The commodity markets finished mixed in the wake of a late week report. Despite some bullish news, the grains took it on the chin. For the week, May wheat fell 11 cents while the nearby corn contract moved a nickel higher. Projections for a larger Brazilian harvest added pressure to already declining prices as the May soybean contract plummeted 32 cents. May meal lost all of last week’s rally falling $19.30 per ton. May cotton added $2.43 per hundred weight. Over in the dairy parlor, April Class III milk futures were flat. The Livestock sector was mixed as the April live cattle contract rose 95 cents. Nearby feeders shed $2.13. And the April lean hog contract put on 27 cents. The U.S. dollar index moved 10 ticks higher. April crude oil bumped up 79 cents per barrel. COMEX Gold poured on 60 cents per ounce. And the Goldman Sachs Commodity Index gained nearly 3 points to close at 444.20. Here now to lend us her insight on these and other trends is one of our regular market analysts, Sue Martin. 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 Sue Martin, welcome back.

Martin: Thank you, Delaney. It's nice to be here.

Howell: I'm glad to have you across the table from me, Sue. This week we had some big news coming as we saw earlier in the news section tonight. We had President Trump sign these retaliatory, or sign these tariffs into effect. What do you see that doing for agriculture and specifically the commodities?

Martin: Well, I think there has been a lot of concern, a lot of fear because in the past we have had retaliation from countries that we have put tariffs out there. Unlike though that it's not a ban. I remember when President Jimmy Carter put a ban on imports from, or exports of our corn to Japan and it ruined our business for years. I don't see this as bad, and I tend to be an optimist, but when I look at China they don't make the top ten of our importers that we're importing from. So the concern is that they're transshipping probably through Thailand or Taiwan. And granted, imports from Thailand I think are up over 260%, 270% just this last year. But when I look at China I think that when they send it out it's going into other countries being formed into another type of a product, maybe it goes from flat steel to a pipe or something like that. Coming from China it takes 66 days to get here so it takes a long time, it's very expensive because of the weight. So I think that when I look at Canada and look at Mexico I think that President Trump was basically kind of using it as a maneuvering tool for NAFTA. What is amazing is it's Russia that we've seen a lot of imports from steel and of course Canada accounts for 40% of our imports just this last year on aluminum.

Howell: Okay. Well, that sounds like a little bit of optimism then that we won't see that take a direct hit to some of our commodities.

Martin: I don't think so. Everybody is worried about our bean exports. And you've just got to say China is a business country as well as us and when you have Brazil producing like they're producing and hitting new record production every year, some of those estimates are up around 117.9 even though CONAB is not there yet. Are they going to go to Brazil for more of their beans? Probably. They have the crop to sell. And if it's more reasonably priced they'll do it and I don't think that is any trade retaliation, I just think it's business.

Howell: It is business. And we'll get a little bit more to that discussion when we talk about soybeans. Let's talk wheat. As we know we had the WASDE also come out this week. Were there any surprises when you looked specifically at the wheat report from WASDE?

Martin: I think the fact that they raised the carryout on the U.S. carryout was a little disappointing. Global supplies shrank a little bit. But at the end of the day I think wheat is still in a weather market and we'll see because as it is coming out of dormancy now it needs moisture and there have been some forecasts that parts of the Wheat Belt will catch some moisture here over the next 10 days. But here's the thing, with the wheat being some of the lowest acres we've had in a very long time, our wheat acres are growing in Minneapolis wheat, I think that what we're looking at is a very tough time in the wheat, crop condition ratings have hit some really low levels. It makes you wonder in the poor to very poor how much lower can it go? The one thing for the wheat market is back to Argentina if this drought stays with them it's going to evolve into their planting season for wheat and that also could start to add more support under our wheat market.

Howell: Definitely. Let's talk Argentina weather specifically when we look at the corn market. Is that still a big story here?

Martin: Well, Argentina is the number two exporter in the world and so I'm surprised it hasn't gotten more footage than it has, or mileage. But when I look at Argentine weather their crops, they should be getting some rains, they're going to catch some showers over the weekend and in the 6 to 10 day forecast they're looking at some heavier thunderstorms, not this next week but the week following and they're going to hit central Argentina areas where they really haven't caught much rain. So I think that is weighing on the market. Plus you had crop condition ratings poor to very poor on soybeans 79%. corn 69%. So again it's such a heavy weighted that we may have priced some of that, a good chunk of that weather in for now. Are these the tops? I don't think so.

Howell: Sue, this is the first year that we're going to see expected, not the first year, the first year in a little while I should say. We're going to see more corn consumed worldwide than what is produced. Do you see that giving us a strong upside potential for corn?

