A lagging export market and weather fluctuations kept market swings in check. For the week, March wheat improved four cents, while the nearby corn contract gained four cents. A reduction in biodiesel mandates from the EPA stifled the soy complex as the January soybean contract added a penny. January meal increased $4.30 per ton. March cotton expanded $1.35 per hundred weight. Over in the dairy parlor, December Class III milk futures soured 12 cents. The livestock complex was mixed as the February cattle contract declined $2.60 and nearby feeders weakened $2.97. The February lean hog contract moved higher by $1.33.   The U.S. dollar index improved 13 points. The January Crude oil rally ran out of steam, dropping 59 cents per barrel. COMEX Gold melted $9.50 per ounce. And the Goldman Sachs Commodity Index shed a point to close at 429.30. 

Pearson: Here now to lend us her insight on these and other trends is one of our regular market analysts, Sue Martin. Sue, welcome back.   

Martin: Thank you, Mike.

Pearson: We are glad to have you. And in case you want to go over things again, you can download or listen to our Market Analysis and Market Plus podcasts online anytime at iptv.org/mtom.

Pearson: Sue, we've got to jump into this wheat market first, get it out of the way, new contract low this week. What does that tell you as we head into the month of December?

Martin: Well, we did have a new contract low and I think we may have turned around and closed higher for the week or very close to it if we did not, corn did too. I think that we're heading into the month here, you've got concerns about very dry conditions starting to form in the Southwest and through the Plains and then now talk of bitterly cold temps to impact us through December, especially the last half of December. So we'll see what happens because with this warmer than normal weather wheat has emerged but yet it's like a cat with nine lives it's hard to kill. But it doesn't do it any good. So you have that. And the one thing we have is on global supplies, we do have a record amount of global supplies, we know that. So prices are so cheap, you have a huge short fund position and I think some of that has started to come out of the market a little bit and you're having heavy deliveries, which is expected, but at the end of the day these funds might do some shortcovering into the end of the year just to capture their bonuses and their money and then we'll see what happens after the turn of the year. But also we have to keep an eye on South American weather, Argentina is going to have some weather issues here I think and so we just, there's a lot of little things percolating. But we know that the wheat needs to have help and we'll see what happens.

Pearson: Maybe the bad news is in we think on the wheat market.

Martin: Well, and another thing that hurt us I think was of course the extended period of exports out of Russia, out of the Black Sea. Their weather was milder than normal so it kept those waterways open longer and then with huge crops this year, last year they were kind of hurt, this year they came back, so they had plenty of supplies to export and that has kind of been competitive. But now we're turning a little more competitive.

Pearson: Okay. Now, we've got a lot of questions for you, Sue Martin, from our followers on social media. We encourage all of you to find us on Facebook, Twitter, Instagram, just search for Market to Market. Unfortunately we only have time for one. So I'm going to turn to @TheAgFix in Dakota Dunes, South Dakota and he wants to know, or he notes, it kind of feels like the herd is getting really bearish on the grains. And you mentioned we did have record short in the wheat market. Do you agree with that, this herd mentality of bearish shortness, especially as we talk about corn?

Martin: Very much I agree with him. I think that there's that saying when everybody is running you should walk and when everybody is walking you should run. And I believe that we have been, well first off, this is such an old bear market. From the high of 2012 now we're heading into year seven and I take cluster years and I take when you have growing stocks in corn and comingle that with growing wheat stocks in the U.S. and globally and then a growing form production deficit meaning the rest of the world doesn't produce enough, how needy are they? It let us kind of have an idea of how much we're going to be in the export market. And there's a record need for corn. And you look at corn and stocks have declined this year. I think we're down, production is down I want to say around 10%, I think we're down 22 million metric tons, something like that. So you are heading in the right direction but then you've got this little nemesis of wheat out there and I have to say, there is a large amount of feed wheat in the world. So that could kind of haunt us a little bit. But I have to tell you, a year of an 8 usually tends to be a little better and usually after a cluster year of a 5 or a 6 you start seeing prices move higher. Last year we put our low in and I hate to say this because I think Twitter will come alive but the 84 year cycle low was hit on corn last year, August 31st with the September contract at $3.01. This year we have played inside the range of last year, we haven't made a higher high and we haven’t taken out the low. And ironically this year the September contract again on August 31st put our low in thus far for a lead contract. I had thought possible the Dec would come down and make a lower low here than that September low, just tag it by ever so little. There's a wave 5 count on Dec corn and that would then have turned us, wave 5's are extremely rare though, we do have a wave 3 at $3.34 and we got, on a major scale, and we got down to $3.35 and three quarters this week and then we turned. Like wheat we have a huge wheat or short position in corn and that is creating some I think shortcovering. I think it was on Wednesday we had 51,000 contracts of open interest drop. That was huge. I think that we're going to see some shortcovering here. There's seasonals as well where you buy corn on December 2nd and turn around and hold it until December 14th. And what's interesting is there is a seasonal on cattle sort of similar but going down and corn going up. Have you noticed we're into some old fashioned seasonal tendencies here where corn on days when it seems to start to percolate and bounce cattle seem to get sold.

