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Market Plus: Sue Martin

posted on May 9, 2014


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Pearson: This is the Friday, May 9, 2014 version of the Market Plus segment. Joining us now is Sue Martin. Sue, welcome back.

Martin: Thank you.

Pearson: On the show we did not get a chance to discuss this big move in the old crop soybean market. Can you help us break down a little bit what happened this week?

Martin: Well, I think first off, you've got China. We broke the market hard and fast. We've come off of just shy of making new yearly highs on beans. It's not normal for the May contract to be the one that makes the high for the year normally, it is usually the July contract or the August. And so I think that the market had gotten itself a little bit overdone, went in for some correction, in the meantime crush may be slowing a little. Then to add to it you have entities that delivered beans and put them out on the river when in essence they could have had 50, 55 cents more in the cash market in the eastern Corn Belt. It doesn't make sense unless they sold, the market sold the spreads up on the board and thought they were going to use those beans, started out and then used the beans trying to break it further. But, alas, we get the Chinese coming into South America buying beans back and so they're coming back active into that market. But, the market breaking down, I think we're limited. Beans are so tight in the U.S. that I think that we're limited as to how hard we break them down. And so you have to step down, catch your breath, bounce up and having had made a lower low this past week and then closing the week higher portends a higher high this next week over this past week.

Pearson: You mentioned something very interesting right there, China has come back into the market in South America and for the past several weeks a lot of folks in America have been talking about how we would be accepting those beans that China had cancelled on or was planning to roll off. Those are off the table now. So we're back to tightness in the country?

Martin: Well, not necessarily. We are tight. Those beans that have been geared up to come here probably would start coming in June to July. But they haven't, I mean, we've gotten some in, yes, but not enough to make a big difference just yet. I think what we've got to realize is, is that it's all about values and if all of a sudden that South American price starts coming up, which I think it will, now all of a sudden they're going to rethink, do we really need to send those to the north or do we just send then on out? I think it's going to become real interesting and we'll just push, it's my thought that we may be surprised, we may not get as many beans in the U.S. as we think. We hear a lot of talk about beans coming down from Canada. Well, we haven't seen those yet either and they could be but rail isn't the best to get a hold of and it costs when you do. So, I think the bean market has potential. It was long overdue for a correction, it was healthy that we corrected. I think the new crop bean is very potentially strong here. And it also goes back to what about El Nino? The El Nino is kind of backing up a little bit right now. So, it may come in later than what some were thinking. But, you know, if that comes in later it still leaves us open for some heat this summer. What if it hits -- and these are all if's -- but what if it hits like more so into August? All of a sudden you could be looking at a wet fall and then try to get those beans out. Also, are we going to catch all the beans? The wheat that is being zeroed out or adjusted and it's just no good, maybe a bushel per acre here, two bushels per acre here, 4.6 over here, whatever, those aren't acceptable yields. So being basically zeroed out, are those guys going to go ahead and put beans on that ground? Why would they put something when they're sitting that dry? I don't think so. I think that ground is going to lay barren for a while. And then you -- so that takes away any thought of double crop there. Then you go over to the soft red and it has been so doggone wet and they're running a little later than they'd like to be to get crops in, how many beans are we going to get on the back side of that? I think this number is going to really -- it's going to be interesting to see the end of June's report for the final plantings.

Pearson: Alright. And now, you mentioned the El Nino backing up, the heat and dryness potentially continuing a little bit longer and we've got a number of questions this week that kind of lead into that. Mark in Enterprise, Kansas, Rodney in Edgar, Wisconsin and Virgil in Newkirk, Oklahoma are curious about the cattle market, particularly feeders. And Mark's question comes right back to what you mentioned, he is in Kansas, it's getting dry. Are they going to have grass? Where do we see this feeder cattle market headed hitting $1.91 this week? Is there still room to the upside?

Martin: Well, it's interesting because your cash market some of them have been up well over $200, $230. And I compare the feeder market this year to the corn market last year. Supplies tight but in the meantime -- and everybody's trying to grab a hold of them, that they can get a hold of, some of your commercials are certainly grabbing them pretty aggressive in sales in auctions. But, bottom line is the cash market may be the one that tops before the futures give up just like a year ago when we had basis reach as high in some areas as $2 over and all of a sudden it fizzled and when it fizzled, it fizzled in a big way. If we end up with El Nino coming in it'll be a good thing, well it would be good if it came in sooner because it might bring some moisture through the cattle country and help out with those pastures. But for now that's not the case. But the demand is good because of heifer retention. So, right now with cheap corn it's feeding that demand, they're going after the heifer calves and so I think that's part of why these feeders are as high as they are. Export demand is huge for beef and I think that we're looking at a market here, we may get feeders up to $2 on the board, they may do that. They might get to $2.11. $2.11 on September feeders happens to be a wave 4 count. That would be like the brick wall of China. But in the meantime I have to ask myself, if we're so good, why isn't the May feeder contract better than it has been? Why is it holding back? Wave 4 was around that $181.80 area. So why are we holding that market back? Wouldn't that be led by the front months? It doesn't seem to be happening. So, they're going after these summer months but I think it's the heifer retention that is driving this market. God forbid if we turn hot and dry this summer and grain prices take off, all of a sudden no pasture or hay supplies dry up and you're having to go to the north to get what you can, corn stocks, whatever, it's not going to spell a pretty picture and I'm already hearing about how these ponds are drying up or getting very low.

