Pearson: This is the Friday, April 11, 2014 version of the Market Plus segment. Joining us now is Darin Newsom. Darin, welcome back.
Newsom: Thank you, Mike.
Pearson: During the show this week we got cut off a little bit talking about soybeans. Wanted to get your thoughts on new crop soybeans. What do we have to look forward to or what should we be expecting on prices here in the short-term?
Newsom: I think in the short-term we could see the market as a whole backing off. I think we could see new crop soybeans backing off, coming down just a little bit, not very much because traders are still, the market as a whole is still concerned about what are acres really going to be, what is the weather situation going to be. Seasonally new crop soybeans tend to move up this time of year. I don't think it's time to throw in the towel. We've had a nice rally in the bean market as a whole. November beans trailed along behind the old crop May and July contracts. Yes, I think they'll come down but I don’t' know that it's time to panic and just bail out and sell everything ahead of time in this market.
Pearson: As we look to the upside, what is the next level of resistance new crop beans could encounter?
Newsom: You know, I apologize, I always seem to forget prices that I'm targeting. I'd have to go back to my charts and look.
Pearson: Room to run yet?
Newsom: There is some room to run. We just did test I believe it was $12.10 was the last price resistance that we tested and we got through that. So I would say we get up into that $12.40, $12.50 range a little bit later this spring, early summer I think we've got an opportunity.
Pearson: Okay. Alright. So don't lose hope.
Newsom: I don't think so. There's just too much that can happen right now. Weather is a wild card. We always know that. The ending stocks that are going to become the new crop beginning stocks, huge question like we talked about on the program. I don't think we've got it sorted out yet what our 2013-2014 ending stocks are going to be so we don't know what we're going to be beginning with, with 2014-2015.
Pearson: Alright. Well, now let's take a look at the cotton market. We did see a step back this week. What are we looking at there?
Newsom: Soybeans, excuse me, the cotton market probably doing what it needs to be doing. We've seen the May/July spread collapse. So that would indicate, in other words the carry is starting to strengthen, it's just a sharp downtrend now in the spread, indicating a much more bearish supply and demand situation despite the fact we have smaller supplies and expected to grow less here again in 2014. The overall supply and demand situation pushed the market maybe a little too high, turned around, it's starting to weaken. Seasonally the market goes down over the course of the spring. So it just looks like we're getting back into step with what normally happens in cotton.
Pearson: Okay. Alright. So long-term then are we going to see this slide down? Or is it all going to depend on the actions of what we're seeing in China and India and Asia?
Newsom: Yeah, exactly. It always comes down to what is going on over in Asia. If you've got some cotton on the books for 2014 it's going to look pretty good. Let the market back off a little bit then pop, it always seems to retrace a little bit, jump back up. Use those opportunities because I just don't see, right now I don't see a lot of reason, unless the spreads change, particularly new crop spreads, I don't see a lot of reason for this market to try to rally, post a huge rally later in the year.
Pearson: Okay. Alright. Well, now let's jump into some of our questions here from our Twitter and Facebook followers. Lester in Newhall, Iowa is curious, is corn going to hit $5.50? And I'm guessing, Lester, we're curious about cash corn. What are we seeing?
Newsom: Let's say we're talking about old crop. I think it's rather doubtful because I'm not convinced ending stocks are as tight as what USDA said in its April supply and demand. New crop, could we get to $5.50? Yes. I think there's an outside chance because if we do see the 92 or 93 whatever million acres came out in the prospective plantings and if we have some weather problems that December contract is probably going to want to run. And I think that's going to give us the opportunity late spring, early summer to see some better prices in the Dec.
Pearson: Okay. Now, a follow up on the corn side. Karl in Algona is curious, this was -- the final corn carryout was the highest on April 6th than it has been in the past 8 years. Karl's question is, is demand overstated?
Newsom: I think demand is overstated. We increased our export demand, as we talked about in the program, we increased the export demand by another 125 million bushels. We weren't even on pace to hit the previous and before that one was increased we weren't on pace to hit the previous before that. So I think demand is a little bit overstated in here. If we go back to the always humorous quarterly stocks report released on March 31st and projected those numbers forward using average demand for the second half of the marketing year we come in closer to 1.475 which is about 140 some million bushels more than what USDA is projecting right now. And so that would seem to account for kind of this overage that they've got estimated now for exports.
