Market Analysis: Sue Martin

Market Analysis: Sue Martin

Sep 20, 2019  | Ep4505 | Podcast

Podcast

The commodity markets were mostly steady as demand bears pushed back against supply bulls. For the week, December wheat was flat while the nearby corn contract gained 2 cents. As the threat of a September freeze fades and Chinese trade negotiators backed out of a U.S. farm tour the November soybean contract fell back 16 cents. December meal lost $6.50 per ton. December cotton dropped $1.76 per hundredweight. Over in the dairy parlor, October Class III milk futures lost 50 cents. The livestock sector ended mixed as October cattle added $1.27. October feeders put on $4.62. And the October lean hog contract shed $6.13. In the currency markets, the U.S. Dollar index gained 32 ticks. October crude oil rose $3.25 per barrel. COMEX Gold rebounded $24.70 per ounce. And the Goldman Sachs Commodity Index jumped more than 16 points to finish at 419.85. Joining us now to offer insight on these and other trends is one of our regular market analysts, Sue Martin. Sue, welcome back.

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

Howell: Sue, I'm glad to have you on the show today. There's certainly a lot to discuss. We're going to kick off our discussion with a social media question coming to us here from Tim in Crookston, Minnesota. He said, will the spring wheat crop become feed wheat?

Martin: Well, with all the rain that they've had one would think yes. But the crop is about 80%, 85% harvested. So I would have to say that there's a fair amount of good quality wheat still there. Reading various websites in the area it sounds like the wheat is in better condition or quality than what was originally thought. So I think that we'll have a good supply of quality wheat, milling wheat. But still it's too wet at the time to finish up harvest but they're on the downhill slide.

Howell: Well Sue, speaking of harvest, here within the next week or two we're going to start seeing a lot of combines rolling across the Corn Belt. When you look at the corn acres in particular how long until we have a yield estimate? And I also want to add in there, how long until the market starts to factor in those numbers that the combines are rolling with?

Martin: Well, it's going to be interesting because that is what is going to help drive this market if the yields are down as much as what some of the public thinks. The USDA, the WASDE was very quick to drop back in June and then they raised it a little bit and then dropped back here in September. But the bottom line is I think that we're going to see NASS, they're going to have a better handle on it as they get more into October. This heat that we're seeing is very abnormal for this time of the year and it is probably sort of a double-edged sword in Illinois and Indiana and Ohio, Wisconsin, Michigan. But it is bringing the crop along better. And your nighttime temperatures are staying over 70 degrees so that's transferring sugar into starch and that's putting weight into that kernel. So the fear of a frost/freeze, which would have killed the crop and stopped it right where it was at, is kind of passed for now and so the trade is looking at it that gee, we keep pushing this out a week and a week and a week that this crop just may make it home. Our weather sources believe that we will see, especially the eastern half of the U.S., enjoying a prolonged Indian summer and that is just about the way it seems like it's coming off. So for now the market is not getting fed any more positive news to push it. But if we fall back and then all of a sudden we start hearing the yields that is going to certainly turn this market around and give us another step higher. But for now $3.75 seems to be static.

Howell: Sue, for a while there we were talking about maybe the potential for $5 corn. Is that out of the question now?

Martin: I think for now it is. We need to see this market, first off do we take out last year's lows? No, I don't think so. That would be $3.42 and a half. But I will say underneath that there's a gap down to $3.38. I don't see that on corn where we've had wheat that did not make higher highs for the year came down and took out all the way back to 2015 the lows of the years in between so that weighed on corn and it's struggling because there's just so much wheat in the world and we've got Russia underpricing us, although they're going to be dealing with some pretty cold temperatures here in grain country, especially north of Ukraine, and then we've got France's wheat crop looking awfully good. So we have competition. And there isn't a lot of talk about Australia. But I think the market more than anything is just lacking news. And in the path of least resistance in that kind of environment it's going to be softer. So I think that when we look at the corn market I think we're seeing a subtle shift towards maybe the smart money kind of, as Shawn Hackett would say, start to maybe look at the long side but they certainly aren't full bore yet either. And the bean market is kind of the same way and we made higher highs this week --

Howell: In the bean markets.

Martin: Yes. And then closed the week, well we did I think in corn too, and then closed the week lower. So that is certainly going to portend to us that we'll probably see lower lows next week to start with.

Howell: Sue, there was definitely no shortage of news for the soybean markets on Friday with the announcement of the Chinese canceling their U.S. farm tour. Monday do we rebound from our poor closes on Friday?

