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Market Plus: Sue Martin

posted on July 18, 2014


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Pearson:  This is the Friday, July 18, 2014 version of the Market Plus segment.  Joining us now is Sue Martin.  Sue, welcome back.

Martin:  Thank you Mike. 

Pearson:  We are glad to have you back with us and as promised I think we will start this segment right off with a look at the lean hog markets.  We saw a little bit of a pull back this week.  We are still dealing with the PED.  Can you talk to us about where you see this market moving in the next week to a month or so?

Martin:  Well, I think that for the moment hogs do have a seasonal tendency to put highs in around July 8th or 9th and slip back.  Maybe slip  back into August but I think we will find a low here fairly early in August and then there is an old saying and we will see how it goes but the old saying goes higher highs in September, higher highs Oct, Nov, and December.  So, we will see if that occurs this year but it sure seems like we have the fundamental base for it.   What is really weighing on the hog market is the traders are all talking about how the consumer is resisting higher pork prices which really surprises me because if he is resisting higher pork prices you would think he would be doing that on the beef too and he is not.  So - or not in a big way.  So, I think what we are seeing is a market that temporarily is going in for a little bit of a correction.  August hogs could slip back towards $126 maybe $127/125 right in there and then I think they should catch and we will see if they can't start to renew themselves.  The fall we should have some really tight supplies of hog numbers coming in the fall.  Slaughter this past week was down nine percent although weights went up 13 1/2 pounds over a year ago, you know cheap corn is very helpful in this environment and so the producer is trying to basically feed the hogs that he does have heavier to try and make up for some of his losses.  But come fall we should still see the numbers very tight and I would think that October pigs should do quite well and maybe we will see a nice rally back in the October and December hogs.

Pearson:  And you would think as you mentioned on the show if fat cattle can get up to that $160/162 range that should provide some support for hog markets.

Martin:  You would think because you have got some expansion starting in the poultry industry which I am amazed it took this long, but they had some issues too.  But in the hog industry you look at like Japan is now dealing with PED Virus too and they are our largest customer and all of the sudden you think oh, they lost 1.1 million pigs, you know they are going to be coming back for more pork, but the Netherlands, Denmark and Mexico, other countries will probably stand to get some of that business over us.  But on the same token and here is another thing, you look at Russia and the problems they are having and the sanctions we have stuck on them, well their economy could really start to slow and probably already has and then the Ukraine same thing.  Neither one is going to fair very well out of this for the moment, but as their currencies fall their products seem to be doing quite, you know demand will go their way but they are big pork users and so maybe Russia all of the sudden has to open the door for more pork.

Pearson:  All right.  Well, we will have to keep an eye on that through this fall.  Now we do have a couple of questions from our Twitter followers.  Dave in Howard, South Dakota is curious will old crop, Sep corn, get above four dollars or just move sideways?  What is a selling opportunity for folks still hanging onto that old crop corn?

Martin:  Well, I think as corn on the futures gets up around four dollars, we even seen it this week on the December and well on the Sept too, you get close to four bucks.  It got to like $3.95 3/4 - $3.96 and they took advantage of it and sold it.  The market might at some point here I am looking for the market to find a spot where it catches, gives us a little rally and it has already tried one and now we are stepping back and of course before the week was done we came down and made new lows for the whole move.  There is some timing coming up here fairly soon that I had told my subscribers would be a low and a low can be move up and react and then you come back down or it can just flat be a bottom.  I don't know if I could say it is going to be "the bottom" for the moment, but the one thing I did notice was on July corn before it expired, year in and year out nothing but a July contract coming off of the highs of $8.29, the all-time high for that contract, a wave four and that is a major wave four, was $3.91 and we went there right into the expiration went to $3.90.  So, that says next year's July contract probably is going to have - it can come down and look at that area but should have some very good support in that level.  Now if it starts to exceed that then we are going to have to start thinking about wave five or something but you know this crop isn't in yet.