Pearson: Okay. And now, Phil in Ontario, Canada has basically the same question, is the great corn demand market reborn in 2014? And I think we've talked about exports. What are we seeing on feed demand? USDA predicted a huge increase in feed demand. Is that coming to fruition?
Newsom: I think so. I was a skeptic for months, on this program, in speeches that I was giving. I didn't think it was there. But, again, as the program showed, this horrible drought situation that we've got going on in the west, we've got more cattle going into the yard, they're coming out at heavier weights, that means we're feeding them more corn, we're feeding them more soybean meal. So I think it's possible that we could actually hit some of these estimates now on this feed demand. So, maybe I've changed my mind a little bit. Now, the bigger picture is the corn market, is the demand market reborn in corn? I'm going to probably steal a line from Twain to say that reports of its death were probably exaggerated by myself and others like me. I don't know that the demand market ever actually went away like I thought it might be.
Pearson: It maybe just we saw a little slowdown, we saw buyers transfer elsewhere --
Newsom: Yeah, we saw a slowdown because we didn't have supplies the last three years. The threat was we could shut down demand if we didn't start building our supplies again. Well, supposedly in 2013 we rebuilt our supplies, demand came back.
Pearson: Alright. Now, we've talked a little bit about weather troubles and weather issues going forward. Ben Lueder up in northeast Iowa is curious, the next storm system that we get to come through the Midwest, at this point since we're not yet into planting in a lot of places but we are so dry, is that going to be a bullish or a bearish factor?
Newsom: You know, I would almost think it would be bullish because we are dry but we're not in the field and the eastern Corn Belt, they're just now getting rid of all the snow that they had over the winter, we've still got frost on the ground. So, a rain moving through now is just going to delay early plantings more. So, is it going to be one or the other? If either it would be a little bullish. But, again, as we talked about, we can plant a lot of corn, the U.S. can plant a lot of corn in a short amount of time. So the initial reaction may be oh this is going to delay, this is going to push the market up. But longer term it's hard to ever be bullish a good rain event.
Pearson: And once they get in the field, planters get rolling.
Newsom: Oh, they'll fly through, yeah.
Pearson: Yes indeed. Alright, Darin, now before we let you go, as part of our new initiative called Market to Market in the Classroom, we are asking our market analysts to provide insight on what they do before joining us on the show. We're going to feature a couple of questions here on the Market Plus segment and eventually these will be found on our classroom website. Our first question to you, Darin Newsom, is what are your sources of data for your recommendations?
Newsom: My own analysis. I don't rely on anything else. Maybe that's bad, maybe that's good, maybe it's closed-minded. But I rely on the analysis that I do. If it's wrong, it's wrong. But if it works out, all the better.
Pearson: So, now, where does your data come from, your raw data?
Newsom: Tens of thousands of hours of watching the markets, basically looking at charts, seeing how everything fits together. So I look at how the market is moving itself. I don't care about USDA tables, as everyone who watches the program knows, I'm concerned with what the market is telling us itself. So it is learning how to read what the market is saying through basic trends, price direction over time, the futures market, future spreads like we always talk about, that is what tells me what is going on in the markets and that is what we analyze.
Pearson: Alright. Second question we'd like you to address. What factors can influence a particular commodity?
Newsom: It's numerous. There's no way to pinpoint any one thing, that's why I believe in chaos theory. You never know what that one factor is going to be. And usually the factor is something we don't even know. If I was going to pull one out of the hat for the grain industry it has to be weather. Weather sets the tone for how people are trading the market and then everything else feeds off of that. So if there's one underlying -- just think of this -- grain futures, in the grain markets themselves, are just derivatives of what is going on in the weather and that's about it.
Pearson: Alright. Well, thank you for taking the time to be with us, Darin, appreciate your commentary today.
Newsom: Thank you, Mike.
Pearson: And thanks to all of you for sending in your questions via Facebook and Twitter. Please continue to do so and we'll continue to get expert analysis straight to you. Thanks for watching and have a great week.