Pearson: Alright. So, in terms of the cash market, would you sell your calves today or hold and feed and hope for a little higher prices later on this summer into the fall?

Martin: I would sell them today. I think -- we may still get higher. I'm not going to say we aren't. And those that are hedged are answering margin calls and they're nervous. And that does a psychological game with them. But very few individuals that I talked to are 100% hedged. So, actually the market going higher is their friend. The margin call is kind of their friend. It doesn't sound that way to them but they've got more animals to lock up or to get sol so they want that market to keep going higher. I would say just keep answering the margin calls, don't cover those shorts and step aside because about the time you do the market is going to cave on you and you'll have lost both ways.

Pearson: Alright. Well, Sue, now before we let you go, as part of our initiative Market to Market in the Classroom we have been asking every one of our analysts to give us a little bit of insight how you prepare before you come on Market to Market. And we're going to feature these on Market Plus and eventually they will be on the Market to Market in the Classroom website so high school students from all over the country can tune in and see what it takes to be Sue Martin. Sue, we've got a couple of questions for you --

Martin: I really envy them.

Pearson: The first one is, what commodity would you recommend to a new speculator just getting into the market?

Martin: If I had a new speculator just getting into the market I would probably pick corn.

Pearson: And why is that?

Martin: Well, first off, we have a huge saucer bottom on the corn market on the daily charts. That's very friendly. It's also there on the weekly. I use timing indicators that are a little different than what a lot of people use and once we get, they're very overdone on the weekly, once those correct then the monthlies, be it whether it's corn, beans or wheat, are all ready to go and monthlies are going to take a while in time to really evolve. And when I look at the corn market it's the only cheap thing up there now. You've got high priced beans, you've got high priced wheat, high priced oats, corn is cheap and I think corn is going to be the next thing. You've got the Ukraine in a major crisis. And I see production there probably planting dropping as much as, well estimates are out there as much as 20%. Well, they have used the Ukraine as a nemesis against us for quite some time and so I don't think they're going to be the wherewithal this next year. And then you look at Argentina, I think you're going to see more wheat going in eventually here for seeding as opposed to corn and we don't know for sure just yet how truly the saffron crop is in Brazil. You've got demand growing for corn in China and I don't see that demand going backwards in a big way. Their production is going to come back. Their hog prices have been cheap and that is going to turn around, they follow cycles like everybody else, that's going to turn around and come back and demand is going to grow for corn usage. We have cheap corn. You know the old saying, the cure for cheap corn is cheap corn.

Pearson: Yep, that's exactly right. And now here's another question and this one I think everyone will be interested to hear your answer because you are a pioneer in your field. This question is, how did you get started trading commodities?

Martin: Oh it was accidental, it was purely accidental. I started working in a brokerage office and I didn't even know what a pork belly was when I started, so I knew nothing. But maybe that was a good thing because I had a lot, I was very open-minded, had no preset ideas so to speak and I had, I was very blessed to have some mentors that took me under their wing and kind of helped me and taught me. And, of course, I was married to a farmer anyway so that sort of gave me a little footing. But still, I knew nothing, because I was previously a city girl. But the gentleman I worked with up and quit the company and just quit and they needed a registered person to keep the office open. So I went and got my test passed and they ran the office on my license for a while and then finally one day I decided I was ready to -- it took a while. I didn't do it very fast but finally I decided I wanted to be a broker and I've been blessed. I've had a lot of good mentors that taught me the right things and taught me how to be unbiased, be willing to look at a lot of things, I'm inquisitive, I have a curious mind and I tend to be very analytical.

Pearson: You bet.

Martin: To a fault.

Pearson: Well, Sue, thanks for taking the time to be with us here tonight and for answering some of our questions.

Martin: Thank you.

Pearson: And thanks to all of you for tuning into our website, watching Market Plus, we do appreciate it. Please continue to send us your questions via Facebook and Twitter and get out there and tell all your friends to follow Market to Market on all the social media. So, with that, we hope you have a great week and happy planting. Thanks for watching. 


Tags: acreage agriculture analysis basis commodity prices corn economy markets midwest new crop grain soybeans Sue Martin USDA weather wheat