansas City wheat. We're still several weeks away. Wheat is a follower of corn short term, but I don't think wheat has much going. I think sideways to very short term, I wouldn't do any hedging at all here right now. I'd wait to probably mid to late July before you see anything.
Pearson: We talked about the corn market earlier. I want to come back to corn for just a moment. Again, we've got a fundamental situation. We've still got a huge ethanol demand out there, although there has been talk that some of these ethanol plants have been selling their corn back into the cash market. We've had those things floating around. There's some concern about that. The blenders credit is still there. The demand is still there for the product. And the renewable fuel standards are still there for the time being.
Kohake: Nothing has changed with the demand side pretty much of the ledger. It's still very, very strong. The carryout is still razor thin. It's going to be through next year. Nothing is going to change. It's just money flow that has got this market very, very irrational. We're seeing limit moves anymore like they're nothing, 30-cent moves once or twice a week anymore. But we know the bullishness is factored in -- we're waiting on a weather scare. In the meantime, I think you saw rallies -- last time we hit seven bucks, we saw the demand slow down. I think you get short up there again, I even like Dec. 12 up around 640. And we're going to be tight next year. You don't have to sell it and wait until next October to take it off. Trade it for 30, 40 cent swings at a time. Margins are too good right now. A lot of money on the table here on these grains. I don't think it's worthwhile sitting back hoping we turn 100 degree for three weeks and you get $9 corn. I'm locking in --
Pearson: Let's talk about the soybean and what you see happening on that front. The USDA -- what kind of a corn acreage number are you predicting? What do you think we're going to see?
Kohake: I think you're right. They're in the high 90s, 90.7, 90.9 area. The number that's going to be a factor is the harvested acres. I think you're eventually going to shave off 3- to 500,000 thousand yields event come down. I think the number Thursday is going to be the carryout number, how has that worked itself -- or how much has it worked itself lower. China has become a big corn importer. Their forecasted for bumper crop this year. Even with the huge record crop, their usage numbers are still three million metric tons higher. Who would have thought ten years ago when china was buying beans like they're going out of style. Now they're buying corn and sticking with South America. It's just shifting.
Pearson: Those are all going to be factors. The bean market, you mentioned that. Obviously some of that Chinese bean demand has now gone to South America as well. Will it be back in the bean market in a big way this year, and what's your take on the bean market?
Kohake: I think the bean market is dead just like the wheat market is. China went to South America last week for about 10 to 15 cargos. They have done nothing at all with us lately. I don't see beans doing anything at all mid to late July. August crop, maybe get a bounce there. But there's still weather issues there as well: late plantings, wetness all that. I think beans are range bound. We've got a big $1.20 range pretty much with beans, 12.80, $14 for the new crop. Unless the dollar -- put new lows in or crude go back up over a hundred, I think the bean market is stagnant.
Pearson: Let's talk about crude oil for a minute since you mentioned it. What's your take on crude oil now? Obviously this emergency reserve dispersal has impacted the market short term.
Kohake: Right, it sold it off the other day when Obama announced it. I think it was all politics myself. It's one and a half day's worth of supply. It's very, very minimal. If did have a kind of buy the rumor, sell the fact type of deal, flush some money out. I think we're at -- of crude. This coming week is going to be very pivotal for crude and all these other outside markets. We've got the end of the month coming up, QE2 ending. Should see a bounce in there. The S & P with short term profit taking. The crude is going to be even bigger. Gaddafi could get finally murdered or step down this week on news that we're going after him harder now. If that's the case, I think the trade short term to get into is to sell Brent, buy WTI, and watch that spread narrow up. The Brent Crude has been rallying like crazy since Kaddafi shut his supply down.
Pearson: And on soybeans -- back to beans, you would be selling them?
Kohake: $13,80, $14 still.
Pearson: Let's shift gears and talk about the cattle market. Big week this week. Strong cash market. Good demand out there for beef, despite all this economic news.
Kohake: Right. $5, $6, $7 rally last two weeks in the cattle market. 4th of July demand supportive. Short term I think you've got to be a hedger up in here. Deferred cattle, got a lot of unknowns with grain prices. Supply is still very, very tight. Fundamentals remain strong out there into next year. But I think short term, if you can get a break even and lock in a profit, I think hedge it. There's way too many uncertain areas out there that have influences on cattle: unemployment, how the S&D and Dow trade every day. Way too many spillover factors that could pull this thing back down in no time at all.
Pearson: Talk about the hog market. Obviously we've got good international demand there.
Kohake: China has doubled their pork numbers by four times in the last ten years. We saw a quarterly hog and pig report out today. It was bearish. So I think you're going to see the nearby hogs down hard on Monday morning. I think you saw calls out there, you know, August, October time frame. Deferred stay firm off tight supplies. But another idea it to bear spread it, sell October, buy like a Feb out in Feb '12, but I think you're going to see a lot of weakness come Monday morning on the nearbys. But I think the WTI is short term close to low.
Pearson:Jamey Kohake, thank you so much. That wraps up this edition of Market to Market. But if you'd like more information from Jamey on where these volatile markets just may be headed, visit the "Market Plus" page at our web site. You'll find "Expanded Market Analysis," audio podcasts and streaming video of our program -- all FREE -- at the Market to Market Web site.
Pearson:And be sure to join us again next week when we'll examine the market impact of next week's reports on U.S. acreage and ending stocks. Until then, thanks for watching. I'm Mark Pearson. Have a great week.