Martin: I do. I think that when I look at corn, first off production is going down nearly every country around the world. And then I look at larger hog numbers, you're looking at China with hog numbers record. Poultry numbers are hitting highs. U.S. production is up. Our beef production is up and we have had cattle moving into the feedlots because of the weather that was enhancing into cattle country, which is hard red winter wheat and consequently moving those cattle into feedlots is causing more feed usage. So when we get into the quarterly stocks report at the end of this month I think we're going to be looking at that quarterly feed usage and it should ramp up. Again, stocks are starting to shrink globally and in the U.S. I look at the corn market and I think it is the story that we're only in the first or second chapter and it has a lot more to be telling us yet. And it was kind of the creeper but I think there's big things yet to come for corn. It's taking a little time as we have been seeing producers sell corn. One thing I've been hearing is that ethanol plants are starting to see that they're being full for April, May and June. I've heard where some even have their facilities, their buy bought for about three-quarters of what they need for every month beyond. That is a concern because where are farmers going to go? But what it tells me more than anything is basis isn't going to be real special so if you see some weather hit because with the weather that has hit in South America and we think the USDA is probably 4.5, 5 million metric tons too high in Brazilian corn production, so when we look at South American production going south and ours we're losing acres here, we need a good crop because our usage is growing, not only here but globally. So I would have to say I think we are going to see higher prices with time.

Howell: Okay. Sue, we're going to save the social media questions for the Market Plus segment. Let's talk soybeans. We saw significant pull back here at the end of the week when we look in the soybean markets, futures markets. Was that because of retaliatory tariffs, impact from that or WASDE? What are your thoughts?

Martin: I think that the soybeans fell back, everybody wants to tie it to the steel tariffs. I don't think it's that at all. The market has been struggling. Our lead contract, now granted every contract we have had made new contract highs over the last year, except our lead contract has not been able to make higher highs over 2017. 2017's range for beans and for corn is inside ranges, lower highs and higher lows. So one of those sides, excuse me, is coming out this year and of course I believe it's the high side. So the bean market has all the South American production in Brazil to look at, to deal with, so we should be because of our crush here so good and the crushing margins are very strong we should be seeing this bean market try to eventually push higher. I just think we're into a corrective phase in the market. That phase might last into early April.

Howell: Sue, really quick before we move onto meats, how high do you see soybean prices heading?

Martin: If we can get that $10.80, $10.84 out, because $10.84 is 50% retracement, then I would say we move on up to around $11.19 to $11.44. Then the real stiff target is the 2016 high of $12.08 and a half and that would be awesome if we could do that. But I see better things for corn.

Howell: Okay. Of course, the bullish story remains in corn. When we look at the cattle markets we saw significant pull back up until the end of the week. Are we going to see further downside potential, a further downside break?

Martin: Well, I've been a proponent of the cattle market and it has been a little disappointing to me because it seems like we get these nice strong days and then it just sort of fades back. But the one thing we did do today, and it might have been driven by the fact that our cash market this week actually ended up pretty strong, and I think a lot of the bears were trying to tout the negativity in the market, they're continuing to look at supply and justifiably second quarter production is going to be 12.8% over a year ago at this time. So I understand that. But we also have really good demand and that demand would even be better if we didn't have all of these Nor'easter's happening. So I think that the cattle market closed higher for the week after having made lower lows. That's a plus. Now, the feeders didn't, but the fats did. And so I think this next week we'll chatter a little bit early in the week and then I think we should start to move and take off and move higher. We may go back but I do think because of all the production that the cattle market is somewhat limited as to how strong we can get yet in this as we move into April. So on these next rallies we're probably going to want to be doing some hedging. One thing in this meat market, especially the cattle market, that I think has been missed is immigration. And immigration, you look at Europe and they improved, in 2016 I think they had 1.3 million people immigrate, in -- that was '15 - and in 2016 they had about 1.2 million immigrate because of the open door policy in Germany and Italy. Well, in Asia, when Asians started moving into Canada they noticed convenience foods, the demand going up. They noticed red meat demand going up. And they noticed that sugar added beverages went up. So I think we're looking at a market here that has long-term good demand underneath it.

Howell: Great. Sue, we're going to hit feeders and hogs during our Market Plus section. But thank you so much for being here.

Martin: Thank you.

Howell: That wraps up the broadcast portion of Market to Market. You can catch more market discussion in Market Plus available in podcast and video form on our website. Market to Market may be airing in different timeslots due to fundraising on PBS. If you find value in our program please consider making an investment in a service that provides you with news and market analysis you have come to trust and know. Join us again next week when we'll examine how federal forces have joined the fight against the nationwide opioid epidemic. So until then, thanks for watching. I'm Delaney Howell. Have a great week.


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