Martin: Well, if we do I don't think they'll hold because I do think that this week's lows are going to be tested and come out. We thought, you've got such a huge key reversal month going in beans and so we kind of expect that maybe we'll hang onto a decent monthly close at the end of the month because we're going into October and we have anticipation. I feel like we're just doing a dance with the Chinese. They must have needed to buy more beans and needed them cheaper so they just pulled back away and President Trump was saying we want a deal not just on agricultural buying, we want it across the board. And so they kind of turned around and said, well we're not going to go visit your farms. Well, that was behooving them more than it was us anyway. So I'm not sure. The trade looked at it as oh, things are going bad again. But to be honest I just think it was a dance and a ploy and there's rumors that they have bought two to three cargos of beans today out of the Pacific Northwest. But the other thing is that they're also inquiring about offers out of Brazil and so for another two to three cargos there. So we'll see what happens. But it's just, I just call it a dance, it's manipulation.

Howell: It is. Sue, when you look at the soybean situation, China out of the picture, based off of last week's report has the soybean picture changed for you with the change in the carryover or ending stocks?

Martin: I think that the bean yields aren't going to be what everybody expects. I think this heat is bringing them on too quickly. It's helpful if you're catching rain along with the heat, that might help. But I think the crops are being pushed and I don't think that's a good thing overall. I think demand is very good for soybeans besides China. If there's one good thing at the end of the day about this it's that we have looked elsewhere for other buyers around the world and solidified ourselves being more diversified. In the meantime China was already staring to do that before these trade tariffs ever went into effect. So it's all a lot of psychology. We'd love to have Chinese buying back and in full force. It may be something that we have to earn back. They're going to use it to their best advantage.

Howell: Yes they will. And we've seen that continued on with the trade talk disputes. Sue, let's talk about what's going on in the livestock markets. In particular, give us the update from today's cattle on feed report. Anything to note there?

Martin: Well the placements number was the positive number. It was down at 91% as of September 1st and that was a lot lower than the average guess. The average guess was I believe around 94. And that is down I want to say about 8% from a year ago, something like that. So that is a positive towards February cattle. In the meantime, the marketings number was right in line with the lower edge of the guess, which was only 98% to 99%, so 98%. And then the on feed number was at 99, just right under 99. So I would call the report pretty friendly actually. But the one thing I will say is as we move forward in cattle going into the first quarter of next year it would be nice to be bullish because of the fact that we've got very good economy, demand for proteins is very good and we're seeing that in cow slaughter. Cow slaughter is up dramatically from a year ago so that's a plus. But in the meantime I think that we have to keep one thing in mind that's different this year possibly, we won't know yet until we get there, but a year ago remember our winter was horribly awful with vortexes and snows and that type of thing and bitterly cold. If we're not quite like that this year coming up then that is going to mean that cattle will gain weight better and be moving more aggressively as opposed to getting backed up or whatever.

Howell: Okay. Sue, we've got to of course talk about the lean hog markets. It seemed like last week they had some wind in their sails. This week they pulled back 9%. Is a turnaround not in the cards for the lean hog markets?

Martin: I think the hog market first off, when we look domestically the hog producer is basically expanding or planning to expand. In the meantime so is the Canadian hog producer because they're looking at exports being better this next year and they too because of Chinese ban on their pork they are making inroads in other markets. The U.S. is still their largest importer or buyer of their pork and beef. But in the meantime the producer because of probably optimism with the thought of getting some more business down the road from China they are expanding. And so sow slaughter is down pretty decently from a year ago. I think in August we were down about 4.7% and we dropped dramatically in July and in June. So I think that that's a little concern because we're certainly going to see more pork production and also more numbers coming. In the flip side though, the demand for pork I think is going to still hold good and our export markets if we could get something going, after all the U.S. has a beautiful product, virus free, I would have to think that should at some point China will need it and they've got their lunar new year coming around so they're going to be buying pork. They wouldn't have included pork in this rollback of tariffs if they hadn't have planned on it.

Howell: Absolutely, Sue Martin I'm going to cut you off there. We're going to keep the rest of this discussion for Market Plus.

Martin: Okay.

Howell: That wraps up the broadcast portion of Market to Market. But we will keep this conversation going on Market Plus where we’ll answer more of your questions. You can find it on our website at Market-to-Market.org. Harvest season provides some great opportunities for photos. Search IPTVMarket on Instagram and keep track of what we capture in the field. Join us again next week when we’ll look at the flipside of spring’s bomb cyclone in one region of the country. So until then, thanks for watching. I’m Delaney Howell. Have a great week!

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