You know we have got some heat out to the Southwest.  It is dry in Ohio, parts of Indiana, Kentucky, Tennessee, North Carolina.  The only thing is we don't have heat, so to speak, in a big way but that crop is shallow rooted in that area.   If that heat started or dryness started moving more to the north and west a little bit, why you could even encompass more of Indiana and into Illinois.  All of the sudden it is the Eastern Corn Belt that we are worried about more than us and it wouldn't take much to stress those crops. Yields might not end up quite as good as you think.  It looks great now but who knows and we are not into El Nino yet.

Pearson:  That is right.  That is still coming here towards the end of this month into August.  Is that still the plan?

Martin:  That is right.  Yes but it will be a moderate to weak one from what I am hearing.

Pearson:  Ok.  All right.  Now we have got a question from Jeremy in Onida, South Dakota and you touched on it here at the corn market.  His question is what does it take for a market to make a low and how close are we on the grains?  As you mentioned corn, where do you see us on the wheat side?

Martin:  Well, on the wheat, you know we have come through some pretty good numbers as well for support and wheat could have a little bit more on the downside another, I would say another 20/30 cents, but you know you look at the wheat and the wheat might catch and start into a range for a little bit.  Corn is more guilty of that, I think than wheat is.  But world demand, the one thing we got to keep in mind is that first off China is expecting to be a bigger buyer this year of wheat and you look at India and their monsoonal rains have not been up to speed and have been very, they were delayed at first and then they have ran subpar.  So, India's wheat crop may not come out quite like what they were hoping for.  You know it is just again it is the weather percolating around the world.  We have to remember you put your bottoms in on the most negative, negative news like there is never going to be another good day and you put your tops in when things couldn't look better and it is like the market has a way of pricing it in.  It is when the story becomes believable on either end that the markets will reverse because everybody is on board.

Pearson:  Now you talk broadly about the markets there and our final question, I think is builds on that.  Mary Jo in Iowa is curious how do people so far away from the crop fields whether you are on Wall Street, Chicago, China, Brazil or Mexico, how do they know what is happening in the fields?  Can you explain a little bit the market mechanics as to how that all functions?

Martin:  Well part of it is they utilize services and that now are able to have the capability.  It is not like the old days where we went out and did all these crop tours.  I mean we still have the Pro Farmer Crop Tour but you don't see a lot of the groups out anymore that you used to.  It is because of satellite imagery that a lot of these services, be it whether it is land worth or whoever, are able to look at the maps and even out of NOAA you will get these maps and actually some of these maps are not really looking as green as what the USDA would have you to believe on crop condition readings.  Regardless, we have what we have and a lot of these traders look to these services for guidance.  They look to the USDA for the fundamental side of the equation whether they agree or not.  They look to that and it is kind of like listening to mom and dad, you know you have got to listen whether you want to or not, and then in the meantime they also look at technicals and you know I think you have to walk a walk.  It has got to be half technical, half fundamental because technicals or the charts will eventually keep you in the mode of the trend and the fundamentals are your trend eventually.  I mean that's - I should say the technicals catch your turns more times than not and the fundamentals is the guidance of the direction of the trend and the trend is your friend.  And they will go for that until they see something that psychologically says you are wrong, things are not what you think, and this year psychology is playing a big part.  We have huge, if you look at most any market, we have had a lot of markets that have rallied good in the first five months of this year and then they have all just kind of just melted away and even coffee has done this.  So, it is like there is something out there an environment of where there is just no matter what they just want to be bearish.  You know they have been bearish since last November and they are still bearish and now they are looking more right.  So, that is kind of how I think they go about it. 

Pearson:  All right.  Well Sue, thanks for taking the time to be with us this weekend.  We really appreciate it.

Martin:  Thank you. 

Pearson:  Thanks to all of you for sending in your questions via Facebook and Twitter.  Please continue to do so and we will get expert analysis straight to you.  Thanks for watching and have a great week.

            


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