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Market Analysis: Sue Martin

posted on March 16, 2012

Market Analysis: Sue Martin

Pearson: Here now to lend us her insight on these and other trends one of our regular market analysts Sue Martin. Sue, it is good to have you with us.

Martin: Thank you, Mark.

Pearson: Now let's get right after it here. Big rallies in the grains. We have got an acreage report coming up that everybody is kind of focusing on. You would almost think people would be over on the sidelines wondering the survey for producers is going to look like for planting intentions but that hasn't been the case. We got a nice rally in wheat.

Martin: Well, I think the wheat market - first off wheat is way ahead of schedule just like everything else for the vegetation and talk of rain coming through this next week is also very beneficial for a large portion of the wheat areas the soft red and the hard red. But I think at the end of the day wheat continues to keep its eyes on the corn and corn continuing to try to push out to the top side. Wheat is also at the top side of its range that it has been in. Both charts look very similar except one thing that I have noticed on wheat and especially the KC Wheat but both Chicago and KC it appears we could be building a saucer bottom on those charts. If that is indeed the case then we have got some higher prices coming when we start to break out. I look at wheat and I think that we are building in a little weather premium concern that the crop is so far ahead that if we get hit with a cold snap we are going to have a problem. I think that cash wheat is a little bit on the tight side. We have got good demand coming at the wheat market and we even had Egypt buying wheat from the U.S. this week. The one thing that stood out though this week is Iran was buying wheat. In fact even on Friday we had an announcement by the private exporter of an announcement of wheat being sold to Iran. But yet on the flip side what has happened with the sanctions and you have got SWIFT which is your international body that works over the transferring of money and they have said that they will exclude, on Saturday, they will exclude all Iranian banks from being involved in their transferring of funds.

Pearson: How is that going to work out?

Martin: Well that is what I am wondering. I am thinking how come we have got exporters here selling wheat to Iran when we have got sanctions on them and now that they are clamping down on the money? So, what is going to happen with that?

Pearson: That could be interesting. There is always transshipment. We have seen that since 1980 with the Russians, but when I look at this market you talk about the weather 80 degree temperatures across the Corn Belt, across the Wheat Belt, even warmer than that, dormancy, I mean there is a plus and a minus to these very nice early temperatures. You mentioned the challenges facing the wheat market and we also had that freeze over in Eastern Europe awhile back. I think the last time you were on you brought that one up and we are going to know here pretty soon what the damages are there. So maybe the saucer bottom in wheat you think might be a factor from a technical standpoint which means we would see higher prices from where we are even after this rally.

Martin: Exactly. What might happen is we might find out that we are tighter on wheat than what we think. You know you go from big supplies to little supplies and demand is good. So, I am think that with what's under pinning the corn market here for demand and it appears to be a cash led market on corn, I think wheat is keeping its eyes on that because wheat can't get too far away from corn because then they will turn around and they will start feeding corn. You know, wheat has been under the price of corn. Some think that would lead to seeing some feeding of wheat. Maybe. But I think at the moment we are still grinding in this sideways phase; July KC Wheat is right up against a two hundred day moving average, it is against the trendline from the November highs, you know it is right there acting like it is ready to break out and so is July corn.

Pearson: All right. Let's move to the corn market and what you see happening there and again a nice rally in corn this week and in the face of what some people are saying could be a huge acreage numbers. I want to talk about new crop in just a minute but let's talk old crop first. Apparently farmers are holding tight because basis levels, like you say, the market is screaming for corn.

Martin: Well, it is. Now basis in Illinois in the past week, week and a half, got up to 40 cents a bushel over the board. And then you had places, feedlots down in the Southern Plains like in Kansas and places, paying 85/87 cents over the board. I have also heard talk of trying to pull corn from the eastern part of the Corn Belt on into the western part of the Corn Belt. IT is rather interesting because it makes you think is the corn, and I think this is the key to the price enhancement, is the corn old crop really there and farmers are holding onto it and at some point they decide to say I am going to let go or is a lot of it, the bulk of it, sold? My opinion is that the bulk of it, I would say, 75 to maybe 70 percent of the crop is sold and the rest of it is going to sit there until summer to see what kind of weather we have. I think after the hard fall, the fourth quarter, that we had in prices I think when we got back over six dollars farmers were elated with it, then with these price pulls where they were getting a chance towards seven dollar corn, farmers were letting go of some corn not to mention ethanol plants are pulling corn sales that they already had made for May and June shipment, they now are starting to pull the May orders in - April and May. I think that is another thing that we are seeing is the price enhancement trying to put enough corn around them, these --, they are trying to put enough corn around them because they know farmers maybe in the field earlier and that means they are going to be very tight supplied.