Pearson: It makes a lot of sense. So you think as we get into the end of the year we could see some of those shorts get out of the market and might see a little bit of a rally?

Martin: I think so and I also think that we have to look at South America, Argentina, they used to be number two and if they aren't they aren't far behind that. And I think that when we look at Argentina it's been a while since they've had a drought and I think they're facing a pretty tough December here and as we head down towards the latter half of December and wind towards the turn of the year they're going to start getting closer towards that pollination period and then you've got Southern Brazil, very Southern Brazil also in the same boat and it sounds like their weather is really going to start to heat up and they're going to become very dry.

Pearson: And as we talk about soybeans that's the story, we do have this potential of a drought pocket developing in Brazil. Sue, can we get a front month contract in soybeans back above $10 here before January 1?

Martin: I think you'll be close. But if you've noticed every time we get January's up there the market catches selling. But if you look at a chart we're forming a pennant formation and we're getting really tight in that pennant. And so to me, even wheat or corn is forming a little bit of a wedge with a little bit of a downward slope. But when I look at the beans here's what you've got to see this year, again, inside range for beans and so we didn't take out last year's low and we haven't taken out last year's high. I think there's promise, the crush is very good in China, almost record high and their demand is huge, and also I should have talked more about that on corn, maybe we can in Market Plus. But basically when I look at the soybean market we need to see the Jan contract close over $9.97 on the last day of December and we need to see March corn close over $3.51 on the last day of December. Doing that you'll have an inside range year closing higher.

Pearson: Alright. Let's jump into the livestock market. We saw cattle take it on the chin a little bit this week, live cattle jumped back. How seasonal is that for the first week after Thanksgiving to see a pullback?

Martin: Well, it is pretty seasonal. In fact, there is this seasonal I think 15 out of the last 15 years they talk about, granted that's no guarantee, we've got to get that little disclaimer in there, but 15 out of the last 15 years the market has tended you sell on the 27th of November, which this year was a nice rally day, and then you turn around and you buy it back around either the 9th or the 11th of December. Well, we've had some moves in here, we've had a 50% retracement in the feeders in the January and that also, and even in the fats, February fats as well, but we were also banging against 18, 20 day moving averages along with that 50% retracement and then the product started softening and from what we were hearing packers were, there was talk that packers were just unloading meat today even though they went out and paid $3 higher this week for cattle on late Thursday into today. Now, that seems kind of strange to me. It would be easy to be really bearish, really easy, however, I struggle getting too negative. Now I think we'll come in here on Monday and we'll probably make a lower low than we did because why? You have an outside range November, higher high, lower low than October. And we'll probably come in and try to take the low of November out, which should be not too tough.

Pearson: $115 and change on the live.

Martin: Yeah and on the Jan feeders $148 something. And then there's technicians that will say oh but you've got a head and shoulders top here, that's going to push you down to around $146, $144 on the feeders. Maybe. However, I have indicators that I absolutely love on cattle and they're very consistent on cattle and those, the inner days, the 180s were just wound for sound, they were flat lined at 99%, I have three indicators I watch, they all have to be together and they were just overdone so I knew we had to be careful but I wouldn't have guessed that we would have as hard of a whoosh as we got. But you have funds heavy long. Are they going to liquidate before the end of the year? They might. But on the same token if you look at meat sales, meat sales are huge, they're record large already into next year so that means they're going to be buying cattle. But when I looked at my indicators the 180 went into good correction today, it's not done yet, but I do have cycle timing on Monday and we're breaking hard into it. That should put a low in.

Pearson: Okay. Well now let's talk hogs. We've got the hog market up a little bit on the week against the cattle market. As we get to the end of this world, the end of this year, excuse me, Sue, how much more strength do you think we can find in this hog market?

Martin: Well, the hog market is, it looks like we backed up hogs a little bit through the holiday and what have you and weights are up, we all know that, and we know that we have a lot of product, not only in beef but in pork and poultry. But I look at the hog market and I'm wondering if we aren't going to see a chance for this hog, cash is up around $58, now here's the deal, futures where they are around $65 or whatever and cash at $58.85 or whatever, those two have to come together by the time you get into the 14th of December. So is the cash going up or is the futures coming down? Well, if you were to annihilate the cattle market I suppose you would bring them down but I'm kind of thinking you're going to see the cash try to hold here and push a little better.

Pearson: Alright. Well, Sue Martin, thank you so much, appreciate your time.

Martin: Thank you.

Pearson: That wraps up the broadcast portion of Market to Market. However, we will keep the conversation going, including answering more of your questions, during Market Pus which is available in podcast and video form on our website. And speaking of podcasts, we now have three different offerings for you to download and rate. Check out MtoM, a peek behind the scenes of this program from the analysts and producers as well as extended conversations with newsmakers in the world of agriculture. Join us again next week as we examine pricing information gaps plaguing some livestock producers. So until then, thanks for watching. I'm Mike Pearson. Have a great week.

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Market to Market is a production of Iowa Public Television which is solely responsible for its content.