Market Plus: Sue Martin (March 9, 2018)

Mar 9, 2018  | 12 min  | Ep4329 | Podcast


Howell: This is the Friday, March 9, 2018 version of the Market Plus segment. Joining us now is Sue Martin. Sue, welcome back.

Martin: Thank you.

Howell: Sue, we didn't get to touch on cotton, feeder or hogs during the markets segment so let's touch on those now. Let's start with the cotton. We're seeing weather be a big story across most of the grains and it's not really any different for cotton is it?

Martin: No it's not. In Brazil the concern of the heavy rains, that could impact on their cotton. But in the meantime here in the U.S. we're looking at our planting season and having the rains across the South could delay the cotton planting and cause for more bean acres to come in. All of that is yet to be seen. It's still early. But when I look at cotton prices seem high to me. We retracted a little bit this week. So I kind of wonder if we can't be seeing a little bit of a top in that area as well. I would probably say cotton looks high priced to me a little bit. I would be more prone to say take some money and lock it up, do some hedging.

Howell: Doing a little protection on our downside risk.

Martin: Absolutely.

Howell: All right. Let's move over here into the feeder markets. Have feeders hit a price wall?

Martin: Well they feel like it. The last time I was on the show I talked about the possibility of feeders going to $169 and I still think that potential is there.

Howell: The question is when I guess.

Martin: Exactly. I'm starting to wonder if we aren't looking at maybe the latter part of the year more than now. If we can get this market up over $151 then on the Aprils I could see where we could start to gain some traction. But we need to be doing it, although a year ago it was March 9th when the markets took off. So I guess never say never in this business but boy it just has, maybe we have had such high expectations and the market started to move a little earlier than normal. So it just concerns me because we realize that there is that situation of bigger production this year and in years like that there is a tendency for markets to peak early and come down. So I'm well aware of that. But we have three indicators that we follow in cattle and they work beautifully in cattle. And on the quarterly data the TRIX has turned positive, it was positive all of last year, has lots of room to go. Of course quarterly data is slow moving. But my floater and my timer are right there just wanting to turn and it's like okay, come on, we need to get going here.

Howell: So I guess the question is what are we going to need to see happen in the feeder markets to get us to that next price level?

Martin: Well, I think that when these indicators turn positive, and just holding in this area will help hold the time, kill time, because they're time oriented. Once they can get positive turns and I've found, I've learned the hard way never to outguess them, but once they do get turned then we should start seeing a transition of more positivity into the cattle market. There has been a lot of death loss this year, a lot of sickness.

Howell: Yeah, the weather changing.

Martin: Oh yes. And so I think that when we look at the feeder market we placed so many animals at light weights and I think now when we start looking for the heavier weight feeders there will be some but there isn't near the supply that we would have had. We're actually totally opposite of what we were a year ago when everybody didn't think we could possibly go higher and it was amazing to me, I remember Walt Hackney being on in April and talking about all the heavy weight animals out on wheat that I did not realize were out there, and sure enough boy they came to haunt us too.

Howell: And I think another, when we look at weights a big concern is these heavier hog weights that we're seeing. Is that a concern for you?

Martin: Yes. We do have heavier weights and that is kind of weighing I think a little bit on the market and I know that China's imports are down, they were only like 6% of our exports in the report that we got here this week, but the one thing that I'm looking at is there is so much sickness across the whole nation whether it's PRRS, PED, now we're even starting to hear a little bit about avian bird flu and you look at humans and the flu epidemic that we've had this year. It seems like it has just been a good year for sickness. I think that at some point we're going to start to see that come back and haunt us. The thing that we're dealing with right at the moment is probably the very cheap prices in China which is slowing up exports of pork to them.

Howell: It really is. Is there anything we can do to increase exports to other countries? What do you see, where should we be looking?

Martin: Well, I think that when we look at our exports, it's interesting because it's the EU and it's Brazil sending most of the pork to China. But, again, Brazil is going through that third dive of their weak flesh investigation and I think that's going to do nothing but just help us because they're finding corruption, they're bent on cleaning it up, which is a good thing, but in the process and as we've seen last year in the cattle industry when a very major got caught for corruption in Brazil it helped our demand come shift more to the U.S., we may see something like that again.