Pearson: And that's when we have a typical season rally and with the weather we are having that could come sooner than later throughout the Corn Belt. So, let's talk old crop then. Do you want to reward this market if you are a producer right now?

Martin: Well, I think you do but I - I am looking at this corn market and my technical indicators indicate that we could still push this market a little further. I look at this market and I think as we go through this next week, you know, old crop first off you expired the March bring in the July and the June. Since 1960/61 this has only happened ten other times and every time July corn made higher highs after the month of March. I think that can still happen. The key again is how much old crop unsold is really in farmer's hands in the Midwest. If it is not as much as some are trying to say it is come July 1st you might have some pretty hungry hands for that corn.

Pearson: In which case the old saying of hanging on until midsummer and the transition is going to be the thing to do. So really quick because we don't have a lot of time in tonight's show because it is that time of the year, but really quick new crop corn what kind of acreage number are you plugging in right now?

Martin: Well, I am at a 95 number and I have been there for quite some time. It maybe that we even push over 95. Remember a year ago we were going to go do 96, and we ended up a lot less. But at the end of the day we have, I think right now, already a 94 number easily pegged in on new crop corn. And I think that when you look at new crop corn you have got to say wait a minute here we are in March and we have at least 94 million acres priced in but we are also two dollars under where we were a year ago for a Dec corn contract. I would be afraid to get too bearish just right yet.

Pearson: Yes and not in that big of hurry to sell new crop at this point?

Martin: Well, I am 30 percent sold on the website and I have been holding off making any more sales just yet. We will be making some more. I am just not willing to step up to the place just yet.

Pearson: Not a lot of time but I know the soybean market is a big factor here too and it has sort of been buying some acres here lately Sue.

Martin: Well, it is certainly has Mark. The acreage on beans is trying - beans are fighting for the outlying areas because I think it knows that corn in the good areas is going to pull some of the acres away. I also think that we continue to see the South American, Brazilian, production drop. -- came out on Friday and they estimated the crop at 63. I had thought when Oil World came out in the morning and said that it was 66.5 that would be lowest and then all of the sudden -- excuse me -- was on corn estimates but their bean numbers were down also. I am thinking that we are looking at pry the lowest estimates but I still think these beans are going to push just a little bit more. I am wondering if they can't tack on a 14.

Pearson: Wow. Well, we are not that far away. So, we might get that opportunity. If we do you pull the trigger. What about on livestock, Sue, fed cattle market, it has been a wild run here lately. A big run up but now we have been softening up some. What is your take?

Martin: Well, I am bearish on cattle or I have been. I believe that the feeder cattle prices have hit their highest for the year especially through August. I think that what we have seen is you are seeing way more feeders coming into the country from Canada. You are seeing imports of beef from Australia, and also this past week we have seen as of March 2nd, we have seen an increase for the first time since what December 2nd? Of an increase of over a year ago of imports of fat beef. So, I think that we are going to see a market that still pushes lower. Feeders has hit their high. In the meantime export sales were down 33 percent from a year ago. Export shipments of beef are down 53 percent from a year ago. I think you have got a bad scenario here for a moment. Now the grilling season this feels like it is going to push an early grilling season but it is Lent. Therefore I think that co-mingled with high gasoline prices is diffusing our demand for the moment. Now give us another week or two and I think you are going to see a low and some demand being put in for May sales.

Pearson: All right. Thirty seconds. Pork, where are we headed?

Martin: Well, the hog market, I looked at the hog market chart today before I left the office, and I thought it was kind of interesting. It almost looks like you could have a huge expanding head and shoulders top, and yet fundamentally pork is - exports are doing quite great in the world and on top of it, it is cheaper than beef. And so I am not a bear on pork but I do think that if you get some nice dicey rallies you have got to sell.

Pearson: Sue Martin, as usual, we appreciate your insights, thanks for joining us, and from everyone here on Market to Market, I am Mark Pearson and have a great week.

Tags: agriculture cattle commodity prices corn economy feeders hogs markets news soybeans wheat