Howell: Okay, because they're going to maybe go in and find some of these other --

Martin: They're really investigating it. This is, I think -- I know they've got at least three phases of this and they're now into the third phase of it, which is also taking into the poultry industry.

Howell: Okay. Sue, let's transition here into talking some social media questions since we didn't get a chance to do that during the regular market section. Lannie in South Dakota @LannieMielke, I think is how you pronounce his name, said, seems 6 weeks ago we had a glut of corn and things looked hopeless for much of a rally. Where did all the corn go?

Martin: Well, we've had very good demand for ethanol, that has been part of it. We've had way more cattle numbers going into feedlots that wasn't anticipated at first. Normally they would stay out on wheat pastures and grass. And so that has created more feed usage. And our exports are up. In fact we're running about 5% I think it is over the five year average on exports when they didn't think that would happen.

Howell: And were you surprised, I guess we didn't touch on this during the regular market section, but they raised, WASDE raised corn exports I think 175 million.

Martin: Yes, they raised corn exports 175 million and ethanol 50. So now at the end of this month, see I think markets are now changing their focus away from worrying about South American production, at the moment, that will come back, but I think they have changed their focus now looking ahead at our prospective plantings report and also looking at our quarterly stocks report at the end of the month. Those come out, along with the hog and pig report, on the 29th of March. So I think what they're looking at there in that report is the quarterly stocks as to how the feed usage is in that corn market. I think they're anticipating that that should be higher and our stocks continue to whittle down. And right now I don't see much slow up in the demand for feed usage nor for the ethanol grind because it just seems like, but what we've done is the farmer has moved a chunk of corn, he has managed to get a chunk of that done. I also see farmers selling, more willing to sell this year new crop corn where they weren't the last few years. I hate to say it this way, but that could be a good sign for prices because once they start doing that and it gets more into the commercial hand all of a sudden the markets seem to do a little better. I have a feeling for corn, I'm very positive corn, it would not surprise me if sometime this year we push through that $4.50 level that has held us for several years and make a run at $5.

Howell: All right. Let's transition to talk wheat. We have Matthew in Napoleon, Ohio says, how far technically can the soft red winter wheat market go higher? And how much 2019 production should I price now?

Martin: Well, I would say that wheat has reached what we call a wave 4 technically and that is kind of a tough price area. And so both in Chicago and KC it has reached that. So we're kind of pulling back congestion, getting a pull back to set the stage for the next run when we start to really assess this hard red winter wheat. We've had flooding in the soft red. That maybe wasn't so good for it but on the same token it wasn't, if your ground is frozen it is what it is. So I think that when I look at the soft red wheat a wave 4 is up over $6.23, in fact it actually is probably up more around the $6.35 mark. So I think that we'll see an opportunity at some point on that level.

Howell: Okay, see a little bit more upside potential.

Martin: I do. But there's nothing wrong with the prices where we're at right now to maybe start some sales. A lot of people didn't think you'd get to a 5.

Howell: Definitely, make some sales. Let's finish up here with a discussion we talked a little bit about during the regular segment about these new import tariffs that President Trump has assigned. We have one final question here dealing with trade, not specifically those tariffs. But Philip in Dresden, Ontario, Canada wants to know, with the signing of the CPTPP in Santiago, Chile on Thursday, how much of a crutch is it to U.S. agriculture that they are not included?

Martin: Well, I think that when President Trump pulled out of the TPP that created, it had to go back to the drawing board and be revamped. And so the other 11 countries banded together and still went forward but I think that they left a door open for him to come back. Intellectual property was part of that. Basically these 11 countries are adding up to about 500 million people, that compares to the EU and so it is sizeable. They are going to be trading amongst themselves, opening up the door, but what it does is it also starts opening up their negotiations with world trade organizations. So I think that when I look at it immediately I don't see it as a problem for the U.S, China is not in it either. And so I think that with time we will maybe even see President Trump re-entertain it if the conditions are right.

Howell: Great. Sue Martin, a pleasure to have you here.

Martin: Thank you.

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